What changed in this filing

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Item 9A. Controls and Procedures

2024-03-15 compared with 2023-03-13 · 760 added, 747 removed, 989 unchanged (60% of the section changed)

1 unchanged sentence

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, 2022.

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.

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 both our Chief Executive Officer and Chief Investment Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023.

Based on that evaluation, our management concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations.

Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.

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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).

Under the supervision and with the participation of our management, including both our Chief Executive Officer and Chief Investment Officer and our Chief Financial Officer, 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.

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Other Information.

Management Agreement Amendment

On March 11, 2024, we and our Manager entered into an amendment to the Management Agreement, effective as of January 1, 2024, in order to extend the term of the Management Agreement and modify the terms upon which the Management Agreement may be terminated.

For additional information on the Amendment, see “ Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management Agreement Amendment ” in this Annual Report on Form 10‑K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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000-56117) filed with the SEC on March 5, 2020).

2.4 Agreement and Plan of Merger, dated as of May 2, 2022, by and among Terra Property Trust, Inc., Terra Income Fund 6, Inc., Terra Merger Sub, LLC, Terra Income Advisors, LLC and Terra REIT Advisors, LLC (incorporated by reference to Exhibit 2.1 to the C urrent Report on Form 8-K filed by Terra Income Fund 6, Inc.

2.4 Agreement and Plan of Merger, dated as of May 2, 2022, by and among Terra Property Trust, Inc., Terra Income Fund 6, Inc., Terra Merger Sub, LLC, Terra Income Advisors, LLC and Terra REIT Advisors, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Terra Income Fund 6, Inc.

with the SEC on May 5, 2022).

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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).

3.2 Second Articles of Amendment and Restatement of Terra Property Trust, Inc.

(incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K with the SEC on December 5, 2023).

3.3 Articles of Supplementary of Terra Property Trust, Inc.

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001-40496) filed with the SEC on June 14, 2021).

Description and Method of Filing

4.3 First Supplemental Indenture, dated June 10, 2021, by and between Terra Property Trust, Inc.

1 unchanged sentence

001-40496) filed with the SEC on June 14, 2021).

Description and Method of Filing

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

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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).

10.3 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.

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10.8 Limited Guaranty, dated as of March 12, 2021, by and among Terra Property Trust, Inc., as Guarantor, for the benefit of Western Alliance Bank (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 18, 2021).

10.10 First Amendment to Loan Documents dated as of June 9, 2021, by and amount Terra Mortgage Portfolio II, LLC, as Borrower, Terra Property Trust, Inc., as Guarantor, and Western Alliance Bank, as Lender (incorporated by reference to Exhibit 10.1 0 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022) .

10.11 Uncommitted Master Repurchase Agreement dated as of November 8, 2021, by and amount Terra Mortgage Capital III, LLC, as Seller, UBS AG, as Buyer (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

10.12 Guarantee Agreement dated as of November 8, 2021, by and amount Terra Property Trust, Inc., as Guarantor, in favor of UBS AG, as Buyer (incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

10.9 First Amendment to Loan Documents dated as of June 9, 2021, by and among Terra Mortgage Portfolio II, LLC, as Borrower, Terra Property Trust, Inc., as Guarantor, and Western Alliance Bank, as Lender (incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

10.1 Uncommitted Master Repurchase Agreement dated as of November 8, 2021, by and between Terra Mortgage Capital III, LLC, as Seller, UBS AG, as Buyer (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

10.11* Amendment No.

1 to Uncommitted Master Repurchase Agreement, dated as of May 24, 2022, between Terra Mortgage Capital III, LLC, as Seller, and UBS AG, as Buyer.

10.12 Guarantee Agreement dated as of November 8, 2021, by and between Terra Property Trust, Inc., as Guarantor, in favor of UBS AG, as Buyer (incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

10.13* Amendment No.

1 to Guarantee Agreement, dated as of March 10, 2022, between Terra Property Trust, Inc., as Guarantor, and UBS AG, as Buyer.

10.14* Amendment No.

2 to Guarantee Agreement, dated as of November 14, 2023, between Terra Property Trust, Inc., as Guarantor, and UBS AG, as Buyer.

10.15 Second Amendment to Loan Documents dated as of January 4, 2022, by and among Terra Mortgage Portfolio II, LLC, as Borrower, Terra Property Trust, Inc., as Guarantor, and Western Alliance Bank, as Lender (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

Description and Method of Filing

10.13 Second Amendment to Loan Documents dated as of January 4, 2022, by and amount Terra Mortgage Portfolio II, LLC, as Borrower, Terra Property Trust, Inc., as Guarantor, and Western Alliance Bank, as Lender (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

10.14 Uncommitted Master Repurchase and Securities Contract Agreement dated as of February 18, 2022, by and amount Terra Mortgage Capital I, LLC, as Seller, Goldman Sach s Bank USA, as Buyer (incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

10.15 Guarantee Agreement dated as of February 18, 2022, by and amount Terra Property Trust, Inc., as Guarantor, in favor of Goldman Sach s Bank USA, as Buyer (incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

10.16 Voting Support Agreement, dated October 1 , 2022, by and among Terra Property Trust, Inc., Terra JV, LLC and Terra Offshore Funds REIT, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.

001-40496) filed with the SEC on October 3, 2022).

10.16 Uncommitted Master Repurchase and Securities Contract Agreement dated as of February 18, 2022, by and between Terra Mortgage Capital I, LLC, as Seller, Goldman Sachs Bank USA, as Buyer (incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

10.17 Guarantee Agreement dated as of February 18, 2022, by and between Terra Property Trust, Inc., as Guarantor, in favor of Goldman Sachs Bank USA, as Buyer (incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).

10.18 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No.

1 unchanged sentence

10.19 Consent and Amendment Letter, dated as of September 27, 2022, by and among Terra Income Fund 6, Inc., Terra Merger Sub, LLC, Eagle Point Credit Management LLC, and certain lenders on the signature pages thereto (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed with the SEC on November 14, 2022).

10.20 Waiver and Amendment No.

2 to Credit Agreement, dated June 30, 2023, among Terra Income Fund 6, LLC, Eagle Point Credit Management, LLC, and the Lenders party thereto (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the SEC on August 11, 2023).

21.1 * Subsidiaries

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generally accepted accounting principles.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for credit losses as of January 1, 2023 due to the adoption of FASB Accounting Standard Update 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

Basis for Opinion

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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.

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.

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Marketable securities 4,961,879 147,960

Loans held for investment, net 584,417,939 457,329,582

Loans held for investment acquired through participation, net 42,072,828 12,343,732

Loans held for investment, net of allowance for credit losses of $ 56,749,498

and $ 25,471,890

417,913,773 584,417,939

Loans held for investment acquired through participation, net of allowance for

credit losses of $ 226,527 and none

38,558,485 42,072,828

Equity investment in unconsolidated investments 37,171,326 62,498,340

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Interest receivable 6,537,368 4,100,501

Due from related party — 2,605,639

Other assets 9,466,846 2,780,367

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Liabilities and Equity

Term loan payable $ 25,000,000 $ 91,940,062

Unsecured notes payable, net of debt issuance cost 116,530,673 81,856,799

Repurchase agreements payable, net of deferred financing fees 169,304,710 43,974,608

Unsecured notes payable, net $ 118,380,897 $ 116,530,673

Secured financing agreements, net 290,525,313 313,600,484

Obligations under participation agreements ( Note 8 )

12,680,594 42,232,027

Mortgage loan payable, net of deferred financing fees and other 29,488,326 32,134,295

Revolving line of credit payable, net of deferred financing fees 89,807,448 38,186,472

Secured borrowing — 34,586,129

Interest reserve and other deposits held on investments 3,954,986 4,633,204

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12.5 % Series A Cumulative Non-Voting Preferred Stock at liquidation preference,

125 shares authorized and 125 shares issued and outstanding at December 31,

2022 and 2021

125,000 125,000

Common stock, $ 0.01 par value, no and 450,000,000 shares authorized and no

and 19,487,460 shares issued and outstanding, at December 31, 2022 and 2021,

Class A common stock, $ 0.01 par value, 450,000,000 and no shares authorized and no shares issued, at both December 31, 2022 and 2021, respectively

Class B Common stock, $ 0.01 par value, 450,000,000 and no shares authorized

and 24,335,370 and no shares issued and outstanding at December 31, 2022

125 shares authorized and no shares and 125 shares issued and outstanding at

December 31, 2023 and 2022, respectively

Class A Common Stock, $ 0.01 par value, 450,000,000 shares authorized and no

shares issued, at both December 31, 2023 and 2022

Class B Common Stock, $ 0.01 par value, 450,000,000 shares authorized and

24,336,033 and 24,335,370 shares issued and outstanding at December 31, 2023

and 2022, respectively

243,360 243,354

Additional paid-in capital 444,458,206 444,449,813

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Asset servicing fee 1,857,765 1,560,044

Provision for loan losses 11,813,409 10,904,163

Provision for credit losses 45,548,803 11,813,409

Real estate operating expenses 4,586,245 5,005,551

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92,398,284 45,785,225

Operating income 10,829,221 7,770,854

Operating (loss) income ( 24,484,250 ) 10,829,221

Other income and expenses

Interest expense from obligations under participation agreements ( 3,180,771 ) ( 10,596,545 )

Interest expense on repurchase agreement payable ( 7,913,942 ) ( 142,495 )

Interest expense on mortgage loan payable ( 2,173,114 ) ( 2,449,239 )

Interest expense on revolving line of credit ( 2,674,568 ) ( 911,811 )

Interest expense on term loan payable ( 524,344 ) ( 6,835,877 )

Interest expense on secured financing ( 28,113,245 ) ( 14,793,540 )

Interest expense on unsecured notes payable ( 9,643,974 ) ( 6,682,937 )

Interest expense on secured borrowing ( 1,507,572 ) ( 1,576,502 )

Net unrealized (losses) gains on marketable securities ( 122,299 ) 22,500

Loss on sale of real estate ( 51,984 ) —

Income from equity investment in unconsolidated investments 2,731,477 5,925,802

Interest expense on obligations under participation agreements ( 1,353,006 ) ( 3,180,771 )

Gain on extinguishment of participation liability 14,079,379 3,435,902

Unrealized losses on investments, net ( 316,573 ) ( 122,299 )

(Loss) income from equity investment in unconsolidated investments ( 2,383,938 ) 2,731,477

Gain on sale of interests in unconsolidated investments — 799,827

Realized loss on loan repayments — ( 517,989 )

Gain on extinguishment of obligations under participation agreements 3,435,902 —

Realized gains on marketable securities 83,411 129,248

Loss on disposal of real estate ( 4,211,153 ) ( 51,984 )

Realized (losses) gains on investments, net ( 459,279 ) 83,411

( 32,401,789 ) ( 17,780,914 )

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Consolidated Statements of Changes in Equity

Preferred Stock 12.5% Series A Cumulative Non-Voting Preferred Stock Common Stock Class A Common Stock Class B Common Stock Additional

Preferred Stock 12.5 % Series A Cumulative Non-Voting Preferred Stock

Class A Common Stock Class B Common Stock Additional

Capital Accumulated Deficit

$0.01 Par Value $0.01 Par Value $0.01 Par Value

$ 0.01 Par Value

Shares Amount Shares Amount Shares Amount Total equity

Balance at January 1, 2023 $ — 125 $ 125,000 — $ — 24,335,370 $ 243,354 $ 444,449,813 $ ( 122,935,993 ) $ 321,882,174

Cumulative effect of credit loss accounting standard effective

January 1, 2023 ( Note 2 )

— — — — — — — — ( 4,619,723 ) ( 4,619,723 )

Shares issued from reinvestment of shareholder distributions — — — — — 663 6 8,393 — 8,399

Redemption of Series A Preferred Stock — ( 125 ) ( 125,000 ) — — — — — — ( 125,000 )

Distributions declared on common shares ($ 0.76 per share)

— — — — — — — — ( 18,602,096 ) ( 18,602,096 )

Distributions declared on preferred shares — — — — — — — — ( 3,907 ) ( 3,907 )

Net loss — — — — — — — — ( 56,886,039 ) ( 56,886,039 )

Balance at December 31, 2023

$ — — $ — — $ — 24,336,033 $ 243,360 $ 444,458,206 $ ( 203,047,758 ) $ 241,653,808

Preferred Stock 12.5 % Series A Cumulative Non-Voting Preferred Stock

Common Stock Class A Common Stock Class B Common Stock Additional

Capital Accumulated Deficit

$ 0.01 Par Value

Shares Amount Shares Amount Shares Amount Shares Amount Total equity

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Balance at December 31, 2022 $ — 125 $ 125,000 — $ — — $ — 24,335,370 $ 243,354 $ 444,449,813 $ ( 122,935,993 ) $ 321,882,174

Preferred Stock 12.5% Series A Cumulative Non-Voting Preferred Stock Common Stock Additional

Capital Accumulated Deficit

$0.01 Par Value

Shares Amount Shares Amount Total equity

Balance at January 1, 2021 $ — 125 $ 125,000 19,487,460 $ 194,875 $ 373,443,672 $ ( 70,438,482 ) $ 303,325,065

Distributions declared on common shares ($ 0.88 per share)

— — — — — — ( 17,110,136 ) ( 17,110,136 )

Distributions declared on preferred shares — — — — — — ( 15,624 ) ( 15,624 )

Net loss — — — — — — ( 12,355,727 ) ( 12,355,727 )

Balance at December 31, 2021 $ — 125 $ 125,000 19,487,460 $ 194,875 $ 373,443,672 $ ( 99,919,969 ) $ 273,843,578

See notes to consolidated financial statements .

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Adjustments to reconcile net loss to net cash provided by operating activities:

Paid-in-kind interest income, net — ( 1,000,028 )

Depreciation and amortization 6,968,985 6,530,595

Provision for loan losses 11,813,409 10,904,163

Impairment charge 1,604,989 3,395,430

Provision for credit losses 45,548,803 11,813,409

Impairment charges 11,765,540 1,604,989

Amortization of net purchase premiums on loans 1,124,157 557,012

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Amortization of above-market rent ground lease ( 103,017 ) ( 130,348 )

Realized gain on marketable securities ( 83,411 ) ( 129,248 )

Unrealized losses (gains) on marketable securities 122,299 ( 22,500 )

Loss on sale of real estate 51,984 —

Realized loss on loan repayments — 517,989

Gain on extinguishment of obligations under participation agreements ( 3,435,902 ) —

Income from equity investment in excess of distributions received ( 1,091,372 ) ( 1,276,726 )

Gain on extinguishment of participation liability ( 14,079,379 ) ( 3,435,902 )

Gain on sale of interests in unconsolidated investments — ( 799,827 )

Realized loss (gain) on investments, net 459,279 ( 83,411 )

Unrealized losses on investments, net 316,573 122,299

Loss on sale of real estate 4,211,153 51,984

Distributions received from equity investment in unconsolidated investments 7,008,461 180,549

Loss (income) from equity investment in unconsolidated investments 4,188,976 ( 1,271,921 )

Changes in operating assets and liabilities:

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Cash flows from investing activities:

Origination and purchase of loans ( 290,005,676 ) ( 252,437,733 )

Proceeds from repayments of loans 126,142,565 197,484,239

Origination and purchase of loans ( 78,883,295 ) ( 290,005,676 )

Purchase of real estate properties ( 52,508,252 ) —

Purchase of held-to-maturity securities ( 20,025,024 ) —

Proceeds from redemption of held-to-maturity securities 20,000,000 —

Return of capital on equity interests in unconsolidated investments 11,287,839 —

Purchase of marketable securities ( 7,905,211 ) ( 136,265 )

Purchase of equity interests in unconsolidated investments ( 7,307,806 ) ( 25,504,979 )

Funding for promissory note receivable ( 3,844,797 ) ( 386,395 )

Proceeds from sale of marketable securities 2,422,095 1,259,417

Cash acquired in purchase of real estate 712,608 —

Capital expenditures on real estate ( 132,506 ) —

Proceeds from sale of interests in unconsolidated investments — 33,688,430

1 unchanged sentence

Proceeds from sale of real estate — 8,585,500

Proceeds from sale of marketable securities 1,259,417 6,608,396

Distributions in excess of net income 923,200 —

Repayments of promissory note receivable ( 386,395 ) —

Proceeds from promissory note receivable 386,395 —

Purchase of marketable securities ( 136,265 ) ( 6,479,148 )

Distributions in excess of equity income — 923,200

Proceeds from repayment of promissory note receivable — 386,395

Cash paid to stockholders of Terra BDC in connection with the BDC Merger — ( 12,920 )

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Cash flows from financing activities:

Proceeds from borrowings under repurchase agreements 151,906,606 44,569,600

Proceeds from borrowings under revolving line of credit 130,519,295 38,575,895

Repayment of borrowings under the term loan ( 93,763,471 ) ( 16,585,001 )

Repayments of borrowings under revolving line of credit ( 78,959,325 ) —

Repayment of secured borrowing ( 38,672,291 ) —

Proceeds from obligations under participation agreements 29,607,969 71,682,634

Repayments of borrowings under repurchase agreements ( 25,599,600 ) —

Repayments of obligations under participation agreements ( 22,239,670 ) ( 101,722,161 )

Proceeds from secured financing 211,017,859 286,577,087

Principal repayments on secured financing ( 205,265,764 ) ( 239,705,071 )

Distributions paid ( 18,597,604 ) ( 16,064,331 )

Proceeds from secured borrowing 4,151,186 16,239,256

Change in interest reserve and other deposits held on investments ( 3,039,221 ) ( 4,733,805 )

Repayment of mortgage principal ( 2,710,384 ) ( 12,057,533 )

Payment of financing costs ( 3,346,724 ) ( 1,033,097 )

Proceeds from issuance of unsecured notes payable, net of discount — 82,464,844

Proceeds from borrowings under the term loan — 2,764,020

Net cash provided by financing activities 34,103,666 101,776,642

Net (decrease) increase in cash, cash equivalents and restricted cash ( 14,629,055 ) 18,178,324

Cash, cash equivalents and restricted cash at beginning of year 51,098,647 32,920,323

Cash, cash equivalents and restricted cash at end of year ( Note 2 )

Proceeds from obligations under participation agreements 1,494,422 29,607,969

Change in interest reserve and other deposits held on investments ( 678,218 ) ( 3,039,221 )

Redemption of Series A Preferred Stock ( 125,000 ) —

Repayments of obligations under participation agreements — ( 22,239,670 )

Net cash (used in) provided by financing activities ( 15,501,029 ) 34,103,666

Net decrease in cash, cash equivalents and restricted cash ( 16,932,815 ) ( 14,629,055 )

Cash, cash equivalents and restricted cash at beginning of period 36,469,592 51,098,647

Cash, cash equivalents and restricted cash at end of period ( Note 2 )

$ 19,536,777 $ 36,469,592

2 unchanged sentences

Cash paid for interest $ 34,435,541 $ 22,569,976

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

Supplemental non-cash information:

Reinvestment of shareholder distributions $ 8,399 $ —

Supplemental Non-Cash Investing Activities:

In May 2023, the Company acquired five industrial buildings for a $ 3.5 million cash payment and the settlement of a mezzanine loan that was accounted for as an equity investment and five senior loans that were held for investment.

The following table presents a summary of the total capitalized costs and the values of the net assets acquired:

Total Capitalized Costs:

Cash and cash equivalents $ 3,515,466

Loans held for investment 68,737,877

Equity investment in unconsolidated investment 10,149,642

Interest receivable 456,650

Other assets 429,326

Net Assets Acquired

Cash and cash equivalents $ 712,608

Other assets 33,802

Land 14,457,149

Buildings and Improvements 65,365,376

Intangible asset and liability:

In-please lease 8,403,667

Below-market rent ( 4,770,870 )

Accounts payable and accrued expenses ( 912,771 )

On October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Merger Agreement”), Terra Income Fund 6, Inc.

(“Terra BDC”), merged with and into Terra Income Fund 6, LLC (formerly Terra Merger Sub, LLC) (“Terra LLC”), a wholly owned subsidiary of Terra Property Trust, Inc.

(the “Company” or Terra Property Trust”), with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as a wholly owned subsidiary of the Company ( Note 3 ).

The following table presents a summary of the consideration exchanged and assets acquired and liabilities assumed as a result of the BDC Merger:

merged with and into Terra Income Fund 6, LLC, a wholly owned subsidiary of Terra Property Trust, Inc.

with Terra Income Fund 6, LLC continuing as the surviving entity of the merger and as a wholly owned subsidiary of the Company ( Note 3 ).

The following table presents a summary of the consideration exchanged and assets acquired and liabilities assumed as a result of the merger:

Total Consideration

Fair value of Terra Property Trust shares of common stock issued $ 71,054,620

Fair value of Terra Property Trust, Inc.

shares of common stock issued $ 71,054,620

Cash paid for fractional shares 12,920

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Terra Property Trust, Inc.

(and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) was incorporated under the Maryland General Corporation Law 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.

( and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) is a real estate investment trust (“REIT”) that originates, invests in and manages a diverse portfolio of real estate and real estate-related assets.

The Company was incorporated under the Maryland General Corporation Law on December 31, 2015.

The Company focuses primarily on commercial real estate credit investments, including first mortgage loans, subordinated loans (including B-notes, mezzanine and preferred equity) and credit facilities throughout the United States.

The Company’s loans finance the acquisition, development or recapitalization of high-quality commercial real estate in the United States .

The Company focuses on middle market loans in the approximately $ 10 million to $ 50 million range, which it believes are subject to less competition, offer higher risk-adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification .

The Company may also make strategic real estate equity and non-real estate-related investments that align with its investment objectives and criteria .

On January 1, 2016, Terra Secured Income Fund 5, LLC (“Terra Fund 5”), the Company’s then parent, contributed its consolidated portfolio of net assets to the Company pursuant to a contribution agreement in exchange for shares of the Company’s common stock.

1 unchanged sentence

On March 2, 2020, the Company engaged in a series of transactions pursuant to which the Company issued an aggregate of 4,574,470.35 shares of its common stock in exchange for the settlement of an aggregate of $ 49.8 million of participation interests in loans held by the Company, cash of $ 25.5 million and other working capital.

The Company has elected to be taxed, and to qualify annually thereafter, as a 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.

The Company has elected to be taxed, and to qualify annually thereafter, as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with the taxable year ended December 31, 2016.

As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors.

The Company also operates its business in a manner that permits it to maintain its exemption from registration as an “investment company” under the Investment Company Act of 1940, as amended.

The Company also operates its business in a manner that permits it to maintain its exemption from registration as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”).

The Company’s investment activities are externally managed by Terra REIT Advisors, LLC (“Terra REIT Advisors” or the “Manager”), a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC (“Terra Capital Partners”), pursuant to a management agreement (the “Management Agreement”), under the oversight of the Company’s board of directors (the “Board”) ( Note 8 ).

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Services necessary for the Company’s business are provided by individuals who are employees of the Manager or by individuals who were contracted by the Company or by the Manager to work on behalf of the Company pursuant to the terms of the Management Agreement.

On April 1, 2021, Mavik Capital Management, LP (“Mavik”), an entity controlled by Vikram S.

Uppal, the Chief Executive Officer of the Company, completed a series of related transactions that resulted in all of the outstanding interests in Terra Capital Partners, being acquired by Mavik for a combination of cash and interests in Mavik (the “Recapitalization”).

No amendments or other modifications were made to the Management Agreement in connection with the Recapitalization, and the Manager and its personnel continue to serve as the external manager of the Company pursuant to the terms of the Management Agreement.

On October 1, 2022, pursuant to the Merger Agreement, Terra BDC, merged with and into Terra LLC, a wholly owned subsidiary of the Company, with Terra LLC continuing as the surviving entity of the BDC Merger and as a wholly owned subsidiary of the Company ( Note 3 ).

As of December 31, 2022, Terra JV, LLC (“Terra JV”), former shareholders of Terra BDC and Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”) held 70.0 %, 19.9 % and 10.1 % of the issued and outstanding shares of the Company’s common stock, respectively.

On October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Merger Agreement”), Terra Income Fund 6, Inc.

(“Terra BDC”), merged with and into Terra Income Fund 6, LLC (“Terra LLC”), a wholly owned subsidiary of the Company, with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as a wholly owned subsidiary of the Company ( Note 3 ).

On December 20, 2023, Terra Fund 5 announced that effective December 29, 2023 (the “Distribution Date”), Terra Fund 5 would distribute all of its shares of the Company’s Class B Common Stock to its members as part of the winding up of Terra Fund 5.

On the Distribution Date, each member of Terra Fund 5 received 2,252.02 shares of the Company’s Class B Common Stock for each unit of membership interest in Terra Fund 5 held by such member.

Because Terra Fund 5 previously owned its interests in the shares of Class B Common Stock indirectly through its ownership of interests in Terra JV, LLC (“Terra JV”), prior to the Distribution Date, Terra JV first distributed the shares of Class B Common Stock to Terra Fund 5 and Terra Secured Income Fund 7, LLC (“Terra Fund 7”), and Terra Fund 5 then distributed those shares to its members on the Distribution Date and Terra Fund 7 became a direct stockholder of the Company’s Class B Common Stock.

As of December 31, 2023, Terra Fund 7 and Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”) held 8.7 % and 10.1 %, respectively, of the issued and outstanding shares of the Company’s common stock.

Notes to Consolidated Financial Statements

As previously disclosed, the Company continues to explore alternative liquidity transactions on an opportunistic basis to maximize stockholder value.

Examples of the alternative liquidity transactions that, depending on market conditions, may be available to the Company include a listing of the Company’s shares of common stock on a national securities exchange, adoption of a share repurchase plan, a liquidation of the Company’s assets, a sale of the Company or a strategic business combination, in each case, which may include the further in-kind distribution of the Company’s shares of common stock indirectly owned by certain of its affiliate funds to the ultimate investors in such affiliate funds.

The Company cannot provide any assurance that any alternative liquidity transaction will be available or, if available, that the Company will pursue or be successful in completing any such alternative liquidity transaction.

One of the potential future liquidity transactions that the Company continues to evaluate is a “direct listing” of the Class A Common Stock on a national securities exchange (i.e., a listing not involving a concurrent public offering of newly issued shares).

If market conditions are not supportive of a direct listing that would in the Company’s view lead to a constructive trading environment for the Class A Common Stock, the Company will explore alternative paths to pursue its investment strategy and provide liquidity to its investors, including converting the Company into a traditional “non-traded REIT.” As part of a potential conversion to a non-traded REIT, the Company would adopt a customary share repurchase plan pursuant to which its investors could request to have their shares of its common stock redeemed for cash.

Summary of Significant Accounting Policies

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Certain prior period amounts have been reclassified to conform to the current period presentation.

Notes to Consolidated Financial Statements

The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or voting interest model.

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Loans Held for Investment

The Company originates, acquires, and structures, or acquired through participations, real estate-related loans generally to be held to maturity (collectively the “loans”).

The Company originates, acquires, and structures, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”).

Loans held for investment are carried at the principal amount outstanding, adjusted for the accretion of discounts on investments and exit fees, and the amortization of premiums on investments and origination fees.

The Company’s preferred equity investments, which are economically similar to mezzanine loans and subordinate to any loans but senior to common equity, are accounted for as loans held for investment.

Loans are carried at 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:

Loans are carried at amortized cost less allowance for credit losses.

Amortized cost is the amount at which a financing receivable or a loan is

Notes to Consolidated Financial Statements

originated or acquired, adjusted for accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash and write-offs.

Allowance for Credit Losses

On January 1, 2023, the Company adopted the provisions of Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses .

ASC 326 mandates the use of a current expected credit loss (“CECL”) methodology for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” methodology previously required under United States generally accepted accounting principles (“U.S.

The CECL methodology requires the consideration of possible credit losses over the life of an instrument as opposed to estimating credit losses upon the occurrence of an actual loss event under the previous “incurred loss” methodology.

As permitted by ASC 326, the Company elected not to measure an allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheet), but rather write off in a timely manner by reversing interest income that would likely be uncollectible.

The Company’s adoption of the ASC 326 resulted in a $ 4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to member’s capital as of January 1, 2023.

Subsequent to the adoption of the CECL methodology, any increase or decrease to the allowance for credit losses is recorded in earnings on the consolidated statement of operations.

Performing Loans

The Company uses a model based approach for estimating the allowance for credit losses on performing loans on a collective basis, including future funding commitments for which the Company does not have the unconditional right to cancel, as these loans share similar risk characteristics.

The Company utilizes information obtained from internal and external sources relating to past events, current economic conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio.

The Company utilizes a commercial mortgage based, third-party loan loss model and because the Company does not have a meaningful history of realized credit losses on its loan portfolio, it subscribes to a database service to provide historical proxy loan loss information.

The Company employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998.

The Company has chosen to incorporate a weighted average macroeconomic forecast that encompasses baseline, optimistic and pessimistic scenarios, into its allowance for credit losses on performing loans estimate during the reasonable and supportable forecast period which is currently eight quarters.

The Company selects certain economics variables from a group of independent variables such as Commercial Real Estate Price Index, unemployment and interest rate which are included in the model as part of macroeconomic forecast and updated regularly based on current economic trends.

For the year ended December 31, 2023, adjustments to the weights ascribed to the multiple macroeconomic forecast scenarios were made in response to changes in expectations of macroeconomic conditions such as inflation and interest rates.

The specific loan level information input into the model includes loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments.

Based on the inputs, the loan loss model determines a loan loss rate through the generation of a probability of default (PD) and loss given default (LGD) for each loan.

The allowance for credit losses on performing loans is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan.

These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses.

Changes in such estimates can significantly affect the expected credit losses.

Beyond the Company’s reasonable and supportable forecast period, the Company reverts to historical loss information on a straight-line basis over the remaining contractual loan term, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion.

The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors.

The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period.

The determination of the performing loans credit loss estimate considers historical loss information and current economic conditions for each loan, reversion period and reasonable and supportable forecasts about the future.

The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and plausible outcomes for the U.S.

The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed.

The Company also performs a qualitative assessment and applies qualitative adjustments as necessary, usually due to limitations of the loan loss model.

The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the

Notes to Consolidated Financial Statements

Company to determine the amount of the expected loss more accurately and reasonably for these investments.

The Company also evaluates the contractual life of its loans to determine if changes are needed for certain contractual extension options, renewals, modifications, and prepayments.

Unfunded Commitments

Some of the Company’s performing loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL methodology because the Company does not have an unconditional right to cancel such commitments.

The allowance for credit losses related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets.

This allowance for credit losses is estimated using the same method outlined above for the Company’s outstanding performing loan balances and increases or decreases are also recorded in earnings on the consolidated statements of operations.

Non-Performing Loans

During the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, the Company considers that loan non-performing.

For all non- performing loans, such as those in default, collateral-dependent or modified loans, including historical troubled debt restructurings, the Company removes these loans from the industry loss rate approach described above and analyzes them separately.

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

As discussed below in Recent Accounting Pronouncements, the Company adopted the provisions of Accounting Standards Update (“ASU”) 2022-02 Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) concurrently with the adoption of CECL on January 1, 2023, prospectively.

Loans Not Secured by Real Estate

The Company has two loans that are not secured by real estate.

These loans, which are included in other assets on the consolidated balance sheets, are recorded at amortized cost.

The Company performs a separate analysis based on recoverability to determine the allowance for credit losses on these loans.

As of December 31, 2023, the Company did not record any allowance for credit losses on these two loans because the Company believes that it will be able to collect all outstanding interest and principal on or before the maturity date.

Allowance for Loan Losses Prior to 2023

Prior to the adoption of the CECL methodology on January 1, 2023, the Company recorded an allowance for loan losses using the incurred loss methodology 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) non-performing loan reserves, if any.

The Company 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;

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Based on a 5-point scale, the Company’s loans are rated “1” through “5”, from less risk to greater risk, as follows:

Notes to Consolidated Financial Statements

Risk Rating Description

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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 foreseeable future.

Such concessionary modifications are classified as troubled debt restructurings (“TDRs”) 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 Unconsolidated Investments

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

Notes to Consolidated Financial Statements

The Company evaluates its equity investment unconsolidated investments on a periodic basis to determine if there are any indicators that the value of its equity investments may be impaired and whether or not that impairment is other-than-temporary.

To the extent an impairment has occurred and is determined to be other-than-temporary, the Company measures the charge as the excess of the carrying value of its investment over its estimated fair value, which is determined by calculating its share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint venture agreements.

Held-to-Maturity Debt Securities

The Company classifies debt securities for which it has both the positive intent and ability to hold until maturity of the security as held-to-maturity debt securities.

These securities are recorded at amortized cost with changes in amortized cost recognized in earnings until realized.

Held-to-maturity debt securities are subject to the allowance for credit losses described above.

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.

From time to time, the Company may invest in short term debt.

These securities are classified as available-for-sale securities and are carried at fair value.

Changes in the fair value of debt securities are reported in other comprehensive income until a gain or loss on the securities is realized.

The Company may also invest in short term equity securities.

Changes in the fair value of equity securities are recognized in earnings.

Real Estate Owned, Net

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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

Notes to Consolidated Financial Statements

insufficient to recover the carrying amount of the real estate assets.

The review of recoverability is based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate assets.

If impaired, the real estate asset will be written down to its estimated fair value.

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Lease expense is recognized on a straight-line basis over the lease term.

Notes to Consolidated Financial Statements

On October 19, 2023, in connection with the deed in lieu of foreclosure discussed in Note 6 , the Company is no longer a party to the ground lease and the related ROU assets and liabilities were written off.

Revenue Recognition

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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.

The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of income and principal becomes doubtful.

Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated.

Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability.

The Company holds loans in its portfolio that contain paid-in-kind (“PIK”) interest provisions.

The Company holds loans in its portfolio that may contain paid-in-kind (“PIK”) interest provisions.

The PIK interest, which represents contractually deferred interest that is added to the principal balance that is due at maturity, is recorded on the accrual basis.

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Cash held in escrow by lender represents amounts funded to an escrow account for debt services and tenant improvements.

Notes to Consolidated Financial Statements

Cash held in escrow is restricted and is not available for general corporate purposes.

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

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statements of cash flows $ 19,536,777 $ 36,469,592

Notes to Consolidated Financial Statements

Participation Interests

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See “ Obligations Under Participation Agreements ” in Note 9 for additional information.

The Company previously financed certain of its senior loans through borrowings under an indenture and credit agreement.

The Company accounted for the borrowings as a term loan, which was carried at the contractual amount (cost), net of unamortized deferred financing fees.

On February 18, 2022, the Company refinanced the Term Loan (as defined below) with a new repurchase agreement.

See “Term Loan” in Note 9 for additional information.

In connection with the BDC Merger, the Company assumed a $ 25.0 million delayed draw term loan.

The Company classified this delayed draw term loan as term loan payable on the consolidated balance sheets.

Repurchase Agreements

The Company finances certain of its senior loans held for investment through repurchase transactions under master repurchase agreements.

The Company accounts for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees.

See “Repurchase Agreements” in Note 9 for additional information.

Secured Financing Agreements, Net

The Company's secured financing agreements include two master repurchase agreements, a revolving line of credit, non-recourse property mortgages, note-on-note financing arrangements and a term loan.

The Company accounts for borrowings under these financing arrangements as secured transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees.

See “ Secured Financing Arrangements ” in Note 9 for additional information.

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, secured borrowing, unsecured notes, mortgage loan payable, term loan payable, repurchase agreement payment and revolving line of credit.

Such financial instruments are carried at cost, less impairment, where applicable.

Such financial instruments are carried at amortized cost, less impairment, where applicable.

Marketable securities are financial instruments that are reported at fair value.

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The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2016.

In order to qualify as a REIT, the Company is required, among other things, to distribute dividends equal

Notes to Consolidated Financial Statements

to at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets.

In order to qualify as a REIT, the Company is required, among other things, to distribute dividends equal to at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets.

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As of December 31, 2023, the Company has satisfied all the requirements for a REIT.

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 did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes , nor did the Company have any unrecognized tax benefits as of the periods presented herein.

The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its consolidated statements of operations.

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The Company’s 2020-2023 federal tax returns remain subject to examination by the Internal Revenue Service.

Notes to Consolidated Financial Statements

Earnings Per Share

The Company has a simple equity capital structure with only common stock and preferred stock outstanding.

The Company has a simple equity capital structure with only common stock outstanding as of December 31, 2023 and common stock and preferred stock outstanding as of December 31, 2022.

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.

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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.

From time to time, the Company may acquire real estate encumbering the senior loans through foreclosure, may invest in real estate related joint ventures and may directly acquire real estate properties.

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):

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

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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.

In October 2019, the FASB decided that for smaller reporting companies, ASU 2016-13 and related amendments are 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.

The Company adopted this ASU and related amendments on January 1, 2023.

The adoption of ASU 2016-13 resulted in an incremental reserve of approximately $ 4.6 million, which included reserve on future loan funding commitments.

The Company will record the cumulative effect of initially applying this guidance as an adjustment to Accumulated deficit using the modified retrospective method of adoption.

The adoption of ASU 2016-13 resulted in an incremental reserve of approximately $ 4.6 million, which included a reserve on future loan funding commitments.

The Company recorded the cumulative effect of initially applying this guidance as an adjustment to Accumulated deficit using the modified retrospective method of adoption.

London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities.

In July 2017, the U.K.

Financial Conduct Authority, which regulates the LIBOR administrator, ICE Benchmark Administration Limited (“IBA”), announced that it would cease to compel banks to participate in setting LIBOR as

Notes to Consolidated Financial Statements

a benchmark by the end of 2021, which has subsequently been delayed to June 30, 2023.

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”).

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2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition (“ASU 2021-01”).

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) — Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”).

ASU 2022-06 deferred the sunset date of ASU 2020-04 to December 31, 2024.

In the event LIBOR is unavailable, the Company’s investment documents provide for a substitute index, on a basis generally consistent with market practice, intended to put the Company in substantially the same economic position as LIBOR.

As a result, the Company does not expect the reference rate reform and the adoption of ASU 2020-04 and ASU 2021-01 to have a material impact on its consolidated financial statements and disclosures.

As of December 31, 2023, all of the Company’s floating rate loans and related financings have transitioned to the applicable replacement benchmark rate, or reference a benchmark rate that is not expected to be replaced.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”).

ASU 2022-02 eliminates troubled debt restructuring guidance for organizations that adopted the amendments in ASU 2016-13 while providing for additional disclosures for loan modifications.

ASU 2022-02 also amends the vintage disclosure guidance for public business entities.

The Company adopted the provisions of ASU 2022-02 concurrently with the adoption of ASU 2016-03.

The adoption of ASU 2022-02 did not have any material impact on the Company’s financial condition and results of operations.

Notes to Consolidated Financial Statements

On October 1, 2022 (the “Closing Date”), pursuant to the Merger Agreement, Terra BDC merged with and into Terra LLC, with Terra LLC surviving as a wholly owned subsidiary of the Company.

The Certificate of Merger and Articles of Merger with respect to the BDC Merger were filed with the Secretary of State of the State of Delaware and State Department of Assessments and Taxation of Maryland (the “SDAT”), respectively, with an effective time and date of 12:02 a.m., Eastern Time, on the Closing Date (the “Effective Time”).

At the Effective Time, except for any shares of common stock, par value $ 0.001 per share, of Terra BDC (“Terra BDC Common Stock”) held by the Company or any wholly owned subsidiary of the Company or Terra BDC, which shares were automatically retired and ceased to exist with no consideration paid therefor, each issued and outstanding share of Terra BDC Common Stock was automatically cancelled and retired and converted into the right to receive (i) 0.595 shares of the newly designated Class B Common Stock and (ii) cash, without interest, in lieu of any fractional shares of Class B Common Stock otherwise issuable in an amount, rounded to the nearest whole cent, determined by multiplying (x) the fraction of a share of Class B Common Stock to which such holder would otherwise be entitled by (y) $ 14.38 .

At the Effective Time, except for any shares of common stock, par value $ 0.001 per share, of Terra BDC (“Terra BDC Common Stock”) held by the Company or any wholly owned subsidiary of the Company or Terra BDC, which shares were automatically retired and ceased to exist with no consideration paid therefor, each issued and outstanding share of Terra BDC Common Stock was automatically cancelled and retired and converted into the right to receive (i) 0.595 shares of the newly designated Class B Common Stock, par value $ 0.01 per share (“Class B Common Stock”) and (ii) cash, without interest, in lieu of any fractional shares of Class B Common Stock otherwise issuable in an amount, rounded to the nearest whole cent, determined by multiplying (x) the fraction of a share of Class B Common Stock to which such holder would otherwise be entitled by (y) $ 14.38 .

Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of the Closing Date.

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The Company, as the acquirer, accounted for the BDC Merger as an asset acquisition and all direct acquisition-related costs are capitalized to the total cost of the assets acquired and liabilities assumed.

Pursuant to Accounting Standard Codification Topic 805, Business Combination , total cost is allocated to the assets acquired and liabilities assumed on a relative fair value basis.

Pursuant to ASC Topic 805, Business Combination , total cost is allocated to the assets acquired and liabilities assumed on a relative fair value basis.

Notes to Consolidated Financial Statements

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The fair value of the 4,847,910 shares of the Class B Common Stock was determined based on the Company’s net asset value per share of $ 14.66 as of October 1, 2022.

Net Gain on Extinguishment of Obligations Under Participation Agreements

Net Gain on Extinguishment of Participation Liability

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.

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Each of the other members of the Board immediately prior to the Effective Time continued as members following the Effective Time.

Voting Support Agreement

On the Closing Date, the Company, Terra JV and Terra Offshore REIT entered into a Voting Support Agreement (the “2022 Voting Agreement”).

Pursuant to the 2022 Voting Agreement, effective as of the Closing Date, Terra JV and Terra Offshore REIT have agreed to, at any meeting of the Company’s stockholders called for the purpose of electing directors (or by

Notes to Consolidated Financial Statements

any consent in writing or by electronic transmission in lieu of any such meeting), cast all votes entitled to be cast by each of them in favor of the election of the Terra BDC Designees until the earlier of (i) the first anniversary of the Closing Date, (ii) the TPT Class B Common Stock Distributions (as defined in the 2022 Voting Agreement) or (iii) an amendment and restatement of the amended and restated management agreement between the Company and Terra REIT Advisors approved by the Company’s Board, including the Terra BDC Designees.

Indemnification Agreements

The Company has entered into customary indemnification agreements with each member of the Board (including each Terra BDC Designee).

These agreements, among other things, require the Company to indemnify each director to the maximum extent permitted by Maryland law, including indemnification of expenses such as attorney’s fees, judgments, fines and settlement amounts incurred in any action or proceeding, including any action or proceeding by or in right of the Company, arising out of his or her service as a director.

These agreements, among other things, require the Company to indemnify each director to the maximum

Notes to Consolidated Financial Statements

extent permitted by Maryland law, including indemnification of expenses such as attorney’s fees, judgments, fines and settlement amounts incurred in any action or proceeding, including any action or proceeding by or in right of the Company, arising out of his or her service as a director.

WMC Merger Agreement

On June 28, 2023, the Company announced it entered into an Agreement and Plan of Merger, dated as of June 27, 2023 (the “WMC Merger Agreement”), with Western Asset Mortgage Capital Corporation, a Delaware corporation (“WMC”).

On July 27, 2023, WMC notified the Company that its board of directors determined that a proposal from AG Mortgage Investment Trust, Inc.

(“MITT”) to acquire WMC was a “Parent Superior Proposal” under the WMC Merger Agreement and that WMC’s board of directors intended to terminate the WMC Merger Agreement unless WMC received a revised proposal from the Company by a specified deadline such that WMC’s board of directors determined that MITT’s proposal was no longer a “Parent Superior Proposal.”

On July 25, 2023, the Company disclosed that it acquired approximately 5.2 % of the outstanding shares of common stock of MITT as of July 24, 2023.

On August 8, 2023, WMC terminated the WMC Merger Agreement pursuant to its terms (the “Termination”), and the Company was paid a termination fee of $ 3.0 million.

The termination fee was used to pay the professional fees incurred in connection with contemplated merger.

Upon the Termination, the amended and restated management agreement the Company entered into with WMC and the Manager on June 27, 2023, terminated in accordance with its terms.

The Company continues to be managed by the Manager pursuant to the terms of the existing Management Agreement between the Company and the Manager.

Loans Held for Investment

The Company elected the practical expedient under ASC 326 to exclude accrued interest from amortized cost.

As of December 31, 2023 and 2022, accrued interest receivable of $ 6.5 million and $ 4.1 million, respectively, is included in interest receivable on the consolidated balance sheets, and is excluded from the amortized cost of loans held for investment.

Portfolio Summary

13 unchanged sentences

_______________

(1) These loans pay a coupon rate of LIBOR or Secured Overnight Financing Rate (“SOFR”), as applicable, plus a fixed spread.

Coupon rate shown was determined using LIBOR of 4.39 %, average SOFR of 4.06 % and forward-looking term rate based on SOFR (“Term SOFR”) of 4.36 % as of December 31, 2022 and LIBOR of 0.10 % as of December 31, 2021.

(2) As of December 31, 2022 and 2021, amount included $ 413.1 million and $ 163.1 million of senior mortgages used as collateral for $ 261.0 million and $ 93.8 million of borrowings under credit facilities, respectively ( Note 9 ).

(3) As of December 31, 2022 and 2021, twenty-one and thirteen of these loans, respectively, are subject to a LIBOR or SOFR floor, as applicable.

(1) These loans pay a coupon rate of LIBOR, Secured Overnight Financing Rate (“SOFR”), or forward-looking term rate based on SOFR (“Term SOFR”), as applicable, plus a fixed spread.

Coupon rates shown were determined using LIBOR of 5.47 %, average SOFR of 5.34 % and Term SOFR of 5.35 % as of December 31, 2023 and LIBOR of 4.39 %, average SOFR of 4.06 % and Term SOFR of 4.36 % as of December 31, 2022.

(2) As of December 31, 2023 and 2022, amount included $ 342.9 million and $ 413.1 million of senior mortgages used as collateral for $ 204.9 million and $ 261.0 million of borrowings under secured financing arrangements, respectively ( Note 9 ).

(3) As of December 31, 2023 and 2022, 14 and 21 loans, respectively, were subject to a LIBOR, SOFR or Term SOFR floor, as applicable.

Notes to Consolidated Financial Statements

Lending Activities

2 unchanged sentences

Balance, January 1, 2023 $ 584,417,939 $ 42,072,828 $ 626,490,767

New loans made 257,780,401 32,225,275 290,005,676

Cumulative effect of credit loss accounting standard effective

January 1, 2023 ( Note 2 )

( 4,123,143 ) ( 126,909 ) ( 4,250,052 )

Principal repayments received ( 122,860,357 ) ( 3,282,208 ) ( 126,142,565 )

Loans acquired and contributed in connection with the BDC Merger 77,562,529 ( 2,744,091 ) 74,818,438

New loans made 78,883,295 — 78,883,295

Settlement of loans (1)(2)

( 70,737,874 ) — ( 70,737,874 )

Net amortization of premiums on loans ( 1,124,157 ) — ( 1,124,157 )

1 unchanged sentence

net ( 1,049,981 ) ( 5,608 ) ( 1,055,589 )

Provision for loan losses ( 11,813,409 ) — ( 11,813,409 )

Provision for credit losses ( 45,491,949 ) ( 99,618 ) ( 45,591,567 )

Balance, December 31, 2023

Notes to Consolidated Financial Statements

$ 417,913,773 $ 38,558,485 $ 456,472,258

_______________

(1) In May 2023, the Company settled $ 68.7 million of senior loans in exchange for ownership interest in the underlying real estate properties ( Note 6 ).

(2) In November 2023, the Company settled a $ 20.8 million mezzanine loan and wrote off the related allowance for credit losses of $ 18.3 million in exchange for a $ 2.5 million note from the sponsor.

On the date of closing, the sponsor made a payment of $ 0.5 million.

The remaining $ 2.0 million is included in Other assets on the consolidated balance sheets.

Loans Held for Investment Loans Held for Investment through Participation Interests Total

2 unchanged sentences

Principal repayments received ( 197,484,239 ) — ( 197,484,239 )

PIK interest (1)

1,955,109 — 1,955,109

Loans acquired and contributed in connection with the BDC Merger 77,562,529 ( 2,744,091 ) 74,818,438

Net amortization of premiums on loans ( 469,563 ) ( 87,449 ) ( 557,012 )

1 unchanged sentence

net 1,512,638 335,361 1,847,999

Realized loss on loan repayments (2)(3)

( 651,553 ) — ( 651,553 )

Provision for loan losses ( 10,904,163 ) — ( 10,904,163 )

Provision for credit losses ( 11,813,409 ) — ( 11,813,409 )

Balance, December 31, 2022

$ 584,417,939 $ 42,072,828 $ 626,490,767

(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 $ 1.0 million for the year ended December 31, 2021.

(2) On September 2, 2021, the Company foreclosed on a hotel property encumbered by a first mortgage and the related subordinated mezzanine loan, both of which were held by the Company, with an aggregate principal balance $ 14.6 million.

On September 23, 2021, the hotel property was sold to a third party for $ 13.8 million.

The net proceeds from the sale, together with a payment under a contractual guarantee of $ 0.8 million from the borrower, were used to pay off both loans in full.

In connection with the loan repayment, the related obligation under participation agreement of $ 6.4 million was simultaneously satisfied.

In connection with the loan repayment, the Company recorded a loss of $ 0.4 million related to the write-off of the interest accrued but uncollected in the third quarter of 2021, excluding the amount attributable to obligations under participation agreements of $ 0.1 million.

(3) Amount also included realized loss of $ 0.3 million related to the TDR transaction described below.

Notes to Consolidated Financial Statements

Portfolio Information

6 unchanged sentences

Credit facility — — — % 28,802,833 29,080,183 4.6 %

Allowance for loan losses — ( 25,471,890 ) ( 4.1 ) % — ( 13,658,481 ) ( 2.9 ) %

Allowance for credit losses — ( 56,976,025 ) ( 12.5 ) % — ( 25,471,890 ) ( 4.1 ) %

Total $ 509,460,826 $ 456,472,258 100.0 % $ 645,795,459 $ 626,490,767 100.0 %

Notes to Consolidated Financial Statements

December 31, 2023 December 31, 2022

1 unchanged sentence

Office $ 144,812,619 $ 144,853,769 31.7 % $ 184,196,708 $ 184,722,657 29.4 %

Industrial 147,796,164 148,891,742 23.8 % 32,000,000 32,206,964 6.9 %

Multifamily 85,660,082 86,210,868 18.9 % 104,589,464 105,570,432 16.9 %

Industrial 67,579,869 67,612,621 14.8 % 147,796,164 148,891,742 23.8 %

Mixed-use 63,096,365 63,531,806 13.9 % 64,880,450 65,838,965 10.5 %

3 unchanged sentences

Infrastructure 21,250,000 21,443,421 4.7 % 21,250,000 21,840,359 3.5 %

Allowance for loan losses — ( 25,471,890 ) ( 4.1 ) % — ( 13,658,481 ) ( 2.9 ) %

Allowance for credit losses — ( 56,976,025 ) ( 12.5 ) % — ( 25,471,890 ) ( 4.1 ) %

Total $ 509,460,826 $ 456,472,258 100.0 % $ 645,795,459 $ 626,490,767 100.0 %

4 unchanged sentences

New York 90,483,672 90,483,672 19.8 % 91,845,479 91,877,084 14.7 %

Georgia 72,401,718 73,101,964 11.7 % 53,289,288 53,536,884 11.4 %

Texas 67,625,000 68,142,046 10.9 % 13,625,000 13,725,690 2.9 %

New Jersey 82,419,378 83,489,049 18.3 % 62,228,622 62,958,482 10.0 %

Washington 56,671,267 57,027,639 9.1 % 3,523,401 3,382,683 0.7 %

Georgia 74,335,828 74,602,328 16.3 % 72,401,718 73,101,964 11.7 %

Utah 49,250,000 50,329,949 11.0 % 49,250,000 50,698,251 8.1 %

North Carolina 43,520,028 44,041,162 7.0 % 44,492,971 44,704,699 9.5 %

Washington 34,052,223 34,020,449 7.5 % 56,671,267 57,027,639 9.1 %

Arizona 31,000,000 31,296,235 6.9 % 31,000,000 31,276,468 5.0 %

North Carolina 21,826,479 21,929,657 4.8 % 43,520,028 44,041,162 7.0 %

Massachusetts 7,000,000 7,000,000 1.5 % 7,000,000 7,000,000 1.1 %

South Carolina — — — % 3,000,000 3,145,614 0.7 %

Allowance for loan losses — ( 25,471,890 ) ( 4.1 ) % — ( 13,658,481 ) ( 2.9 ) %

Texas — — — % 67,625,000 68,142,046 10.9 %

Allowance for credit losses — ( 56,976,025 ) ( 12.5 ) % — ( 25,471,890 ) ( 4.1 ) %

Total $ 509,460,826 $ 456,472,258 100.0 % $ 645,795,459 $ 626,490,767 100.0 %

Allowance for Credit Losses

As described in Note 2 , on January 1, 2023, the Company adopted the provisions of ASU 2016-13, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.

The adoption of ASU

Notes to Consolidated Financial Statements

2016-13 resulted in a $ 4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to accumulated deficits as of January 1, 2023.

The following table presents the activity in allowance for credit loss for funded loans:

Years Ended December 31,

Allowance for credit losses, beginning of period $ 25,471,890 $ 13,658,481

Cumulative effect of credit loss accounting standard effective

January 1, 2023 ( Note 2 )

Provision for credit losses (1)

45,591,567 11,813,409

Charge-offs (2)

( 18,337,484 ) —

Recoveries — —

Allowance for credit losses, end of period $ 56,976,025 $ 25,471,890

_______________

(1) Prior to the adoption of the CECL model on January 1, 2023, the Company recorded an allowance for credit 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) non-performing loan reserves, if any.

(2) Amount is related to the settlement of a mezzanine loan described in “Lending Activities” above.

Certain of the Company’s performing loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company.

These unfunded commitments amounted to approximately $ 35.7 million and $ 47.3 million as of December 31, 2023 and 2022, respectively.

The following table presents the activity in the liability for credit losses on unfunded commitments:

Year Ended December 31, 2023

Liability for credit losses on unfunded commitments, beginning of period $ —

Cumulative effect of credit loss accounting standard effective January 1, 2023 ( Note 2 )

Reversal of provision for credit losses ( 42,764 )

Liability for credit losses on unfunded commitments, end of period $ 326,907

The liability for credit losses on unfunded commitments is included in other liabilities on the consolidated balance sheets.

Accrued Interest Receivable

The Company elected not to measure a CECL reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely matter.

If the Company determines it has uncollectible accrued interest receivable, it generally would reverse the accrued and unpaid interest against interest income and no longer accrue for interest.

For the years ended December 31, 2023 and 2022, the Company did not reverse any interest income accrual because all accrued interest income was deemed collectible.

As of December 31, 2023 and 2022, the Company had four and two loans that were in default, and suspended interest income accrual of $ 18.4 million and $ 8.5 million for the years ended December 31, 2023 and 2022, respectively, because recovery of such income was doubtful.

As of December 31, 2023 and 2022, there was no interest receivable recognized on these loans.

Non-Performing Loans

As discussed in Note 2 , for loans that are considered non-performing, the Company removes them from the industry loss rate approach and analyzes them separately for recoverability.

As of December 31, 2023 and 2022, the Company had six and four non-performing loans with total carrying value of $ 209.3 million and $ 89.9 million, respectively.

Accordingly, the Company utilized the estimated fair value of the loan collateral or sponsor’s guarantee to estimate the total allowance for credit losses of $ 54.6 million and $ 25.5 million as of December 31, 2023 and 2022, respectively.

Please see “Note 7.

Fair Value Measurements – Significant Unobservable Inputs” for information on how the fair value of these loans were determined.

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.

The Company 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;

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, 2022 December 31, 2021

Loan Risk Rating Number of Loans Principal Balance Carrying Value % of Total Number of Loans Principal Balance Carrying Value % of Total

(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

3 Moderate/average risk

4 Higher risk

5 Highest risk

The following table presents the amortized cost of the Company’s loan portfolio by year of origination and loan risk rating as of December 31, 2023:

December 31, 2023

Loan Risk Rating Number of Loans Amortized Cost % of Total Amortized Cost by Year Originated

2023 2022 2021 2020 2019 Prior

1 — $ — — % $ — $ — $ — $ — $ — $ —

3 unchanged sentences

5 — — — % — — — — — —

Non-performing 6 209,297,064 40.7 % — 60,612,621 — — 58,200,770 90,483,673

21 513,448,283 100.0 % $ 10,809,959 $ 156,850,913 $ 97,514,884 $ 27,810,327 $ 120,043,223 $ 100,418,977

Allowance for credit losses ( 56,976,025 )

Total, net of allowance for credit losses $ 456,472,258

The following table presents the principal balance and the amortized cost of the Company’s loans based on the loan risk rating as of December 31, 2022:

December 31, 2022

Loan Risk Rating Number of Loans Principal Balance Amortized Cost % of Total

1 — $ — $ — — %

Allowance for loan losses ( 25,471,890 ) ( 13,658,481 )

Total, net of allowance for loan losses $ 626,490,767 $ 469,673,314

2 2 25,000,000 25,041,782 3.8 %

(1) Because these loans have an event of default, they are removed from the pool of loans on which a general allowance is calculated and are evaluated for collectability individually.

As of December 31, 2022 and 2021, the specific allowance for loan losses on these loans were $ 25.5 million and $ 12.8 million, respectively, as a result of a decline in the fair value of the respective collateral.

As of December 31, 2022, the Company did not have any loans with a loan risk rating of “4” or “5”, and did not record any general allowance for loan losses for the year ended December 31, 2022.

As of December 31, 2022, the Company had four loans deemed impaired and recorded specific allowance for loan losses of $ 11.8 million for the year ended December 31, 2022.

As of December 31, 2021, the Company had one loan with a loan risk rating of “4” and no loans with a loan risk rating of “5”, and recorded general allowance for loan losses of $ 0.6 million for the year ended December 31, 2021.

Additionally, as of December 31, 2021, the Company had three loans deemed impaired and recorded specific allowance for loan losses of $ 10.3 million for the year ended December 31, 2021.

The following table presents the activity in the Company’s allowance for loan losses:

Years Ended December 31,

Allowance for loan losses, beginning of year $ 13,658,481 $ 3,738,758

Provision for loan losses 11,813,409 10,904,163

Charge-offs (1)

3 25 530,867,244 536,992,660 82.4 %

Allowance for loan losses, end of year $ 25,471,890 $ 13,658,481

Non-performing (1)

4 89,928,215 89,928,215 13.8 %

(1) Amount related to the TDR below.

As of December 31, 2022 and 2021, the Company had two loans and one loan that were in default, respectively.

Additionally, for the years ended December 31, 2022 and 2021, the Company suspended interest income accrual of $ 8.5 million and $ 3.6 million, respectively, on three loans because recovery of such income was doubtful.

31 $ 645,795,459 651,962,657 100.0 %

Allowance for credit losses ( 25,471,890 )

Total, net of allowance for credit losses $ 626,490,767

_______________

(1) Because these loans have an event of default, they were removed from the pool of loans on which a general allowance was calculated and were evaluated for collectability individually.

As of December 31, 2022, the specific allowance for credit losses on these loans were $ 25.5 million, as a result of a decline in the fair value of the respective collateral.

Troubled Debt Restructuring

As of December 31, 2022, there was one investment that qualified as troubled debt restructuring.

As of December 31, 2021, the Company had a recorded investment in troubled debt restructuring of $ 13.7 million.

In December 2022, the borrower of a $ 40.1 million senior loan experienced financial difficulty and offered to repay the loan for $ 38.7 million.

The remaining $ 1.4 million was converted to subordinated equity that accrues dividends at 8.0 % and the Company is entitled to receive waterfall profit upon a sale.

The Company does not anticipate a full recovery of the equity position and does not expect to receive any additional income.

As a result, the remaining $ 1.4 million is reflected as a loan

The remaining $ 1.4 million was converted to subordinated equity that accrues dividends at 8.0 % and the

Notes to Consolidated Financial Statements

receivable and it is fully reserved for as of December 31, 2022.

Company is entitled to receive waterfall profit upon a sale.

The Company does not anticipate a full recovery of the equity position and does not expect to receive any additional income.

As a result, the remaining $ 1.4 million is reflected as a loan receivable and it is fully reserved for as of December 31, 2023 and 2022.

The Company classified this loan modification as a TDR as it met all the conditions to be considered a TDR pursuant to ASC 310-40.

4 unchanged sentences

_______________

(1) As of December 31, 2022, the principal balance of this loan was the same as the carrying value.

The Company recorded an allowance for loan losses of $ 1.4 million to fully reserve for the unpaid principal balance.

(1) As of December 31, 2023 and 2022, the principal balance of this loan was the same as the carrying value.

The Company recorded an allowance for credit losses of $ 1.4 million to fully reserve for the unpaid principal balance.

There was no income from this investment from the date of modification on December 28, 2022 through December 31, 2023.

2021 — Due to financial difficulty resulting from the COVID-19 pandemic, a borrower defaulted on interest payments in May 2020 on a $ 3.5 million mezzanine loan, and the Company subsequently suspended the interest accrual.

The Company purchased the senior loan from a third-party lender on September 3, 2021 in order to facilitate a refinancing.

Subsequently on September 23, 2021, the senior and mezzanine loans were refinanced and the Company issued a new senior loan with a committed amount of $ 14.7 million, of which $ 13.6 million was funded at closing.

The concession granted in the refinancing was the forgiveness of principal and accrued interest of $ 1.3 million on the mezzanine loan, of which $ 1.0 million was previously recorded as an allowance for loan losses, in addition to $ 0.4 million of nonaccrual interest.

The Company classified the refinancing as a TDR as it met all the conditions to be considered a TDR pursuant to ASC 310-40.

This investment was repaid in full in April 2022.

The following table summarizes the recorded investment of TDR as of the date of restructuring:

Number of loans modified 1

Pre-modified recorded carrying value $ 18,503,470

Post-modified recorded carrying value (1)

_______________

(1) As of December 31, 2021, the principal balance of this loan was $ 13.6 million and the carrying value of this loan, which includes the present value of the exit fee, was $ 13.7 million.

There is no allowance for loan losses recorded for this new senior loan.

Once classified as a TDR, the new senior loan was classified as an impaired loan until it was extinguished and the carrying value was evaluated at each reporting date for collectability based on the fair value of the underlying collateral.

Since the fair value of the collateral was greater than the carrying value of the new senior loan, no specific allowance was recorded as of December 31, 2021.

For the period from January 1, 2022 through the date of repayment on April 1, 2022, income from the new senior loan was $ 0.3 million.

For the year ended December 31, 2021, interest income from the new senior loan was $ 0.3 million.

Equity Investment in Unconsolidated Investments

7 unchanged sentences

RESOF ’s primary investment objective is to generate attractive risk-adjusted returns by purchasing performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.

RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including

Notes to Consolidated Financial Statements

rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans).

RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans).

The general partner of RESOF is Mavik Real Estate Special Opportunities Fund GP, LLC , which is a subsidiary of the Company’s sponsor, Terra Capital Partners .

4 unchanged sentences

As of December 31, 2023 and 2022, the carrying value of the Company ’ s investment in RESOF was $ 18.2 million and $ 36.8 million, respectively.

For the year ended December 31, 2022, the Company recorded equity income from RESOF of $ 5.2 million, and did not receive any distributions from RESOF.

For the year ended December 31, 2021, the Company recorded equity income from RESOF of $ 6.2 million and received distributions from RESOF of $ 3.5 million.

For the year ended December 31, 2023, the Company recorded equity income from RESOF of $ 1.1 million.

The equity income for the year ended December 31, 2023 included the negative adjustments made due to the dilution in the Company’s ownership interest in RESOF as new investors were admitted in 2022 and 2023.

For the year ended December 31, 2023, the Company received distributions from RESOF of $ 6.6 million.

For the year ended December 31, 2022, the Company recorded equity income from RESOF of $ 5.2 million and received no distributions from RESOF.

In connection with the equity investment in RESOF, the Company paid origination fees to the Manager totaling $ 0.5 million, to be amortized to equity income on a straight-line basis over the life of RESOF.

Notes to Consolidated Financial Statements

The following tables present summarized financial information of the Company’s equity investment in RESOF.

16 unchanged sentences

Net investment income 20,304,548 22,394,820

Unrealized (depreciation) appreciation on investments ( 2,180,632 ) 524,113

Unrealized appreciation (depreciation) on investments 1,137,701 ( 2,180,632 )

Provision for income tax ( 138,944 ) —

Net increase in partners’ capital resulting from operations $ 21,303,305 $ 20,214,188

Equity Investment in Joint Ventures

As of December 31, 2022, the Company beneficially owned equity interests in three joint ventures that invest in real estate properties.

As of December 31, 2023 and 2022, the Company beneficially owned equity interests in three joint ventures that invest in real estate properties.

The Company evaluated its equity interests in the joint ventures and determined it does not have a controlling financial interest and is not the primary beneficiary.

1 unchanged sentence

In September 2022, the Company sold a 53 % effective interest in two joint ventures and 59 % effective interest in another joint venture for a total of $ 33.7 million and recognized a gain on sale of $ 0.8 million.

The following table presents the Company’s beneficial ownership interests in its equity investments in the joint ventures and their respective carrying values:

In December 2022, the Company originated a $ 10.0 million mezzanine loan to a borrower to finance the acquisition of a real estate portfolio.

In connection with this mezzanine loan, the Company entered into a residual profit sharing agreement with the borrower where the borrower will pay the Company an additional amount of 35.0 % of remaining net cash flow from the sale of the real estate portfolio.

The Company accounts for this arrangement using the equity method of accounting.

In connection with this mezzanine loan, the Company entered into a residual profit sharing agreement with the borrower where the borrower would pay the Company an additional amount of 35.0 % of remaining net cash flow from the sale of the real estate portfolio.

The Company accounted for this arrangement using the equity method of accounting.

In May 2023, the Company purchased the underlying asset ( Note 8 ) and the $ 10.0 million mezzanine loan was settled in connection with the purchase.

In November 2023, in connection with a loan restructuring, the Company contributed $ 5.0 million to another joint venture that owns a real estate property.

The Company accounted for its investment in this joint venture as an equity method investment because it does not have a controlling financial interest in the entity.

Notes to Consolidated Financial Statements

1 unchanged sentence

December 31, 2023 December 31, 2022

Entity Co-owner (1)

Beneficial Ownership Interest Carrying Value Beneficial Ownership Interest Carrying Value

LEL Arlington JV LLC (1)

Affiliate/Third party 27.2 % $ 7,271,603 80 % $ 23,949,044

LEL NW 49th JV LLC (1)

Affiliate/Third party 27.2 % 1,521,556 80 % 5,306,467

Entity Co-owner Beneficial Ownership Interest Carrying Value Beneficial Ownership Interest Carrying Value

LEL Arlington JV LLC Third party/Affiliate 27.2 % $ 7,024,245 27.2 % $ 7,271,603

LEL NW 49th JV LLC Third party/Affiliate 27.2 % 1,619,157 27.2 % 1,521,556

TCG Corinthian FL Portfolio

JV LLV (1)(2)

Affiliate/Third Party 30.6 % 6,896,816 — % —

JV LLV Third party/Affiliate 30.6 % 5,590,427 30.6 % 6,896,816

Windy Hill PV Five CM, LLC (1)

Third party 42.4 % 4,740,914 N/A —

SF-Dallas Industrial, LLC (2)

N/A N/A 10,013,691 — % —

N/A N/A — N/A 10,013,691

$ 18,974,743 $ 25,703,666

_______________

(1) The Company sold a portion of the interest in this investment to an affiliate in September 2022.

(2) This investment was purchased from a third party in March 2022.

(1) This investment was acquired in November 2023.

(2) This investment that meets the definition of an equity investment was entered into in December 2022.

As discussed above, this investment was settled in May 2023.

The following tables present estimated combined summarized financial information of the Company’s equity investment in the joint ventures.

13 unchanged sentences

Interest expense ( 10,762,003 ) ( 7,572,790 )

Unrealized gains 3,244,813 447

Unrealized (losses) gains ( 3,835,179 ) 3,244,813

Net loss $ ( 13,302,650 ) $ ( 5,880,837 )

For the year ended December 31, 2022, the Company recorded equity loss from the joint ventures of $ 2.5 million, and received distributions from the joint ventures of $ 0.9 million.

For the year ended December 31, 2021, the Company recorded equity loss from the joint ventures of $ 0.2 million and received no distributions.

For the year ended December 31, 2023, the Company recorded net equity loss from the joint ventures and the mezzanine loan of $ 3.5 million, and did not receive any distributions from the joint ventures.

For the year ended December 31, 2022, the Company recorded net equity loss from the joint ventures of $ 2.5 million, and received distributions from the joint ventures of $ 0.9 million.

In connection with these investments, the Company paid origination fee to the Manager totaling $ 0.6 million, to be amortized to equity income over the life of the respective joint venture.

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Real Estate Activities

2022 — In June 2022, the Company sold 4.9 acres of land it owned in Pennsylvania for net proceeds of $ 8.6 million, and recognized a net loss on sale of $ 0.1 million excluding impairment charges of $ 1.6 million and $ 3.4 million recognized in March 2022 and December 2021, respectively.

2021 — In September 2021, the Company signed a new lease for the vacant space in an office building.

The lease commenced on December 1, 2021 and has term of 10 years with an option to extend the lease for 5 years.

Additionally, the lease provides for a fixed rental payment plus a percentage rent that is based on 6 % of the gross sales of the tenant’s business.

The lease also provides a 3 % increase in rental payment every year.

In November 2021, the Company received notice from a tenant of their intention to terminate its lease effective November 30, 2022.

In connection with the lease termination, the Company received a termination fee of $ 3.1 million, to be amortized to income over the remaining life of the lease.

In December 2021, the Company recorded an impairment charge of $ 3.4 million on the 4.9 acres of 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.

2023 — During the year ended December 31, 2023, the Company recorded an impairment charge of $ 11.8 million on the multi-tenant office building located in California in order to reduce the carrying value of the building to its estimated fair value.

In October 2023, the Company conveyed its interest in the office building to the lender by deed-in-lieu of foreclosure and recognized a loss on disposal of real estate of $ 4.2 million.

Accordingly, the Company no longer owns the multi-tenant office building.

Additionally, during the year ended December 31, 2023, the Company entered into the following investments:

Location Number of

Properties Date of

Acquisition Property Type Total Capitalized

Texas, United States 3 3/24/2023 Industrial $ 48,798,273

Texas, United States 5 5/25/2023 Industrial 83,288,961

$ 132,087,234

These acquisitions were deemed to be real estate asset acquisitions, and therefore total transaction costs were capitalized to the cost basis of the assets.

The following table presents an allocation of the total capitalized costs:

Total Capitalized Costs:

Cash and cash equivalents $ 52,313,739

Loans held for investment 68,737,877

Equity investment in unconsolidated investment 10,149,642

Interest receivable 456,650

Other assets 429,326

$ 132,087,234

Net Assets Acquired

Cash and cash equivalents $ 712,608

Other assets 33,802

Land 23,785,004

Buildings and Improvements 104,613,728

Intangible assets and liabilities:

In-place lease (weighted-average expected life of 3.95 years)

Below-market rent (weighted-average expected life of 3.98 years)

( 8,864,137 )

Accounts payable and accrued expenses ( 912,771 )

$ 132,087,234

2022 — In June 2022, the Company sold the 4.9 acres of land it owned in Pennsylvania for net proceeds of $ 8.6 million and recognized a net loss on sale of $ 0.1 million, excluding impairment charges of $ 1.6 million and $ 3.4 million recognized in March 2022 and December 2021, respectively.

Notes to Consolidated Financial Statements

Real Estate Owned, Net

Real estate owned was comprised of 4.9 acres of land located in Pennsylvania and a multi-tenant office building, with lease intangible assets and liabilities, located in California.

Real estate owned is comprised of eight industrial buildings located in Texas and a multi-tenant office building located in California, with lease intangible assets and liabilities.

The following table presents the components of real estate owned, net as of:

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Cost Accumulated Depreciation/Amortization Net Cost Accumulated Depreciation/Amortization Net

$ — $ — $ — $ 10,000,000 $ — $ 10,000,000

Land $ 23,785,004 $ — $ 23,785,004 $ — $ — $ —

Building and building

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Total real estate $ 132,580,612 $ ( 2,825,790 ) $ 129,754,822 $ 57,304,497 $ ( 16,722,650 ) $ 40,581,847

_______________

(1) The 4.9 acres of land in Pennsylvania was sold by the Company in the second quarter of 2022.

Notes to Consolidated Financial Statements

Real Estate Operating Revenues and Expenses

13 unchanged sentences

Total $ 4,586,245 $ 5,005,551

As of December 31, 2022, the Company owned a multi-tenant office building that was leased to four tenants.

In addition, the office building is subject to 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 64.6 years as of December 31, 2022, 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.

As of December 31, 2023, the Company owned eight industrial buildings that were leased to ten tenants.

As of December 31, 2022, the Company owned a multi-tenant office building that was leased to three tenants.

In addition, the office building was subject to a ground lease whereby the Company was the lessee (or a tenant) to the ground lease.

The ground lease provided 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 is scheduled for November 1, 2025.

The Company is currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v.

The Company was litigating with

Notes to Consolidated Financial Statements

the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v.

Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No.

The Company believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant.

The Company’s position has prevailed in all three of the prior arbitrations to reset the ground rent.

Since future rent reset determinations under the ground lease cannot be known at this time, the Company did not include any potential future rent increases in calculating the present value of future rent payments.

The Company intends vigorously to pursue the litigation.

While the Company believes its arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty.

If the landlord prevails, the future rent reset determinations could result in significantly higher ground rent, which would likely result in a significant diminution in the value of the Company’s interest in the ground lease and the office building.

On October 19, 2023, the Company conveyed its interest in the property to a subsidiary of Centennial Bank by deed in lieu of foreclosure.

Accordingly, the Company is no longer a party to the ground lease and has taken the necessary steps to terminate the associated litigation.

Scheduled Future Minimum Rent Income

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2025 4,144,116

2026 3,779,840

2027 2,560,061

2028 2,144,996

Thereafter 1,977,416

Total $ 19,679,606

Notes to Consolidated Financial Statements

Scheduled Annual Net Amortization of Intangibles

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Increase in Depreciation and Amortization (1)

Decrease in Rent Expense (1)

2024 $ ( 2,938,140 ) $ 4,245,729 $ 1,307,589

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(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.

and amortization of in-place lease intangibles is included in depreciation and amortization.

Supplemental Ground Lease Disclosures

As discussed in “ Leases ” above, on October 19, 2023, the Company conveyed its interest in the property to a subsidiary of Centennial Bank by deed in lieu of foreclosure.

Accordingly, the Company is no longer a party to the ground lease.

Supplemental balance sheet information related to the ground lease was as follows as of:

December 31, 2022

Operating lease

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Weighted average discount rate — operating lease 7.6 %

Notes to Consolidated Financial Statements

The component of lease expense for the ground lease was as follows:

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Operating lease $ 1,645,875 $ 2,079,000

Notes to Consolidated Financial Statements

Maturities of operating lease liability as of December 31, 2022 was as follows:

Years Ending December 31, Operating Lease

2023 $ 2,079,000

2024 2,079,000

2025 2,079,000

2026 2,079,000

2027 2,079,000

Thereafter 122,227,875

Total lease payments 132,622,875

Imputed interest ( 105,244,089 )

Total $ 27,378,786

Fair Value Measurements

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

Level 3 — Significant unobservable inputs are based on the best information available in the circumstances, to the extent observable inputs are not available, including the Company’s own assumptions used in determining the fair value of investments.

Fair value for these investments 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 financing transactions subsequent to the acquisition of the investment.

Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment.

The inputs into the determination of fair value require significant management judgment.

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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, 2022 and 2021, the Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, term loan payable, repurchase agreement payable, mortgage loan payable and revolving line of credit.

As of December 31, 2023 and 2022, the Company had not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, held-to-maturity debt securities, obligations under participation agreements, term loan payable, repurchase agreement payable, mortgage loan payable and revolving line of credit.

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.

Marketable securities and derivatives are financial instruments that are reported at fair value.

Notes to Consolidated Financial Statements

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.

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 and included in Other assets in 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 according to the fair value hierarchy as of:

As discussed in Note 9 , in March 2023, the Company entered into a loan agreement with a lender to provide financing for the acquisition of real estate properties ( Note 6 ).

In connection with the financing, the Company purchased an interest rate cap for $ 258,500 to effectively cap the related index rate at 5.0 %.

The interest rate cap met all the criteria of a derivative under ASC 815, but it did not meet the criteria under ASC 815-20-25 to qualify for hedging accounting.

As such, the interest rate cap is reported at fair value and is included in other assets in the consolidated balance sheet, and the change in the fair value of the interest rate cap is reported in the consolidated statements of operations.

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

December 31, 2023

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Level 1 Level 2 Level 3 Total

Marketable Securities:

Debt securities $ 147,960 $ — $ — $ 147,960

Money market fund (1)

$ 2,244,992 $ — $ — $ 2,244,992

Marketable securities - debt securities 1,148,653 — — 1,148,653

Marketable securities - equity securities 3,813,226 — — 3,813,226

Derivative - interest rate cap (2)

— 83,807 — 83,807

Total $ 7,206,871 $ 83,807 $ — $ 7,290,678

_______________

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

(2) Amount is included in other assets on the consolidated balance sheets.

December 31, 2022

2 unchanged sentences

Marketable Securities:

Equity securities $ 1,310,000 $ — $ — $ 1,310,000

Debt securities $ 147,960 $ — $ — $ 147,960

Total $ 147,960 $ — $ — $ 147,960

The following table presents the activities of the marketable securities:

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

Years Ended December 31,

Marketable Securities Derivatives Marketable Securities

Beginning balance $ 147,960 $ — $ 1,310,000

Purchases (1)

7,905,211 258,500 136,265

Proceeds from sale (2)

Reclassification of net realized gains on marketable securities into earnings 83,411 129,248

Unrealized (losses) gains on marketable securities ( 122,299 ) 22,500

( 2,422,095 ) — ( 1,259,417 )

Reclassification of net realized (losses) gains on marketable

securities into earnings ( 434,254 ) — 83,411

Unrealized losses on marketable securities and derivatives ( 234,943 ) ( 174,693 ) ( 122,299 )

Ending balance $ 4,961,879 $ 83,807 $ 147,960

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

_______________

(1) On July 25, 2023, the Company disclosed that it acquired approximately 5.2 % of the outstanding shares of common stock of MITT as of July 24, 2023.

(2) During the fourth quarter of 2023, the Company sold a portion of the MITT common stock.

As of December 31, 2023, the Company owned less than 3.0 % of the outstanding shares of common stock of MITT.

Notes to Consolidated Financial Statements

fees, and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of:

Financial Instruments Not Carried at Fair Value

In the first quarter of 2023, the Company purchased $ 20.0 million of corporate bonds with a coupon rate of 6.125 % with a maturity date of May 15, 2023.

The Company classified these bonds as held-to-maturity debt securities, as it had the intent and ability to hold these securities until maturity.

These securities were recorded at amortized cost and were fully redeemed at par on May 15, 2023.

The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of:

December 31, 2023 December 31, 2022

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Total loans $ 509,460,826 $ 456,472,258 $ 457,339,949 $ 645,795,459 $ 626,490,767 $ 623,145,754

Term loan payable 3 $ 25,000,000 $ 25,000,000 $ 25,000,000 $ 93,763,470 $ 91,940,062 $ 94,344,595

Unsecured notes payable 1 $ 123,500,000 $ 118,380,897 $ 98,020,050 $ 123,500,000 $ 116,530,673 $ 103,481,748

Repurchase agreement payable 3 170,876,606 169,304,710 170,876,606 44,569,600 43,974,608 44,569,600

Secured financing agreements 3 293,413,757 290,525,313 293,413,757 315,264,779 313,600,484 315,407,341

Obligations under participation

agreements 3 — — — 12,584,958 12,680,594 12,680,595

Mortgage loan payable 3 29,252,308 29,488,326 29,394,870 31,962,692 32,134,295 32,192,785

Secured borrowing 3 — — — 34,521,104 34,586,129 34,425,029

Revolving line of credit

payable 3 90,135,865 89,807,448 90,135,865 38,575,895 38,186,472 38,575,895

Total liabilities $ 416,913,757 $ 408,906,210 $ 391,433,807 $ 451,349,737 $ 442,811,751 $ 431,569,684

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, 2023 and 2022 due to their short-term nature.

Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charge)

The Company periodically assesses whether there are any indicators that the value of its real estate investments may be impaired or that their carrying value may not be recoverable ( Note 2 ).

The following table presents information about assets for which the Company recorded impairment charge and that were measured at fair value on a non-recurring basis for the year ended December 31, 2023 and 2022:

Year Ended December 31,

Fair Value Impairment Charge Fair Value Impairment Charge

Impairment Charge

Real estate and intangibles $ 27,004,389 $ 11,765,540 $ 8,395,011 $ 1,604,989

$ 11,765,540 $ 1,604,989

Impairment charge, and their related triggering events and fair value measurements were as follows:

Real Estate and Intangibles

The impairment charge described below are reflected within Impairment charge in the consolidated statements of operations.

For the year ended December 31, 2023, the Company recorded an impairment charge of $ 11.8 million on the multi-tenant office building located in California in order to reduce the carrying value of the building to its estimated fair value.

The fair value measurement was determined by estimating discounted cash flows using two significant unobservable inputs, which were the cash flow discount rate ( 8.50 %) and terminal capitalization rate ( 7.50 %).

In October 2023, the Company conveyed its

Notes to Consolidated Financial Statements

interest in the office building to the lender by deed in lieu of foreclosure.

Accordingly, the Company no longer owns the multi-tenant office building.

For the year ended December 31, 2022, the Company recorded an impairment charge of $ 1.6 million on the 4.9 acres of land located in Pennsylvania to reduce the carrying value of the land to its estimated fair value, which was based on the selling price in the purchase and sale agreement.

The land was sold in June 2022.

Valuation Process for Fair Value Measurement

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

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.

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

Market quotations are not readily available for the Company’s real estate-related loan investments, all of which are included in Level 3 of the fair value hierarchy, and therefore these investments are valued utilizing a yield approach, i.e., a discounted cash flow methodology to arrive at an estimate of the fair value of each respective investment in the portfolio using an estimated market yield.

In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, which may include available current market data on applicable yields of comparable debt/preferred equity instruments;

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covenants of the investment, including prepayment provisions;

the portfolio company’s ability to make payments, net operating income and debt-service coverage ratio;

the ability of our borrowers and investees to make payments and their net operating income and debt-service coverage ratio;

construction progress reports and construction budget analysis;

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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.

Because there is no readily available market for these investments, the fair values of these investments are approved in good faith by the Company’s board of directors (which is made up exclusively of independent directors).

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

Notes to Consolidated Financial Statements

The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of December 31, 2023 and 2022.

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, 2022 Primary Valuation Technique Unobservable Inputs December 31, 2022

Fair Value at December 31, 2023

Primary Valuation Technique Unobservable Inputs December 31, 2023

Asset Category Minimum Maximum Weighted Average

Loans held for investment, net $ 581,182,892 Discounted cash flow Discount rate 8.71 % 19.36 % 11.46 %

Loans held for investment, net (1)

$ 418,458,916 Discounted cash flow Discount rate 9.58 % 16.95 % 7.02 %

Loans held for investment acquired through

1 unchanged sentence

Total Level 3 Assets $ 457,339,949

Repurchase agreement payable 170,876,606 Discounted cash flow Discount rate 5.22 % 6.17 % 6.82 %

Obligations under participation agreements 12,680,595 Discounted cash flow Discount rate 16.36 % 16.36 % 16.36 %

Mortgage loan payable 29,394,870 Discounted cash flow Discount rate 8.24 % 8.24 % 8.24 %

Term loan payable 25,000,000 Discounted cash flow Discount rate 5.63 % 5.63 % 5.63 %

Revolving line of credit 90,135,865 Discounted cash flow Discount rate 7.64 % 7.64 % 7.64 %

Secured financing agreements $ 293,413,757 Discounted cash flow Discount rate 6.25 % 12.72 % 8.91 %

Total Level 3 Liabilities $ 293,413,757

_______________

(1) Amount includes $ 154.6 million of non-performing loans ( Note 4 ).

The fair market value estimates were determined primarily using discounted cash flow models and Level 3 inputs, which include estimates of property-specific cash flows over a specific holding period, a discount rate range of 6.75 % to 7.00 % and a terminal capitalization rate range of 5.75 % to 6.00 %.

These inputs are based on the location, type and nature of the property, current sales and lease comparable,

Notes to Consolidated Financial Statements

anticipated real estate and capital market conditions, and managements knowledge, experience and judgment.

Additionally, the Company may use sales comparables, purchase price and appraisals to corroborate the estimated value of a loan’s collateral or may use sponsor’s guarantee to estimate the value of a non-performing loan.

Fair Value at December 31, 2022 Primary Valuation Technique Unobservable Inputs December 31, 2022

4 unchanged sentences

Total Level 3 Assets $ 623,145,754

Term loan payable $ 94,344,595 Discounted cash flow Discount rate 4.00 % 4.00 % 4.00 %

Repurchase agreement payable 44,569,600 Discounted cash flow Discount rate 2.45 % 2.74 % 2.57 %

Obligations under participation agreements $ 12,680,595 Discounted cash flow Discount rate 16.36 % 16.36 % 16.36 %

Mortgage loan payable 32,192,785 Discounted cash flow Discount rate 6.08 % 6.08 % 6.08 %

Secured borrowing 34,425,029 Discounted cash flow Discount rate 6.64 % 6.64 % 6.64 %

Revolving line of credit 38,575,895 Discounted cash flow Discount rate 4.00 % 4.00 % 4.00 %

Secured financing agreements 315,407,341 Discounted cash flow Discount rate 5.22 % 8.24 % 7.09 %

Total Level 3 Liabilities $ 328,087,936

2 unchanged sentences

The Company entered into the 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:

8 unchanged sentences

Total $ 22,663,039 $ 20,272,342

Notes to Consolidated Financial Statements

_______________

1 unchanged sentence

Any excess is deferred and amortized to interest income over the term of the loan.

(2) Amount for the years ended December 31, 2022 and 2021 excluded $ 0.2 million and $ 0.3 million of origination fee, respectively, paid to the Manager in connection with the Company’s equity investment in an unconsolidated investment.

This origination fee was capitalized to the carrying value of the unconsolidated investment as a transaction cost.

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

5 unchanged sentences

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.

Notes to Consolidated Financial Statements

Asset Servicing Fee

2 unchanged sentences

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, 2022 and 2021, the Company has not received any breakup fees.

As of December 31, 2023 and 2022, the Company had not received any breakup fees.

Operating Expenses

4 unchanged sentences

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.

Cost Sharing and Reimbursement Agreement

The Company and Terra LLC have entered into a cost sharing and reimbursement agreement effective October 1, 2022, pursuant to which Terra LLC is responsible for its allocable share of the Company’s expenses, including fees paid by the

Management Agreement Amendment

On March 11, 2024, the Company and the Manager entered into an amendment to the Management Agreement, effective as of January 1, 2024 (the “Amendment”), in order to extend the term of the Management Agreement and modify the terms upon which the Management Agreement may be terminated.

Except as discussed below, the terms of the Management Agreement remain unchanged by the Amendment.

Except where the context requires otherwise, all references herein to the “Management Agreement” are to the Management Agreement as modified by the Amendment.

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

The Management Agreement may be terminated by the Company during the Initial Term or any Renewal Term upon a finding by either (i) at least two-thirds of the independent directors on the Board or (ii) the holders of a majority of the outstanding shares of the Company’s common stock (other than those shares held by members of the Company’s senior management team or affiliates of the Manager) that either (a) there has been unsatisfactory performance by the Manager that is materially detrimental to the Company, or (b) the compensation payable to the Manager pursuant to the Management Agreement is unfair;

provided, however, that the Company will not have the right to terminate the Management Agreement on the basis of unfair compensation to the Manager if the Manager agrees to continue to provide its services under the Management Agreement in exchange for reduced fees that at least two-thirds of the independent directors on the Board determine to be fair pursuant to the procedures set forth in the Management Agreement.

The Company must deliver prior written notice of any such termination to the Manager at least 180 days prior to the last calendar day of the Initial Term or the then-current Renewal Term, as applicable, and the Management Agreement will terminate effective as of the last calendar day of the Initial Term or the then-current Renewal Term, as applicable.

Upon any termination of the Management Agreement by the Company as discussed above, the Company will pay the Manager, on the date on which such termination is effective, a termination fee in an amount equal to three times the average annual fees of all types and expense reimbursements received by or owed to the Manager pursuant to the Management

Notes to Consolidated Financial Statements

Company to the Manager based on relative assets under management.

Agreement during the 24-month period immediately preceding such termination (the “Termination Fee”), calculated as of the end of the most recently completed monthly prior to the date of such termination.

The Company may also terminate the Management Agreement, effective upon 30 calendar days’ prior written notice from the Board to the Manager, without payment of any Termination Fees or other penalties, upon (i) the material breach of the Management Agreement by the Manager or its affiliates that continues for 30 days after written notice thereof to the Manager (or 45 days after delivery of written notice thereof if the Manager takes diligent steps to cure such breach within 30 days of delivery of the written notice), (ii) any fraud or other criminal conduct, gross negligence or breach of fiduciary duty by the Manager or its affiliates in connection with the Management Agreement, as determined by a final, non-appealable judgment of a court of competent jurisdiction, (iii) the Manager’s bankruptcy, insolvency or dissolution, or (iv) an Internalization Event (as defined in the Management Agreement).

No Termination Fee or other penalty is payable upon such a termination by the Company.

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

The Company will pay the Manager the Termination Fee upon such termination by the Manager.

Due From Affiliate

On December 1, 2022, the Company entered into a revolving promissory note receivable with Mavik Special Opps Co-Investments, LP, an affiliate of the Company.

The promissory note receivable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days.

The promissory note was scheduled to mature on December 1, 2023.

In December 2023, the promissory note was amended to extend the maturity date to June 30, 2024.

During the year ended December 31, 2023 and 2022, the Company provided funding under the promissory note receivable of $ 3.8 million and $ 0.4 million, respectively.

As of December 31, 2023 and 2022, amount outstanding under the promissory note receivable was $ 3.8 million and none , respectively, which is included in Other assets on the consolidated balance sheet.

Cost Sharing and Reimbursement Agreement

These fees are eliminated in consolidation and therefore have no impact on the Company’s consolidated financial statements.

2 unchanged sentences

Due to Manager

As of December 31, 2022 and 2021, approximately $ 3.9 million and $ 2.4 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.

Due from Related Party

As of December 31, 2022, there was no amount due from related party.

As of December 31, 2021, amount due from a related party was $ 2.6 million, primarily related to the reserve funding on a loan that was held by an affiliate.

The reserve funding was transferred to the Company in February 2022.

As of December 31, 2023 and 2022, approximately $ 4.2 million and $ 3.9 million, respectively, was due to the Manager, as reflected on the consolidated balance sheets, primarily related to the present value of the disposition fees on individual loans due to the Manager.

Mavik Real Estate Special Opportunities Fund, LP

3 unchanged sentences

In the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the “Participants”).

The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification.

The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company

Notes to Consolidated Financial Statements

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.

1 unchanged sentence

ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings.

The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (See “ Participation interests ” in Note 2 and “ Obligations under Participation Agreements a nd Secured Borrowing ” in ( Note 9 ).

The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (see “ Participation Interests ” in Note 2 and “ Obligations Under Participation Agreements ” in Note 9 ).

Participation Interests Purchased by the Company

4 unchanged sentences

Participating Interests Principal Balance Carrying Value

Havemeyer TSM LLC (1)(2)

23.00 % $ 3,282,208 $ 3,313,813

Mesa AZ Industrial Owner, LLC (1)

2 unchanged sentences

40.80 % 7,444,357 7,488,777

Allowance for credit losses — ( 226,527 )

$ 38,444,357 $ 38,558,485

Notes to Consolidated Financial Statements

December 31, 2022

Participating Interests Principal Balance Carrying Value

Hillsborough Owners LLC (4)

Havemeyer TSM LLC (1)(2)

23.00 % $ 3,282,208 $ 3,313,813

Mesa AZ Industrial Owner, LLC (1)

38.27 % 31,000,000 31,276,468

UNJ Sole Member, LLC (1)

2 unchanged sentences

________________

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

(2) The Company acquired its interest in this investment in connection with the BDC Merger

(3) The Company acquired its interest in this investment in September 2022.

(4) The loan was held in the name of Terra BDC, a formerly affiliated fund that was advised by Terra Income Advisors, LLC, an affiliate of the Company’s sponsor and Manager.

In connection with the BDC Merger, the Company contributed the loan to Terra BDC and the related obligation under participation agreement was released.

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

(2) This loan was repaid in February 2023.

Transfers of Participation Interest by the Company

6 unchanged sentences

$ 18,625,738 $ 18,738,386 $ 12,584,958 $ 12,680,594

Transfers Treated as Obligations Under Participation Agreements as of

December 31, 2021

Principal Balance Carrying Value % Transferred Principal Balance Carrying Value

370 Lex Part Deux, LLC (2)(3)

________________

RS JZ Driggs, LLC (2)(3)

15,606,409 15,754,641 50.00 % 7,806,370 7,880,516

Shopoff & Cindy I.

Shopoff (2)(3)

25,000,000 25,206,964 52.95 % 13,237,500 13,347,088

$ 100,619,048 $ 100,974,244 $ 42,048,294 $ 42,232,027

________________

(1) Participant was a third party.

(2) Participant was Terra BDC and now Terra LLC.

(3) In connection with the BDC Merger, the obligations under participation agreements were effectively extinguished and the Company recognized a gain on extinguishment of obligations under participation agreements of $ 3.4 million ( Note 3 ).

In September 2023, the participant conveyed its interest in the obligation under participation agreements to the Company and the Company recognized a gain on extinguishment of participation liability of $ 14.1 million.

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 participation agreement.

, disposition fees, asset

Notes to Consolidated Financial Statements

management and asset servicing fees), are based upon their respective pro rata participation interest in such participated investments, as specified in the respective participation agreement.

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.

2 unchanged sentences

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.

Notes to Consolidated Financial Statements

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 from the sale on the portion transferred are recorded as secured borrowing.

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.

In August 2022, the secured borrowing was repaid in full.

The following table summarizes the loan that was transferred to a third-party that was accounted for as secured borrowing as of:

Transfers Treated as Secured Borrowing as of December 31, 2021

Principal Balance Carrying Value % Transferred Principal Balance Carrying Value

Windy Hill PV Five CM, LLC $ 49,954,068 $ 50,264,568 69.11 % $ 34,521,104 $ 34,586,129

$ 49,954,068 $ 50,264,568 $ 34,521,104 $ 34,586,129

Unsecured Notes Payable

The 6.00 % Senior Notes Due 2026

On June 10, 2021, the Company issued $ 78.5 million in aggregate principal amount of its 6.00 % notes due 2026 (the “initial note”), for net proceeds of $ 76.0 million after deducting underwriting commissions of $ 2.5 million, but before offering expenses payable by the Company.

On June 25, 2021, the underwriters partially exercised their option to purchase an additional $ 6.6 million of the notes for net proceeds of $ 6.4 million (the “additional notes” and, together with the initial notes, the “ 6.00 % Senior Notes Due 2026”), after deducting underwriting commissions of $ 0.2 million, but before offering expenses payable by us, which closed on June 29, 2021.

Interest on the 6.00 % Senior Notes Due 2026 is paid quarterly in arrears every March 30, June 30, September 30 and December 30, at a fixed rate of 6.00 % per year, beginning September 30, 2021.

The 6.00 % Senior Notes Due 2026 mature on June 30, 2026, unless redeemed earlier by the Company, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after June 10, 2023.

In connection with the issuance of the 6.00 % Senior Notes Due 2026, the Company entered into (i) an Indenture, dated June 10, 2021 (the “Base Indenture”), by and between the Company and U.S.

Bank National Association, as trustee (the “Trustee”), and (ii) the First Supplemental Indenture thereto, dated June 10, 2021 (the “Supplemental Indenture” and, collectively with the Base Indenture, the “Indenture”), by and between the Company and the Trustee.

The Indenture contains certain covenants that, among other things, limit the ability of the Company, subject to exceptions, to make distributions in excess of 90% of the Company’s taxable income, incur indebtedness (as defined in the Indenture) or purchase shares of the Company’s capital stock unless the Company has an asset coverage ratio (as defined in the Indenture) of at least 150 % after giving effect to such transaction.

The Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the notes to become or to be declared due and payable.

As of December 31, 2022 and 2021, the Company was in compliance with the covenants included in the Indenture.

The 7.00 % Senior Notes Due 2026

As previously reported by Terra BDC, on February 10, 2021, Terra BDC issued $ 34.8 million in aggregate principal amount of 7.00 % fixed-rate notes due 2026, for net proceeds of $ 33.7 million after deducting underwriting commissions of $ 1.1 million and on February 26, 2021, the underwriters exercised the option to purchase an additional $ 3.6 million of the notes for net proceeds of $ 3.5 million, after deducting underwriting commissions of $ 0.1 million (collectively the “ 7.00 % Senior Notes Due 2026”).

Pursuant to the Merger Agreement, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the 7.00 % Senior Notes Due 2026 outstanding as of the Effective Time and the performance of every covenant of the Indenture, dated February 10, 2021 (the “TIF6 Indenture”), between Terra BDC and the Trustee, as supplemented by the First Supplemental Indenture, dated February 10, 2021, by and between Terra BDC and the Trustee (the

Notes to Consolidated Financial Statements

“First Supplemental Indenture”), to be performed or observed by Terra BDC, including, without limitation, the execution and delivery to the Trustee of a supplement to the TIF6 Indenture in form satisfactory to the Trustee.

On the Closing Date, Terra BDC, Terra LLC and the Trustee entered into a Second Supplemental Indenture pursuant to which Terra LLC assumed the payment of the 7.00 % Senior Notes Due 2026 and the performance of every covenant of the TIF6 Indenture, as supplemented by the First Supplemental Indenture, to be performed or observed by Terra BDC.

The 7.00 % Senior Notes Due 2026 will mature on March 31, 2026, unless earlier repurchased or redeemed.

The 7.00 % Senior Notes Due 2026 bear interest at a rate of 7.00 % per annum, payable on March 30, June 30, September 30 and December 30 of each year.

The 7.00 % Senior Notes Due 2026 are Terra LLC’s direct unsecured obligations and rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by Terra LLC;

effectively subordinated in right of payment to any of Terra LLC’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness;

and structurally subordinated to all existing and future indebtedness and other obligations of any of Terra LLC’s subsidiaries and financing vehicles.

Terra LLC may redeem the 7.00 % Senior Notes Due 2026 in whole or in part at any time on or after February 10, 2023, at a redemption price equal to 100 % of the outstanding principal amount thereof, plus accrued and unpaid interest.

The TIF6 Indenture contains certain covenants that, among other things, limit the ability of Terra LLC, subject to exceptions, to incur indebtedness in violation of the Investment Company Act of 1940, as amended, and to make distributions, incur indebtedness or repurchase shares of Terra LLC’s capital stock unless it satisfies asset coverage requirements set forth in the First Supplemental Indenture after giving effect to such transaction.

The TIF6 Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the 7.00 % Senior Notes Due 2026 to become or to be declared due and payable.

Summarized Information

The table below presents detailed information regarding the unsecured notes payable as of:

December 31, 2022 December 31, 2021

Principal Balance Carrying Value Fair Value Principal Balance Carrying Value Fair Value

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

Coupon Rate Effective Rate (1)

Maturity Date 2023 2022

6.00 % Senior Notes Due 2026

2 unchanged sentences

7.00 % 10.05 % 3/31/2026 38,375,000 38,375,000

Total principal amount 123,500,000 123,500,000

Unamortized issue discount ( 1,444,813 ) ( 1,946,370 )

Unamortized purchase discount (2)

( 3,161,457 ) ( 4,332,096 )

Unamortized deferred financing costs ( 512,833 ) ( 690,861 )

Unsecured notes payable, net $ 118,380,897 $ 116,530,673

_______________

(1) Carrying value is net of unamortized issue discount of $ 1.9 million and $ 2.4 million, and unamortized deferred financing costs of $ 0.7 million and $ 0.9 million as of December 31, 2022 and 2021, respectively.

(2) Carrying value is net of unamortized purchase discount of $ 4.3 million as of December 31, 2022.

Revolving Line of Credit

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 was scheduled to mature on March 12, 2023.

On January 4, 2022, the Company amended the Revolving Line of Credit to increase the maximum amount available to $ 125.0 million and extended the maturity date of the facility to March 12, 2024 with an annual 12-month extension available at the Company’s option, which are subject to certain conditions.

On August 3, 2022, the Company further amended the Revolving Line of Credit to increase the borrowing sub-limit in New York City and to allow for loans acquired through participation agreements as eligible assets.

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 guarantees 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 is required to maintain (i) a minimum total net worth of $ 250.0 million;

(ii) a $ 3.5 million quarterly operating profit, as defined within the agreement;

and (iii) a ratio of

Notes to Consolidated Financial Statements

total debt to total net worth of no more than 2.50 to 1.00.

As of December 31, 2022 and 2021, the Company was in compliance with these covenants.

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 also incurred financing fees of $ 0.6 million, to be amortized to interest expense over the life of the Revolving Line of Credit.

As of December 31, 2022 and 2021, borrowings under the Revolving Line of Credit were $ 90.1 million and $ 38.6 million, respectively, collateralized by $ 177.4 million and $ 60.1 million of eligible assets, respectively.

For the years ended December 31, 2022 and 2021, the Company received proceeds from the Revolving Line of Credit of $ 130.5 million and $ 38.6 million, respectively, and made repayments of $ 79.0 million and none , respectively.

On September 3, 2020, Terra Mortgage Capital I, LLC (the “Issuer”), 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 provided 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 stated maturity date of the Debt was March 14, 2025.

On February 18, 2022, the Company refinanced the Term Loan with a new repurchase agreement (see “ Goldman Master Repurchase Agreement ” below).

The Term Loan bore 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 Company accounted for the step-up in interest rate using the effective interest rate method.

In connection with the refinancing, the Company reversed the previously accrued step-up interest of $ 0.4 million.

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 guaranteed the payment of certain losses, damages, costs, expenses, and other obligations incurred by Goldman in connection with the occurrence of fraud, intentional misrepresentation, 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 guaranteed the payment of the aggregate outstanding amount of the Term Loan upon the occurrence of certain bankruptcy events.

Under the Guaranty, the Company was 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.

On February 18, 2022, the Company refinanced the Term Loan with a new repurchase agreement and expects continued covenant compliance under the terms of the new repurchase agreement.

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

(2) In connection with the BDC Merger, Terra LLC assumed all the obligations under the 7.00 % Senior Notes ( Note 3 ) and recorded a purchase discount of $ 4.6 million, representing the difference between the carrying value and the fair value of the notes on the date of the merger.

The 6.00 % Senior Notes Due 2026

On June 10, 2021, the Company issued $ 78.5 million in aggregate principal amount of its 6.00 % notes due 2026, and on June 25, 2021, the underwriters partially exercised their option to purchase an additional $ 6.6 million of the notes (collectively the “ 6.00 % Senior Notes Due 2026”).

The 6.00 % Senior Notes Due 2026 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after June 10, 2023, at a redemption price equal to 100 % of the outstanding principal amount thereof, plus accrued and unpaid interest.

The 7.00 % Senior Notes Due 2026

On February 10, 2021, Terra BDC issued $ 34.8 million in aggregate principal amount of 7.00 % fixed-rate notes due 2026, and on February 26, 2021, the underwriters exercised the option to purchase an additional $ 3.6 million of the notes (collectively the “ 7.00 % Senior Notes Due 2026”).

The 7.00 % Senior Notes Due 2026 may be redeemed in whole or in part at any time or from time to time at Terra BDC’s option on or after February 10, 2023, at a redemption price equal to 100 % of the outstanding principal amount thereof, plus accrued and unpaid interest.

In connection with the BDC Merger, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the outstanding 7.00 % Senior Notes Due 2026.

Covenant Compliance

The Company’s unsecured notes payable contain certain financial covenants.

As of December 31, 2023, the Company was in compliance with such covenants.

Notes to Consolidated Financial Statements

The following table presents detailed information with respect to each borrowing under the Term Loan as of:

December 31, 2021

Mortgage Assets Borrowings Under the Term Loan (1)(2)

Principal Amount Carrying Value Fair

330 Tryon DE LLC $ 22,800,000 $ 22,902,354 $ 22,594,654 $ 13,680,000

1389 Peachtree St, LP;

1401 Peachtree St, LP;

1409 Peachtree St, LP 53,289,288 53,536,884 52,031,363 31,283,661

AGRE DCP Palm Springs, LLC 43,222,381 43,669,992 43,829,842 23,146,265

Patrick Henry Recovery Acquisition, LLC 18,000,000 18,041,124 18,055,377 10,800,000

University Park Berkeley, LLC 25,815,378 25,991,962 26,015,500 14,853,544

$ 163,127,047 $ 164,142,316 $ 162,526,736 $ 93,763,470

For the years ended December 31, 2022 and 2021, the Company made repayments on borrowings under the Term Loan of $ 93.8 million and $ 16.6 million, respectively, and received proceeds from borrowings under the Term Loan of none and $ 2.8 million, respectively.

Secured Financing Arrangements

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

December 31, 2023 December 31, 2022

Current Maturity Extended Maturity Weighted Average Interest Rate (1)

Pledged Asset Carrying Value Maximum Facility Size Principal Amount Principal

Repurchase Agreements:

UBS Master Repurchase Agreement

On November 8, 2021, Terra Mortgage Capital III, LLC (the “Seller”), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Uncommitted Master Repurchase Agreement (the “UBS Master Repurchase Agreement”) with UBS AG ( the “Buyer”).

The UBS Master Repurchase Agreement provides for advances of up to $ 195 million in the aggregate, which the Company expects to use to finance certain secured performing commercial real estate loans, including senior mortgage loans, where the underlying mortgaged properties consist of value-added assets with loan-to-value ratio between 65 % and 80 % that are typically yielding between 2.5 % and 5.0 %.

Advances under the UBS Master Repurchase Agreement accrue interest at a per annum pricing rate equal to the sum of (i) the 30-day LIBOR or Term SOFR if LIBOR is not available and (ii) the applicable spread, which ranges from 1.60 % to 2.25 %, and have a maturity date of November 7, 2024.

The actual terms of financing for each asset will be determined at the time of financing in accordance with the UBS Master Repurchase Agreement.

Subject to satisfaction of certain conditions, the Seller may extend the maturity date of the UBS Master Repurchase Agreement annually thereafter on mutually agreeable terms.

In connection with the UBS Master Repurchase Agreement, the Company incurred deferred financing costs of $ 0.6 million, which are being amortized to interest expense over the term of the facility.

The UBS Master Repurchase Agreement contains margin call provisions that provide the Buyer with certain rights in the event of a decline in the credit of the underlying assets purchased under the UBS Master Repurchase Agreement.

Upon the occurrence of a margin deficit event, the Buyer may require the Seller to make a payment to reduce the purchase price to eliminate any margin deficit.

In connection with the UBS Master Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of the Buyer (the “UBS Guarantee Agreement”), pursuant to which the Company will guarantee the payment of up to 25 % of the amount outstanding under the UBS Master Repurchase Agreement.

The UBS Master Repurchase Agreement and the UBS Guarantee Agreement contain various representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types.

In addition, the UBS Guarantee Agreement contains financial covenants, which require the Company to maintain:

(i) cash liquidity of at least the greater of $ 5 million or 5 % of the then-current outstanding amount under the UBS Master Repurchase Agreement;

(ii) total liquidity of at least the greater of $ 15 million or 10 % of the then-current outstanding amount under the UBS Master Repurchase Agreement (iii) tangible net worth at an amount equal to or greater than $ 215.7 million 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 3.50 to 1.00.

In March 2022, the Company amended the UBS Guarantee Agreement to reduce the EBITDA to interest expense ratio of not less than 1.25 to 1.00, and as of December 31, 2022 and 2021, the Company was in compliance with these covenants.

Notes to Consolidated Financial Statements

The following tables present detailed information with respect to each borrowing under the UBS Master Repurchase Agreement as of:

December 31, 2022

Collateral Borrowings Under Master Repurchase Agreement

Principal Amount Carrying Value Fair

Value Borrowing Date Principal Amount Interest

NB Factory TIC 1, LLC $ 28,000,000 $ 28,857,892 $ 28,902,234 11/8/2021 $ 18,970,000 LIBOR+ 1.74 % (LIBOR floor of 0.1 %)

Grandview’s Madison Place, LLC 17,000,000 17,105,928 17,105,928 3/7/2022 13,600,000 Term SOFR + 1.965 %

Grandview’s Remington Place,

LLC 23,100,000 23,199,620 23,203,343 5/6/2022 18,480,000 Term SOFR + 1.965 %

$ 68,100,000 $ 69,163,440 $ 69,211,505 $ 51,050,000

December 31, 2021

Collateral Borrowings Under Master Repurchase Agreement

Principal Amount Carrying Value Fair

Value Borrowing Date Principal Amount Interest

14th & Alice Street Owner, LLC $ 39,384,000 $ 40,089,153 $ 40,130,448 11/8/2021 $ 25,599,600 LIBOR+ 1.45 % (LIBOR floor of 0.1 %)

NB Factory TIC 1, LLC 28,000,000 28,420,056 28,851,547 11/8/2021 18,970,000 LIBOR+ 1.74 % (LIBOR floor of 0.1 %)

Goldman Sachs Bank facility (2)(3)

February 2024 February 2025 8.59 % $ 140,607,937 $ 200,000,000 $ 75,455,624 $ 119,826,607

UBS AG facility (2)(4)

November 2024 (5) 7.32 % 23,210,490 195,000,000 18,480,000 51,050,000

Total 163,818,427 395,000,000 93,935,624 170,876,607

Non-Recourse Financing:

Promissory notes payable (2)(6)

March 2025 - March 2026 March 2026 - March 2027 10.70 % 100,309,108 N/A 63,509,518 —

Property mortgages - fixed rate June 2028 June 2028 6.25 % 81,674,492 N/A 40,250,000 —

Property mortgages - variable rate (7)

April 2027 April 2028 8.85 % 48,080,330 37,000,000 33,256,885 29,252,308

Total 230,063,930 37,000,000 137,016,403 29,252,308

Other Secured Financing:

Revolving line of credit (2)(8)

March 2024 March 2025 8.70 % 81,982,990 125,000,000 47,461,730 90,135,865

Term loan (9)

March 2024 March 2024 12.72 % 130,435,138 15,000,000 15,000,000 25,000,000

Total 212,418,128 140,000,000 62,461,730 115,135,865

606,300,485 572,000,000 293,413,757 315,264,780

For the years ended December 31, 2022 and 2021, the Company borrowed $ 32.1 million and $ 44.6 million, respectively, under the UBS Master Repurchase Agreement for the financing of new investments, and made repayments of $ 25.6 million and $ 0.0 million , respectively.

Goldman Master Repurchase Agreement

On February 18, 2022, Terra Mortgage Capital I, LLC (the “GS Seller”), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Uncommitted Master Repurchase and Securities Contract Agreement (the “Repurchase Agreement”) with Goldman Sachs Bank USA ( the “GS Buyer”).

The Repurchase Agreement provides for advances of up to $ 200.0 million in the aggregate, which the Company expects to use to finance the originations of certain secured performing commercial real estate loans and the acquisitions of certain secured non-performing commercial real estate loans.

The Repurchase Agreement replaced the Term Loan, at which time all Mortgage Assets under the Term Loan were assigned as purchased assets under the Repurchase Agreement.

Advances under the Repurchase Agreement accrue interest at a per annum pricing rate equal to the sum of (i) Term SOFR (subject to underlying loan floors on a case-by-case basis) and (ii) the applicable spread, which ranges from 1.75 % to 3.00 %, and have a maturity date of February 18, 2024.

The actual terms of financing for each asset will be determined at the time of financing in accordance with the Repurchase Agreement.

Subject to satisfaction of certain conditions, the GS Seller may extend the maturity date of the Repurchase Agreement for another 12-month term.

In connection with the Repurchase Agreement, the Company incurred financing costs of $ 0.6 million, which are being amortized to interest expense over the term of the facility.

Additionally, because the Repurchase Agreement was accounted for as a loan modification of the Term Loan, the remaining unamortized deferred financing fees of $ 1.7 million under the Term Loan were carried over to the Repurchase Agreement to be amortized over the life of the Repurchase Agreement.

The Repurchase Agreement contains margin call provisions that provide the GS Buyer with certain rights in the event of a decline in debt yield, loan-to-value ratio, and value of the underlying loans purchased under the Repurchase Agreement.

Upon the occurrence of a margin deficit event, the GS Buyer may require the GS Seller to make a payment to reduce the purchase price to eliminate any margin deficit.

In connection with the Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of the GS Buyer (the “Guarantee Agreement”), pursuant to which the Company will guarantee the obligations of the GS Seller under the Repurchase Agreement.

Subject to certain exceptions, the maximum liability under the Repurchase Agreement will not exceed

Notes to Consolidated Financial Statements

25 % of the then currently outstanding repurchase obligations for performing loans and 50 % of the then currently outstanding repurchase obligations for non-performing loans under the Repurchase Agreement.

The Repurchase Agreement and the Guarantee Agreement contain 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 contains financial covenants, which require the Company to maintain:

(i) cash liquidity of at least the greater of $ 5 million or 5 % of the then-current outstanding amount under the Repurchase Agreement;

(ii) total liquidity in an amount equal to or greater than the lesser of $ 15 million or 10 % of the then-current outstanding amount under the Repurchase Agreement (iii) tangible net worth at an amount no less than 75 % of that at closing;

(iv) an EBITDA to adjusted 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, 2022, the Company was in compliance with these covenants.

The following table presents detailed information with respect to each borrowing under the Repurchase Agreement as of:

December 31, 2022

Collateral Borrowings Under Repurchase Agreement

Principal Amount Carrying Value Fair

Value Borrowing Date Principal Amount Interest

330 Tryon DE LLC $ 22,800,000 $ 22,902,215 $ 22,687,235 2/18/2022 $ 18,240,000 Term SOFR + 2.015 % ( 0.01 % floor)

1389 Peachtree St, LP;

1401 Peachtree St, LP;

1409 Peachtree St, LP 57,184,178 57,453,482 56,844,322 2/18/2022 41,587,275 Term SOFR + 2.465 %

AGRE DCP Palm Springs, LLC 43,222,382 43,758,804 43,062,933 2/18/2022 28,094,548 Term SOFR + 1.315 % ( 1.8 % floor)

Patrick Henry Recovery Acquisition, LLC 18,000,000 18,041,782 17,824,300 2/18/2022 14,400,000 Term SOFR + 0.865 % ( 1.5 % floor)

University Park Berkeley, LLC 26,342,468 26,536,122 26,472,938 2/18/2022 17,504,783 Term SOFR + 1.365 % ( 1.5 % floor)

Unamortized deferred financing costs and other ( 2,888,444 ) ( 1,664,296 )

Secured financing agreements, net $ 290,525,313 $ 313,600,484

_______________

For the year ended December 31, 2022, the Company borrowed $ 119.8 million under the Repurchase Agreement and did not make any repayments.

Delayed Draw Term Loan

As previously reported by Terra BDC, on April 9, 2021, Terra BDC, as borrower, entered into a credit agreement (the “Credit Agreement”) with Eagle Point Credit Management LLC, as the administrative agent and collateral agent (“Eagle Point”), and certain funds and accounts managed by Eagle Point, as lenders (in such capacity, collectively, the “Lenders”).

The Credit Agreement provides for (i) a delayed draw term loan of $ 25.0 million and (ii) additional incremental loans in a minimum amount of $ 1.0 million and multiples of $ 0.5 million in excess thereof, which may be approved by a Lender in its sole discretion (the “Delayed Draw Tern Loan”).

The scheduled maturity date of the Delayed Draw Tern Loan was April 9, 2025.

The Delayed Draw Tern Loan bears interest on the outstanding principal amount thereof at a rate equal to 5.625 % per annum;

provided that if at any time Terra BDC was rated below investment grade, the interest rate would increase to 6.625 % until the rating is no longer below investment grade.

In connection with the entry into the Credit Agreement, Terra BDC also agreed to pay Eagle Point an upfront fee in an amount equal to 2.50 % of the loan commitment amount on the initial borrowing date as described in the Credit Agreement.

Terra BDC also paid, with respect to any unused portion of the Term Loan, a commitment fee of 0.75 % per annum.

Terra BDC could prepay any Loan, in whole or in part, together with all accrued but unpaid interest thereon, upon at least

30 but not more than 60 days’ prior notice to the Agent.

If Terra BDC elected to make such prepayments prior to October 9, 2023, Terra BDC would also be required to pay a make whole premium, being the present value at such date of (1) the principal

amount being prepaid of such Loan, plus (2) all remaining required interest payments due on the principal amount being prepaid of such Loan through the maturity date (excluding accrued but unpaid interest to the date on which the make whole premium becomes owed), computed using a discount rate equal to the applicable U.S.

Treasury rate (as set forth in the Credit

(1) Amount is calculated using the applicable index rate as of December 31, 2023.

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

(3) Interest rate is based on Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 2.0 % to 5.00 %.

In March 2024, the Company amended the Goldman Sachs Bank facility agreement to extend the maturity date to February 18, 2025 and to reduce the minimum interest coverage ratio covenant.

(4) Interest rate is based on Term SOFR plus a spread of 1.965 %.

In February 2024, the outstanding balance was repaid.

In March 2024, the Company amended the side letter to the UBS AG facility agreement to reduce the maximum amount available under this facility to zero.

In connection with this amendment, UBS AG waived the payment of any fees and the meeting of any representations, warranties or covenants for the period commencing on December 31, 2023 until such time as there are amounts outstanding under the UBS AG facility agreement.

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

(6) Interest rate is based on Term SOFR plus a spread ranging from 4.75 % to 5.6 % with a combined floor rate ranging from 9.0 % to 10.9 %.

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

(8) Prior to March 31, 2023 borrowings under this facility bore interest at an annual rate of LIBOR + 3.25 % with a combined floor of 4.0 %.

In connection with the transition of LIBOR, on March 31, 2023, the facility was amended and the interest rate was changed to Term SOFR + 3.35 % with a combined floor of 6.0 %.

In March 2024, the Company amended the facility agreement to waive the quarterly minimum net worth covenant for the purposes of the December 31, 2023 measurement date and to decrease the minimum net worth covenant for future quarterly measurement dates.

The amendment includes certain additional changes, including, but not limited to, extending the maturity date to September 12, 2024 with an option to extend the facility term for an additional 12 -month period, reducing the credit limit to $ 75.0 million, increasing the coupon rate and revising the minimum profitability covenant.

(9) Terra LLC assumed this facility from Terra BDC in connection with the BDC Merger.

Terra BDC pledged substantially all of its owned and thereafter acquired property as security for the obligations under the credit agreement.

On June 30, 2023, the Company amended the facility to, among other things, (i) extend the scheduled maturity date to March 31, 2024, and (ii) increase the rate on which the loans bear interest from a fixed rate of 5.625 % per annum to a floating rate based on SOFR plus 7.375 % with a SOFR floor of 5.0 %.

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

Notes to Consolidated Financial Statements

Agreement) plus 50 basis points, over (B) the principal amount being prepaid of such Loan;

provided that the make whole premium may in no event be less than zero.

In connection with its entry into the Credit Agreement, Terra BDC also entered into a security agreement (the “Security Agreement”), by and among Terra BDC, as grantor, and Eagle Point, as administrative agent, for the benefit of the Lenders, their affiliates and Eagle Point as the secured parties thereunder.

Pursuant to the Security Agreement, Terra BDC pledged substantially all of its then owned and thereafter acquired property as security for the obligations of Terra BDC under the Credit Agreement, subject to certain limitations and restrictions set forth in the Security Agreements.

On September 27, 2022, Terra BDC, Terra LLC, Eagle Point and the Lenders entered into a Consent Letter and Amendment (the “Credit Facility Amendment”) effective October 1, 2022.

Pursuant to the Credit Facility Amendment (i) Eagle Point and the Lenders consented to the consummation of the BDC Merger and the assumption by Terra LLC of all of the obligations of Terra BDC under the Credit Agreement, (ii) and the Credit Agreement was amended to, among other things, change the scheduled maturity date to July 1, 2023, and remove the make whole premium on voluntary prepayments of the loans.

The Credit Agreement contains customary representations, warranties, reporting requirements, borrowing conditions and affirmative, negative and financial covenants.

As of December 31, 2022, Terra LLC was in compliance with these covenants.

Mortgage Loan Payable

As of December 31, 2022, the Company had a $ 29.3 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, 2022 December 31, 2021

Lender Current

Interest Rate Maturity

Date Principal Amount Carrying Value Carrying Value of

Collateral Principal Amount Carrying Value Carrying Value of

Centennial Bank LIBOR + 3.85 %

(LIBOR Floor of 2.23 %)

May 31, 2023 $ 29,252,308 $ 29,488,326 $ 40,581,847 $ 31,962,692 $ 32,134,295 $ 46,067,129

For the years ended December 31, 2023 and 2022, approximately $ 2.5 million and $ 2.0 million, respectively, of amortization of deferred financing costs and other from secured financing agreements was included in interest expense on the consolidated statements of operations.

Additionally, for the years ended December 31, 2023 and 2022, the Company received proceeds from secured financing of $ 211.0 million and $ 286.6 million, respectively, and made repayments on secured financing of $ 205.3 million and $ 239.7 million, respectively.

Repurchase Agreements

The Company seeks to mitigate risks associated with its repurchase agreements by managing risk related to the credit quality of its assets, interest rates, liquidity, the rate of prepayment and market value.

The margin call provisions under the repurchase facilities provide the lender with certain rights in the event of a decline in the credit of the underlying assets purchased.

To monitor credit risk associated with the performance and value of its loans and investments, the Company’s asset management team regularly reviews its investment portfolios and is in regular contact with its borrowers, monitoring performance of the collateral and enforcing its rights as necessary.

The Company further seeks to manage risks associated with the repurchase agreements by matching the maturities and interest rate characteristics of its loans with the related repurchase agreement.

Financing Activities

During the year ended December 31, 2023, the Company entered into the following financing arrangements:

• Two property mortgages for a total of $ 73.5 million for the acquisition of eight industrial buildings;

• Three promissory notes for a total of $ 63.5 million to finance three senior loan investments.

Additionally, in October 2023, the Company conveyed its interest in an office building to the lender by deed-in-lieu of foreclosure and the related $ 27.6 million mortgage payable is effectively extinguished.

Covenant Compliance

The Company’s secured financing agreements contain certain financial tests and covenants.

In the event of a default or any breach of covenant of a related agreement, the lender has the right to accelerate all amounts due, charge interest at a default rate, retain all cash flow from the loans originated and/or sell such loans in a private sale on terms possibly unfavorable to the Company.

As of December 31, 2023, the Company was in compliance with all such covenants, as amended or waived (see footnotes to " Secured Financing Arrangements" table above).

Scheduled Debt Principal Payments

4 unchanged sentences

2026 131,009,518

Unamortized deferred financing costs ( 8,633,623 )

2027 33,256,885

2028 40,250,000

Unamortized deferred financing costs and other ( 8,007,547 )

Total $ 408,906,210

At December 31, 2022 and 2021, the unamortized deferred debt issuance costs were $ 8.6 million and $ 5.9 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,

_______________

(1) Amount includes $ 75.5 million of borrowings under a repurchase agreement for which the maturity was extended to 2025 subsequent to December 31, 2023.

Amount also includes $ 47.5 million of borrowings under a revolving line of credit for which the maturity was extended to September 2024 plus an option to extend the maturity for an additional 12-month period.

Notes to Consolidated Financial Statements

as applicable.

As of December 31, 2022 and 2021, obligations under participation agreements had a carrying value of approximately $ 12.7 million and $ 42.2 million, respectively, and the carrying value of the loans that are associated with these obligations under participation agreements was approximately $ 18.7 million and $ 101.0 million, respectively, (see “ Participation Agreements ” in Note 8 ).

Additionally, as of December 31, 2021, secured borrowing had a carrying value of approximately $ 34.6 million, and the carrying value of the loan that is associated with the secured borrowing was $ 50.3 million.

The weighted-average interest rate on the obligations under participation agreements and secured borrowing was approximately 16.4 % and 10.4 % as of December 31, 2022 and 2021, respectively.

The secured borrowing was repaid in August 2022.

Obligations Under Participation Agreements

As discussed in Note 2 , the Company follows the guidance in ASC 860 when accounting for loan participations.

Such guidance requires the transferred interests meet certain criteria in order for the transaction to be recorded as a sale.

Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements.

As of December 31, 2023, there were no obligations under participation agreements.

As of December 31, 2022, obligations under participation agreements had a carrying value of $ 12.7 million, and the carrying value of the loans that are associated with these obligations under participation agreements was $ 18.7 million, (see “ Participation Agreements ” in Note 8 ).

The weighted-average interest rate on the obligations under participation agreements was 16.4 % as of December 31, 2022.

Commitments and Contingencies

10 unchanged sentences

The Manager has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.

From time to time, the Company and the Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies.

Additionally, as described above under “ Note 6 .

Real Estate Owned, Net—Real Estate Operating Revenue and Expenses,” as of December 31, 2022, the Company owned a multi-tenant office building that is subject to a ground lease.

As described above in Note 6 “ Real Estate Operating Revenue and Expenses” , the Company previously owned a multi-tenant office building that is subject to a ground lease.

The ground lease 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 is scheduled for November 1, 2025.

The Company was litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent.

On October 19, 2023, the Company conveyed its interest in the property to a subsidiary of Centennial Bank by deed-in-lieu of foreclosure.

Accordingly, the Company is no longer a party to the ground lease, and has taken the necessary steps to terminate the associated litigation (styled Terra Ocean Ave., LLC v.

Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No.

The Company believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant.

The Company’s position has prevailed in all three of the prior arbitrations to reset the ground rent.

The Company intends vigorously to pursue the litigation.

While the Company believes its arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty.

20STCV34217).

Additionally, from time to time, we and individuals employed by us and our Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our borrowers and investees.

While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that such proceedings will have a material effect upon our financial condition or results of operations.

See Note 8 for a discussion of the Company’s commitments to the Manager.

12 unchanged sentences

The Board may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, into one or more classes or series of stock.

As of December 31, 2022 and 2021, there were no Preferred Stock issued or outstanding other than the Series A Preferred Stock (defined below).

As of December 31, 2023, there were no Preferred Stock issued or outstanding.

As of December 31, 2022 there were 125 shares of Series A Preferred Stock (as defined below) issued and outstanding.

Series A Preferred Stock

1 unchanged sentence

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 Series A Preferred Stock paid dividends at an annual rate of 12.5 % of the liquidation preference.

These dividends were 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, ranked 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 Stockholders’ voting is required if (i) authorization or issuance of any securities senior to the Series A Preferred Stock;

The Series A Preferred Stock carried a redemption premium of $ 50 per share if redeemed prior to January 1, 2019.

The Series A Preferred Stock generally had no voting rights.

However, the Series A Preferred Stockholders’ voting was 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.

On October 1, 2022, in connection with the BDC Merger, the Company amended its charter to increase the shares authorized from 500,000,000 to 950,000,000 , consisting of 450,000,000 shares of Class A Common Stock, $ 0.01 par value per share (“Class A Common Stock”), 450,000,000 shares of Class B Common Stock, $ 0.01 par value per share (“Class B Common Stock”), and 50,000,000 shares of Preferred Stock.

In March 2023, the Series A Preferred Stock was fully redeemed at par for a total of $ 125,000 plus accrued dividends.

Concurrently, 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders and each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the BDC Merger was automatically changed into one issued and outstanding share of Class B Common Stock.

As of December 31, 2022, Terra JV, LLC, former shareholders of Terra BDC and Terra Offshore Funds REIT, LLC held 70.0 %, 19.9 % and 10.1 % of the issued and outstanding shares of the Class B Common Stock, respectively.

As of December 31, 2023, Terra Fund 7 and Terra Offshore REIT held 8.7 % and 10.1 %, respectively, of the issued and outstanding shares of the Company’s common stock.

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

On the date that is 180 calendar days (or, if such date is not a business day, the next business day) after the date (the “First Conversion Date”) of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such

Notes to Consolidated Financial Statements

earlier date as approved by the Board, one-third of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock.

On the date that is 365 calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date following the First Conversion Date as approved by the Board (the “Second Conversion Date”), one-half of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock.

On the date that is 545 calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date following the Second Conversion Date as approved by the Board, all of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock.

In connection with the potential liquidity transactions discussed in Note 1 , on December 1, 2023, the Company amended its articles of amendment and restatement (the “A&R Articles”) to provide the Board with greater flexibility to pursue a direct listing.

In connection with a listing of shares of Class A Common Stock on a national securities exchange, the outstanding shares of Class B Common Stock will be convertible on a one -for-one basis into listed shares of Class A Common Stock, subject to certain conversion terms and holding periods.

Currently, there are no outstanding shares of Class A Common Stock.

The A&R Articles also incorporate the provisions generally required by state regulators in order to become a non-traded REIT and publicly sell shares of the Company’s stock not listed on an exchange.

These non-traded REIT provisions will spring into effect and become operative if the Company ultimately decides to register and sell shares in a non-traded REIT format.

Distributions

3 unchanged sentences

For the years ended December 31, 2023 and 2022, the Company made distributions to investors totaling $ 18.6 million and $ 16.0 million, respectively, of which $ 18.6 million and $ 6.5 million were returns of capital, respectively.

Additionally, for each of the years ended December 31, 2022 and 2021, the Company made distributions to preferred stockholders of $ 15,624 .

Additionally, for the years ended December 31, 2023 and 2022, the Company made distributions to preferred stockholders of $ 3,907 and $ 15,624 , respectively.

Distributions paid to stockholders consist of ordinary income, capital gains, return of capital or a combination thereof for income tax purposes.

5 unchanged sentences

$ 0.76 $ 0.78

Dividend Reinvestment Plan

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

For the year ended December 31, 2023, the Company issued 663 shares of Class B Common Stock for a total of $ 8,399 pursuant to the Plan.

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 ones below that would require adjustment to, or disclosure in, the Company’s consolidated financial statements.

Management has determined that there are no material events other than those described in Note 9 that would require adjustment to, or disclosure in, the Company’s consolidated financial statements.

Terra Property Trust, Inc.

1 unchanged sentence

As of December 31, 2023

Initial Costs Cost Capitalized Subsequent to Acquisition Decrease in Net Investment (1)

Gross Amount at Period End

Initial Costs Cost Capitalized Subsequent to Acquisition Increase (Decrease) in Net Investment Gross Amount at Period End

Description Encumbrance Land Building and Building Improvements Land Building and Building Improvements Total Accumulated Depreciation Date of Construction Date Acquired Life Used for Depreciation

Office building

Monica, CA $ 29,252,308 $ — $ 51,308,076 $ 2,508,533 $ — $ — $ 53,816,609 $ 53,816,609 $ 7,156,383 2002-2004 July 30, 2018 40 years

Conshohocken, PA — 14,703,359 — 242,071 ( 14,945,430 ) — — — — N/A January 9, 2019 N/A

$ 29,252,308 $ 14,703,359 $ 51,308,076 $ 2,750,604 $ ( 14,945,430 ) $ — $ 53,816,609 $ 53,816,609 $ 7,156,383

Industrial buildings in Dallas, TX $ 40,250,000 $ 14,457,149 $ 65,365,376 $ 132,506 $ — $ 14,457,149 $ 65,497,882 $ 79,955,031 $ 1,189,296 1970;

May 2023 30 - 35 years

Industrial buildings in Dallas, TX 33,256,885 9,327,855 39,248,352 194,512 — 9,327,855 39,442,864 48,770,719 812,121 1975;

March 2023 35 - 38 years

$ 73,506,885 $ 23,785,004 $ 104,613,728 $ 327,018 $ — $ 23,785,004 $ 104,940,746 $ 128,725,750 $ 2,001,417

(1) For the year ended December 31, 2019, the Company recorded an impairment charge of $ 1.5 million on the land in order to reduce the carrying value of the land to its estimated fair value, which was the then estimated selling price less the cost of sale.

For the year ended December 31, 2021, the Company recorded another impairment charge of $ 3.4 million to reflect the current estimated selling price less the cost of sale.

For the period from January 1, 2022 through the date the land was sold in June 2022, the Company recorded another impairment charge of $ 1.6 million to reflect the current estimated selling price less the cost of sale.

In June 2022, the Company sold land for net proceeds of $ 8.6 million, and recognized a net loss on sale of $ 0.1 million.

At December 31, 2023, the aggregate cost of real estate for federal income tax purposes was $ 109.2 million.

The changes in total real estate assets and accumulated depreciation are as follows:

Real Estate Asset Accumulated Depreciation

Reconciliation of Real Estate Asset Reconciliation of Accumulated Depreciation

December 31, 2023 Year Ended

1 unchanged sentence

Balance, beginning of year $ 53,816,609 Balance, beginning of year $ 7,156,383

Sale of land ( 8,395,011 ) Depreciation for the year 1,664,842

Impairment charge ( 1,604,989 ) Balance, end of year $ 7,156,383

Additions during the year:

Acquisitions 128,398,732 Depreciation for the year 3,254,832

Capital improvements 327,018 Deductions during the year:

Deductions during the year:

Disposition (1)

( 8,409,798 )

Dispositions (1)

( 42,051,069 ) Balance, end of year $ 2,001,417

Impairment charge (1)

( 11,765,540 )

Balance, end of year $ 128,725,750

___________________________

(1) During the year ended December 31, 2023, the Company recorded an impairment charge of $ 11.8 million on the multi-tenant office building located in California in order to reduce the carrying value of the building to its estimated fair value.

In October 2023, the Company conveyed its interest in the office building to the lender by deed-in-lieu of foreclosure and recognized a loss on disposal of real estate of $ 4.2 million.

As of December 31, 2023, the Company no longer owns the multi-tenant office building.

Terra Property Trust, Inc.

1 unchanged sentence

As of December 31, 2023

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

610 Walnut Investors LLC (3)(4)

US - CA Office Term SOFR + 12.0 % ( 2.0 % Floor)

9/7/2025 Interest Only — 18,625,738 18,738,386

Dwight Mezz II, LLC US - CA Student

housing 11.0 % 5/6/2027 Interest Only — 3,000,000 2,916,369

Havemeyer TSM LLC (5)

US - NY Mixed-use 15.0 % 6/1/2023 Interest Only — 3,282,208 3,313,813

UNJ Sole Member, LLC (5)

US - CA Mixed-use 15.0 % 6/1/2027 Interest Only — 7,444,357 7,482,547

Description (1)

Number of Loans Property Type/Location Contractual Interest

Maximum Maturity Date (3)

Periodic Payment Terms Prior Liens Face Amount Carrying Amount Principal Amount of Mortgages Subject to Delinquent Principal or Interest

Mezzanine loans individually < 3% of carrying amount of total loans:

Mezzanine loan 1 Student housing/California 11.0 % May 2027 Interest Only — $ 3,000,000 $ 2,935,304 $ —

Mezzanine loan 1 Industrial/Massachusetts 8.5 % September 2027 Interest Only — 7,000,000 7,000,000 —

Mezzanine loan (4)(5)

1 Mixed-use/California 15.5 % June 2027 Interest Only — 7,444,357 7,488,777 —

17,444,357 17,424,081 —

First Mortgages:

14th & Alice Street Owner, LLC (6)

US - CA Multifamily LIBOR + 4.0 % ( 0.25 % Floor)

4/15/2024 Interest Only — 1,364,944 1,364,944

1389 Peachtree St, LP;

1401 Peachtree St, LP;

1409 Peachtree St, LP US - GA Office LIBOR + 4.5 %

8/10/2024 Interest Only — 57,184,178 57,453,482

330 Tryon DE LLC US - NC Office Term SOFR + 4.25 % ( 0.1 % Floor)

3/1/2024 Interest Only — 22,800,000 22,902,215

AGRE DCP Palm Springs, LLC US - CA Hotel - full/select service LIBOR + 5.0 % ( 1.8 % Floor)

1/1/2025 Interest Only — 43,222,382 43,758,804

AARSHW Property LLC (7)

US - NJ Industrial SOFR + 7.5 % ( 0.15 % Floor)

8/17/2025 Interest Only — 44,368,331 44,669,513

AAESUF Property LLC US - NJ Land SOFR + 11.95 % ( 0.05 % Floor)

3/1/2025 Interest Only — 17,860,291 18,288,969

American Gilsonite Company US - UT Infrastructure 14.0 % 8/31/2024 Interest Only — 21,250,000 21,840,359

Dallas - Big Town Owner, LLC US - TX Industrial Term SOFR + 4.5 % ( 2.5 % Floor)

12/27/2027 Interest Only — 26,635,183 26,838,830

Dallas - Oakland Owner, LLC US - TX Industrial Term SOFR + 4.5 % ( 2.5 % Floor)

12/27/2027 Interest Only — 9,673,597 9,747,559

Dallas - US HWY 80 Owner, LLC US - TX Industrial Term SOFR + 4.5 % ( 2.5 % Floor)

12/27/2027 Interest Only — 11,395,169 11,482,294

Dallas - 11333 Pagemill Owner, LLC US - TX Industrial Term SOFR + 4.5 % ( 2.5 % Floor)

12/27/2027 Interest Only — 12,296,945 12,390,965

Dallas - 11221 Pagemill Owner, LLC US - TX Industrial Term SOFR + 4.5 % ( 2.5 % Floor)

12/27/2027 Interest Only — 7,624,106 7,682,398

Terra Property Trust, Inc.

Schedule IV – Mortgage Loans on Real Estate (Continued)

As of December 31, 2022

Portfolio Company (1)

Collateral Location Property Type Interest Payment Rates Maximum Maturity Date (2)

Periodic Payment Terms Prior Liens Face Amount Carrying Amount

First Mortgages (Continued):

Grandview's Madison Place, LLC US - WA Multifamily Term SOFR + 4.45 % ( 0.05 % Floor)

2/10/2027 Interest Only $ — $ 17,000,000 $ 17,105,928

Grandview's Remington Place, LLC US - WA Multifamily Term SOFR + 4.45 % ( 0.05 % Floor)

4/22/2026 Interest Only — 23,100,000 23,199,620

Hillsborough Owners LLC US - NC Mixed-use LIBOR + 8.0 % ( 0.25 %% Floor)

11/1/2024 Interest Only — 20,720,028 21,138,947

Mesa AZ Industrial Owner, LLC US - AZ Land Term SOFR + 12.7 % ( 2.3 % Floor)

9/14/2024 Interest Only — 31,000,000 31,276,468

NB Factory TIC 1, LLC US - UT Student

housing LIBOR + 5.0 % ( 0.25 % Floor)

3/5/2024 Interest Only — 28,000,000 28,857,892

Patrick Henry Recovery Acquisition, LLC US - CA Office LIBOR + 2.95 % ( 1.5 % Floor)

12/1/2024 Interest Only — 18,000,000 18,041,782

The Lux Washington, LLC US - WA Multifamily LIBOR + 7.0 % ( 0.75 % Floor)

1/22/2026 Interest Only — 16,571,267 16,722,091

University Park Berkeley, LLC US - CA Multifamily LIBOR + 4.2 % ( 1.5 % Floor)

3/1/2025 Interest Only — 26,342,468 26,536,122

First mortgages individually > 3% of carrying amount of total loans:

Office/Georgia 10.0 % August 2024 Interest Only — 56,835,827 56,835,827 56,835,827

Loan B Hotel/California 10.5 % January 2025 Interest Only — 43,222,382 43,801,303 —

Loan C (7)(8)

Industrial/New Jersey 12.8 % August 2025 Interest Only — 60,579,869 60,612,621 60,579,869

Loan D Land/New Jersey 17.3 % March 2025 Interest Only — 21,839,509 22,876,428 —

Loan E Office/California 8.9 % December 2024 Interest Only — 18,000,000 18,041,150 —

Loan F Infrastructure/Utah 14.0 % August 2025 Interest Only — 21,250,000 21,443,421 —

Loan G Mixed-use/North Carolina 13.5 % November 2024 Interest Only — 21,826,479 21,929,657 —

Loan H (4)(5)

Land/Arizona 18.1 % September 2024 Interest Only — 31,000,000 31,296,235 —

Loan I Student housing/Utah 10.4 % March 2024 Interest Only — 28,000,000 28,886,528 —

Loan J Multifamily/Washington 9.8 % April 2026 Interest Only — 23,100,000 23,210,490 —

Loan K Multifamily/California 10.9 % October 2024 Interest Only — 27,494,267 27,810,327 —

First mortgages individually < 3% of carrying amount of total loans:

First mortgages 2 Multifamily/California & Washington 9.5 %- 13.1 %

March 2027 Interest Only — 12,317,167 12,174,903 1,364,944

365,465,500 368,918,890 118,780,640

Preferred equity investments:

370 Lex Part Deux, LLC (8)

US - NY Office LIBOR + 8.25 % ( 2.44 % Floor)

7/9/2022 Interest Only — 67,586,792 67,586,792

Ann Street JV LLC US - GA Multifamily 14.0 % 6/27/2026 Interest Only — 15,217,540 15,648,482

Asano Bankers Hill, LLC US - CA Mixed-use SOFR + 15.0 % ( 0.25 % Floor)

7/31/2025 Interest Only — 17,450,623 17,920,424

REEC Harlem Holdings Company LLC (9)

US - NY Mixed-use LIBOR + 12.5 %

3/9/2025 Interest Only — 15,983,234 15,983,234

RS JZ Driggs, LLC (10)

US - NY Multifamily 12.3 % 8/1/2021 Interest Only — 4,993,245 4,993,245

Preferred equity investments individually > 3% of carrying amount of total loans:

Office/New York 13.7 % July 2022 Interest Only — 69,976,792 69,976,792 69,976,792

Loan M Multifamily/Georgia 14.0 % June 2026 Interest Only — 17,500,001 17,766,501 —

Loan N Mixed use/California 20.3 % August 2025 Interest Only — 18,567,296 18,855,139 —

Mixed use/New York 18.0 % March 2025 Interest Only — 15,258,233 15,258,233 15,258,233

Preferred equity investments individually < 3% if carrying amount of total loans:

Preferred equity

investment (11)

1 Multifamily/New York 12.3 % August 2021 Interest Only — 5,248,647 5,248,647 5,248,647

126,550,969 127,105,312 90,483,672

Credit facility:

Shopoff & Cindy I.

US-CA Industrial 15.0 % 4/4/2023 Interest Only — 28,802,833 29,080,183

Total loans (12)

$ 509,460,826 513,448,283 $ 209,264,312

Allowance for loan losses — ( 25,471,890 )

Total investments $ 645,795,459 $ 626,490,767

Allowance for credit losses (13)

( 56,976,025 )

(1) All of the Company’s loans have a prepayment penalty provision.

Carrying value, net $ 456,472,258

___________________________

(1) All of the Company’s loans have a prepayment provision.

(2) For all floating rate loans, contractual interest rate was determined using the applicable benchmark rate as of December 31, 2023.

(3) Maximum maturity date assumes all extension options are exercised.

(3) The Company sold a portion of its interest in this loan through a participation agreement to a third party ( Note 8 ).

(4) 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 Agreement and Secured Borrowing ” in Note 9 and “ Transfers of Participation Interest by the Company ” in Note 8 in the accompanying notes to the consolidated financial statements.

(5) The Company purchased a portion of its interest in this loan through a participation agreement.

Participation interest is with RESOF REIT, a related-party real estate investment trust managed by the Manager ( Note 8 ).

(6) This loan is classified as a TDR.

The Company does not anticipate a full recovery of the remaining principal balance, as such, the loan is fully reserved.

(4) Participation interest is with Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager.

(5) The Company acquired these investments through participation agreements.

See “ Participation Agreements ” in Note 8 in the accompanying notes to the consolidated financial statements.

(6) This loan is current in maturity default.

The Company recorded an allowance of credit losses of $ 11.8 million on this loan as a result of a decline in the fair value of the underlying collateral.

(7) Amount included $ 4.0 million of incremental borrowing that bears interest at an annual rate of 20.0 % until certain conditions are met, at which time the interest rate will be the same as the original loan.

(8) This loan is currently in maturity default.

For the year ended December 31, 2022, the Company suspended interest income accrual of $ 3.7 million on this loan, because recovery of such income was doubtful.

As of December 31, 2022, the Company recorded a specific allowance for loan losses of $ 11.2 million on the loan as a result of a decline in the fair value of the collateral.

(9) For the year ended December 31, 2022, the Company suspended interest income accrual of $ 2.9 million on this loan, because recovery of such income was doubtful.

As of December 31, 2022, the Company recorded a specific allowance for loan losses of $ 12.9 million on the loan as a result of a decline in the fair value of the collateral.

(10) This loan is in maturity default.

(8) The interest payment on this loan is past due;

however, the Company expects to be able to collect all amounts due for both principal and interest according to the contractual terms of the loan.

(9) This loan is current in maturity default.

The Company recorded an allowance of credit losses of $ 26.4 million on this loan as a result of a decline in the fair value of the underlying collateral.

(10) This loan is current in maturity default.

The Company recorded an allowance of credit losses of $ 15.1 million on this loan and expects the sponsor to pay the remaining balance.

(11) This loan is current in maturity default.

The Company initiated a litigation to seek full repayment of the loan from the sponsor.

For the year ended December 31, 2022, the Company suspended interest income accrual of $ 2.0 million on this loan, because recovery of such income was doubtful.

(11) Amount included $ 3.0 million of incremental borrowing that bears interest at an annual rate of Term SOFR plus 7.0 % with a SOFR floor of 4.30 %.

(12) The aggregate cost for U.S.

federal income tax purposes was $ 575.9 million.

(13) Excludes $ 0.3 million of allowance for credit losses related to unfunded commitments.

Terra Property Trust, Inc.

7 unchanged sentences

New mortgage loans 78,883,295

Loans acquired and contributed in the BDC Merger 74,818,438

Accrual, payment and accretion of investment-related fees and other, net 1,847,999

Deductions during the period:

Collections of principal ( 126,142,565 )

Provision for loan losses ( 11,813,409 )

Settlement of loans ( Note 4 )

( 70,737,874 )

Amortization of premium ( 1,124,157 )

Accrual, payment and accretion of investment-related fees and other, net ( 1,055,589 )

Provision for loan losses ( 45,591,567 )

Cumulative effect of credit loss accounting standard effective January 1, 2023 ( Note 2 , Note 4 )

( 4,250,052 )

Balance, end of year $ 456,472,258

3 unchanged sentences

/s/ Vikram S.

Chief Executive Officer

Chief Executive Officer and Chief Investment Officer

(Principal Executive Officer)

/s/ Gregory M.

Chief Financial Officer and Chief Operating Officer,

Chief Financial Officer, Treasurer and Secretary

(Principal Financial and Accounting Officer)

6 unchanged sentences

/s/ Gregory M.

Pinkus Chief Financial Officer, Chief Operating Officer, Treasurer

and Secretary March 10, 2023

Pinkus Chief Financial Officer, Treasurer and Secretary March 15, 2024

Pinkus (Principal Financial and Accounting Officer)

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures