What changed in this filing

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Item 1. Financial Statements

2024-11-08 compared with 2024-08-09 · 360 added, 305 removed, 1428 unchanged (32% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cash and cash equivalents $ 21,192,776 $ 10,674,475

33 unchanged sentences

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

issued, as of both June 30, 2024 and December 31, 2023

issued, as of both September 30, 2024 and December 31, 2023

Class B Common Stock, $ 0.01 par value, 450,000,000 shares authorized and 24,337,371

and 24,336,033 shares issued and outstanding as of June 30, 2024 and

and 24,336,033 shares issued and outstanding as of September 30, 2024 and

December 31, 2023, respectively

8 unchanged sentences

Consolidated Statements of Operations and Comprehensive (Loss) Income

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

7 unchanged sentences

Asset servicing fee 360,606 487,210 1,162,126 1,454,109

Provision for credit losses 2,576,325 4,652,644 4,449,436 3,802,593

(Reversal of) provision for credit losses ( 687,598 ) 27,096,841 3,761,838 30,899,434

Real estate operating expenses 586,293 1,912,322 2,059,570 4,986,446

9 unchanged sentences

Interest expense on unsecured notes payable ( 2,465,390 ) ( 2,416,518 ) ( 7,358,342 ) ( 7,216,091 )

Interest expense on obligations under participation agreements ( 770,648 ) ( 576,915 ) ( 1,389,143 ) ( 1,109,061 )

Unrealized gain on investments, net 201,501 51,224 178,570 57,808

Income (loss) from equity investment in unconsolidated

investments 1,671,970 ( 1,759,934 ) 1,198,583 ( 2,196,794 )

Interest expense on obligations under participation

agreements ( 779,793 ) ( 243,945 ) ( 2,168,936 ) ( 1,353,006 )

Unrealized (loss) gain on investments, net ( 74,849 ) ( 1,040,192 ) 103,721 ( 982,384 )

Income (loss) from equity investment in

unconsolidated investments 1,025,176 41,839 2,223,759 ( 2,154,955 )

Loss on repayment of loan ( 5,629,510 ) — ( 5,629,510 ) —

Gain on extinguishment of debt — 14,079,379 — 14,079,379

Realized loss on investments, net — — ( 446,009 ) ( 25,024 )

4 unchanged sentences

Other comprehensive income (loss)

Available-for-sale debt securities 316,392 — ( 19,390 ) —

Unrealized gain (loss) on available-for-sale debt securities 5,051 — ( 14,339 ) —

5,051 — ( 14,339 ) —

21 unchanged sentences

Other comprehensive loss:

Available-for-sale debt securities — — — — — — — ( 335,782 ) ( 335,782 )

Unrealized loss on available-for-sale debt securities — — — — — — — ( 335,782 ) ( 335,782 )

Balance at March 31, 2024 — — — 24,336,424 243,364 444,462,676 ( 213,882,368 ) ( 335,782 ) 230,487,890

6 unchanged sentences

— — — — — — — —

Available-for-sale debt securities — — — — — — — 316,392 316,392

Unrealized gain on available-for-sale debt securities — — — — — — — 316,392 316,392

Balance at June 30, 2024

— — — 24,336,871 243,369 444,467,721 ( 226,072,396 ) ( 19,390 ) 218,619,304

Shares issued from reinvestment of shareholder

distributions — — — 500 5 5,368 — — 5,373

Distributions declared on common shares ($ 0.19 per share)

— — — — — — ( 4,650,804 ) — ( 4,650,804 )

Net loss — — — — — — ( 7,803,936 ) — ( 7,803,936 )

Other comprehensive income:

— — — — — — — —

Unrealized gain on available-for-sale debt securities — — — — — — — 5,051 5,051

Balance at September 30, 2024

$ — — $ — 24,337,371 $ 243,374 $ 444,473,089 $ ( 238,527,136 ) $ ( 14,339 ) $ 206,174,988

See notes to unaudited consolidated financial statements .

Terra Property Trust, Inc.

Consolidated Statements of Changes in Equity (Continued)

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

5 unchanged sentences

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

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 — — — — — 34 — 478 — 478

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

Distributions declared on common shares ($ 0.19 per share)

Shares issued from reinvestment of

shareholder distributions — — — — — 34 — 478 — 478

Redemption of Series A Preferred

Stock — ( 125 ) ( 125,000 ) — — — — — — ( 125,000 )

Distributions declared on common

shares ($ 0.19 per share)

— — — — — — — — ( 4,650,492 ) ( 4,650,492 )

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

Distributions declared on preferred

shares — — — — — — — — ( 3,907 ) ( 3,907 )

Net income — — — — — — — — 547,479 547,479

2 unchanged sentences

shareholder distributions — — — — — 109 — 1,510 — 1,510

Distributions declared on common shares ($ 0.19 per share)

Distributions declared on common

shares ($ 0.19 per share)

— — — — — — — — ( 4,650,501 ) ( 4,650,501 )

1 unchanged sentence

Balance at June 30, 2023 — — — — — 24,335,513 243,354 444,451,801 ( 155,550,202 ) 289,144,953

Shares issued from reinvestment of

shareholder distributions — — — — — 198 3 2,572 — 2,575

Distributions declared on common

shares ($ 0.19 per share)

— — — — — — — — ( 4,650,531 ) ( 4,650,531 )

Net loss — — — — — — — — ( 17,477,698 ) ( 17,477,698 )

Balance at September 30, 2023 $ — — $ — — $ — 24,335,711 $ 243,357 $ 444,454,373 $ ( 177,678,431 ) $ 267,019,299

See notes to unaudited consolidated financial statements .

1 unchanged sentence

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

9 unchanged sentences

Amortization and accretion of investment-related fees, net ( 591,147 ) ( 1,016,972 )

Impairment charge — 11,765,540

Amortization of above-market rent ground lease — ( 97,761 )

Impairment charge — 11,765,540

Loss on repayment of loan 5,629,510 —

Gain on extinguishment of debt — ( 14,079,379 )

Realized loss on investments, net 446,009 25,024

Unrealized gain on investments, net ( 178,570 ) ( 57,808 )

Unrealized (gain) loss on investments, net ( 103,721 ) 982,384

Distributions received from equity investment in unconsolidated investments 2,918,307 5,805,494

11 unchanged sentences

Net cash (used in) provided by operating activities ( 5,571,455 ) 5,957,953

See notes to unaudited consolidated financial statements.

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

Nine Months Ended September 30,

Cash flows from investing activities:

13 unchanged sentences

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

Net cash provided by (used in) investing activities 39,427,985 ( 6,824,828 )

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

Six Months Ended June 30,

Net cash provided by investing activities 117,919,119 604,319

Cash flows from financing activities:

6 unchanged sentences

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

Net cash (used in) provided by financing activities ( 21,228,055 ) 16,446,305

Net increase in cash, cash equivalents and restricted cash 10,887,503 21,627,314

Net cash used in financing activities ( 98,709,172 ) ( 13,476,016 )

Net increase (decrease) in cash, cash equivalents and restricted cash 13,638,492 ( 6,913,744 )

Cash, cash equivalents and restricted cash at beginning of period 19,536,777 36,469,592

1 unchanged sentence

$ 33,175,269 $ 29,555,848

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental Disclosure of Cash Flows Information:

2 unchanged sentences

Reinvestment of shareholder distributions $ 14,897 $ 4,563

See notes to unaudited consolidated financial statements.

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

Supplemental non-cash investing information:

19 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2024

September 30, 2024

Terra Property Trust, Inc.

21 unchanged sentences

Notes to Unaudited Consolidated Financial Statements

As of June 30, 2024, 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.

As of September 30, 2024, 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.

Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include all of the Company’s accounts and those of its consolidated subsidiaries.

All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S.

GAAP”) and include the accounts of the Company and its consolidated subsidiaries.

The accompanying interim consolidated financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X.

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

Consolidation

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

18 unchanged sentences

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,

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

Notes to Unaudited Consolidated Financial Statements

consolidated balance sheet), but rather write off in a timely manner by reversing interest income that would likely be uncollectible.

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.

26 unchanged sentences

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.

1 unchanged sentence

Loans Not Secured by Real Estate

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

As of September 30, 2024 and December 31, 2023, the Company has one loan and two loans, respectively, that were 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 June 30, 2024, 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 of each loan.

As of September 30, 2024 and December 31, 2023, the Company did not record any allowance for credit losses on these loans because the Company believes that it will be able to collect all outstanding interest and principal on or before the maturity date of each loan.

Equity Investment in Unconsolidated Investments

11 unchanged sentences

Marketable Securities

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

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

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.

The Company may also invest in short-term equity securities classified as held for trading.

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

Notes to Unaudited Consolidated Financial Statements

Real Estate Owned, Net

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

Notes to Unaudited Consolidated Financial Statements

Acquisition of properties generally are accounted for as asset acquisitions.

30 unchanged sentences

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

Notes to Unaudited Consolidated Financial Statements

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.

Notes to Unaudited Consolidated Financial Statements

Real Estate Operating Revenues:

17 unchanged sentences

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:

September 30,

Cash and cash equivalents $ 21,192,776 $ 19,242,370

12 unchanged sentences

See “ Secured Financing Arrangements ” in Note 8 for additional information.

Notes to Unaudited Consolidated Financial Statements

Fair Value Measurements

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

Notes to Unaudited Consolidated Financial Statements

agreement payment and revolving line of credit.

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

11 unchanged sentences

federal and state income taxes at regular corporate rates.

As of June 30, 2024, the Company has satisfied all the requirements for a REIT.

As of September 30, 2024, 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 ASC 740-10-25, Income Taxes , nor did the Company have any unrecognized tax benefits as of the periods presented herein.

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

For the three and six months ended June 30, 2024 and 2023, the Company did not incur any interest or penalties.

For the three and nine months ended September 30, 2024 and 2023, the Company did not incur any interest or penalties.

Although the Company files federal and state tax returns, its major tax jurisdiction is federal.

1 unchanged sentence

Earnings Per Share

The Company has a simple equity capital structure with only common stock outstanding as of June 30, 2024 and December 31, 2023, and common stock and preferred stock outstanding prior to March 31, 2023.

The Company has a simple equity capital structure with only common stock outstanding as of September 30, 2024 and December 31, 2023, and common stock and preferred stock outstanding prior to March 31, 2023.

As a result, earnings per share, as presented, represents both basic and dilutive per-share amounts for the periods presented in the consolidated financial statements.

8 unchanged sentences

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.

Notes to Unaudited Consolidated Financial Statements

Loans Held for Investment

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

As of June 30, 2024 and December 31, 2023, accrued interest receivable of $ 8.1 million and $ 6.5 million, respectively, is included in interest receivable on the consolidated balance sheets, and is excluded from the amortized cost of loans held for investment.

Notes to Unaudited Consolidated Financial Statements

As of September 30, 2024 and December 31, 2023, accrued interest receivable of $ 4.7 million and $ 6.5 million, respectively, is included in interest receivable on the consolidated balance sheets, and is excluded from the amortized cost of loans held for investment.

Portfolio Summary

The following table provides a summary of the Company’s loan portfolio as of:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Fixed Rate Floating

11 unchanged sentences

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

Coupon rates shown were determined using the London Interbank Offered Rate (“LIBOR”) of 5.45 %, average SOFR of 5.34 % and Term SOFR of 5.34 % as of June 30, 2024 and average SOFR of 5.34 % and Term SOFR of 5.35 % as of December 31, 2023.

(2) As of June 30, 2024 and December 31, 2023, amount included $ 302.6 million and $ 342.9 million of senior mortgages used as collateral for $ 192.5 million and $ 204.9 million of borrowings under secured financing arrangements, respectively ( Note 9 ).

(3) As of June 30, 2024 and December 31, 2023, 13 and 14 loans, respectively, were subject to a SOFR or Term SOFR floor, as applicable.

Coupon rates shown were determined using the average SOFR of 5.16 % and Term SOFR of 4.85 % as of September 30, 2024 and average SOFR of 5.34 % and Term SOFR of 5.35 % as of December 31, 2023.

(2) As of September 30, 2024 and December 31, 2023, amount included $ 201.4 million and $ 342.9 million of senior mortgages used as collateral for $ 120.6 million and $ 204.9 million of borrowings under secured financing arrangements, respectively ( Note 9 ).

(3) As of September 30, 2024 and December 31, 2023, 10 and 14 loans, respectively, were subject to a SOFR or Term SOFR floor, as applicable.

Lending Activities

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

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

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

Balance, January 1, 2024

1 unchanged sentence

Principal repayments received ( 213,137,530 ) — ( 213,137,530 )

New loans made 42,609,078 — 42,609,078

Origination, purchase and funding of loans 48,833,299 970,512 49,803,811

Loss on repayment of loan (1)

( 5,629,510 ) — ( 5,629,510 )

Net amortization of premiums on loans ( 177,180 ) — ( 177,180 )

1 unchanged sentence

net ( 388,655 ) 18,907 ( 369,748 )

Provision for credit losses ( 4,141,777 ) ( 25,195 ) ( 4,166,972 )

Balance, June 30, 2024

(Provision for) reversal of provision for credit losses ( 3,911,264 ) 60,650 ( 3,850,614 )

Balance, September 30, 2024

$ 243,502,933 $ 39,608,554 $ 283,111,487

_______________

(1) In August 2024, a $ 65.0 million senior loan was repaid, resulting in a loss on repayment of $ 5.6 million, which included the write-off of interest receivable of $ 4.8 million.

Notes to Unaudited Consolidated Financial Statements

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

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

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

2 unchanged sentences

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

New loans made 63,775,372 — 63,775,372

Origination, purchase and funding of loans 73,104,166 — 73,104,166

Principal repayments received ( 120,082,766 ) ( 3,282,208 ) ( 123,364,974 )

5 unchanged sentences

Provision for credit losses ( 30,568,286 ) ( 288,359 ) ( 30,856,645 )

Balance, June 30, 2023 $ 475,173,171 $ 38,645,336 $ 513,818,507

Balance, September 30, 2023 $ 432,327,832 $ 38,354,459 $ 470,682,291

Portfolio Information

The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of:

June 30, 2024 December 31, 2023

The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans.

Carrying value represents the amortized cost of loan, net of applicable allowance for credit losses.

September 30, 2024 December 31, 2023

Loan Structure Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total

2 unchanged sentences

Mezzanine loans 17,444,357 17,361,795 6.1 % 17,444,357 17,245,527 3.8 %

Allowance for credit losses — ( 34,905,309 ) ( 9.1 ) % — ( 56,976,025 ) ( 12.5 ) %

Total $ 312,894,965 $ 283,111,487 100.0 % $ 509,460,826 $ 456,472,258 100.0 %

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Property Type Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total

Office $ 116,221,158 $ 84,604,062 29.8 % $ 144,812,619 $ 106,462,535 23.3 %

Industrial 70,022,380 70,022,380 18.2 % 67,579,869 67,612,621 14.8 %

Infill land 54,870,512 56,197,733 19.9 % 52,839,509 54,024,545 11.8 %

1 unchanged sentence

Mixed-use 47,838,132 47,375,334 16.7 % 63,096,365 47,362,653 10.4 %

Hotel - full/select service 43,222,382 43,832,428 11.4 % 43,222,382 43,801,303 9.6 %

Student housing 31,000,000 31,859,506 11.3 % 31,000,000 31,758,493 7.0 %

Industrial 7,000,000 6,956,469 2.5 % 67,579,869 67,543,553 14.8 %

Hotel - full/select service — — — % 43,222,382 43,460,206 9.5 %

Infrastructure — — — % 21,250,000 21,443,089 4.7 %

Allowance for credit losses — ( 34,905,309 ) ( 9.1 ) % — ( 56,976,025 ) ( 12.5 ) %

Total $ 312,894,965 $ 283,111,487 100.0 % $ 509,460,826 $ 456,472,258 100.0 %

Notes to Unaudited Consolidated Financial Statements

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Geographic Location Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total

2 unchanged sentences

New York 75,517,822 43,916,695 15.5 % 90,483,672 49,041,668 10.7 %

New Jersey 85,922,380 87,067,380 22.7 % 82,419,378 83,489,049 18.3 %

Arizona 31,970,512 32,152,733 11.4 % 31,000,000 31,151,623 6.8 %

1 unchanged sentence

Utah 28,000,000 28,910,000 10.2 % 49,250,000 50,293,850 11.0 %

North Carolina 21,826,479 21,929,665 5.7 % 21,826,479 21,929,657 4.8 %

New Jersey 22,900,000 24,045,000 8.5 % 82,419,378 83,485,543 18.4 %

Washington 22,459,274 22,360,105 7.9 % 34,052,223 33,908,737 7.4 %

North Carolina 21,826,479 21,361,344 7.5 % 21,826,479 21,140,026 4.6 %

Massachusetts 7,000,000 6,956,469 2.5 % 7,000,000 6,930,932 1.5 %

Allowance for credit losses — ( 34,905,309 ) ( 9.1 ) % — ( 56,976,025 ) ( 12.5 ) %

Total $ 312,894,965 $ 283,111,487 100.0 % $ 509,460,826 $ 456,472,258 100.0 %

Allowance for Credit Losses

As described in Note 2 , on January 1, 2023, the Company adopted the provisions of ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):

As described in Note 2 , on January 1, 2023, the Company adopted the provisions of Accounting Standards Updates (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“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 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:

Six Months Ended June 30,

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

These unfunded commitments amounted to approximately $ 23.7 million and $ 35.7 million as of September 30, 2024 and December 31, 2023, respectively.

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

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

As of September 30, 2024 and December 31, 2023, the Company had four and six non-performing loans with total carrying value, excluding specific allowance, of $ 128.5 million and $ 209.3 million, respectively.

Accordingly, the Company utilized the estimated fair value of the loan collateral or sponsor’s guarantee to estimate the total specific allowance for credit losses of $ 31.6 million and $ 54.6 million as of September 30, 2024 and December 31, 2023, respectively.

Please see “Note 6.

Fair Value Measurements – Valuation Process for Fair Value Measurement” for information on how the fair values of these loans were determined.

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

Nine Months Ended September 30, 2024

Specific Allowance General Allowance Total

Funded Unfunded

Allowance for credit losses, beginning of period $ 54,642,777 $ 2,333,248 $ 326,907 $ 57,302,932

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

Provision for credit losses 4,166,972 3,406,854

Provision for (reversal of provision for) credit losses 4,597,541 ( 746,927 ) ( 88,776 ) 3,761,838

Charge-offs ( 27,639,191 ) — — ( 27,639,191 )

Recoveries — —

Allowance for credit losses, end of period $ 31,601,127 $ 1,586,321 $ 238,131 $ 33,425,579

These unfunded commitments amounted to approximately $ 27.8 million and $ 35.7 million as of June 30, 2024 and December 31, 2023, respectively.

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

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

Six Months Ended June 30,

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

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

Notes to Unaudited Consolidated Financial Statements

Nine Months Ended September 30, 2023

Specific Allowance General Allowance Total

Funded Unfunded

Allowance for credit losses, beginning of period $ 25,471,890 $ — $ — $ 25,471,890

Cumulative effect of credit loss accounting

standard effective January 1, 2023 ( Note 2 )

— 4,250,052 369,671 4,619,723

Provision for credit losses 33,390,774 ( 2,534,129 ) 42,789 30,899,434

Liability for credit losses on unfunded commitments, end of period $ 609,371 $ 765,410

Charge-offs — — — —

Allowance for credit losses, end of period $ 58,862,664 $ 1,715,923 $ 412,460 $ 60,991,047

Accrued Interest Receivable

1 unchanged sentence

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

For the three and six months ended June 30, 2024, the Company reversed $ 0.7 million of accrued interest

Notes to Unaudited Consolidated Financial Statements

income because such income was deemed uncollectible.

For the three and six months ended June 30, 2023, the Company did no t reverse any interest income accrual because all accrued interest income was deemed collectible.

For the three months ended June 30, 2024 and 2023, the Company suspended interest income accrual of $ 6.8 million and $ 3.7 million on five and three loans, respectively, because recovery of such income was not probable.

For the six months ended June 30, 2024 and 2023, the Company suspended interest income accrual of $ 12.6 million and $ 7.2 million on five and three loans, respectively, because recovery of such income was not probable.

As of June 30, 2024 and December 31, 2023, interest receivable recognized on these loans was $ 4.8 million and $ 3.4 million, respectively.

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 June 30, 2024 and December 31, 2023, the Company had six non-performing loans with total carrying value of $ 192.7 million and $ 209.3 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 $ 31.0 million and $ 54.6 million as of June 30, 2024 and December 31, 2023, respectively.

Please see “Note 6.

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

For the nine months ended September 30, 2024, the Company reversed $ 0.7 million of accrued interest income because such income was deemed uncollectible.

For the three months ended September 30, 2024 and the three and nine months ended September 30, 2023, the Company did no t reverse any interest income accrual because all accrued interest income was deemed collectible.

For the three months ended September 30, 2024 and 2023, the Company suspended interest income accrual of $ 5.3 million and $ 5.4 million on five and five loans, respectively, because recovery of such income was not probable.

For the nine months ended September 30, 2024 and 2023, the Company suspended interest income accrual of $ 17.8 million and $ 12.6 million on five and five loans, respectively, because recovery of such income was not probable.

In August 2024, in connection with the repayment of a $ 65.0 million senior loan, the Company wrote off the related interest receivable of $ 4.8 million.

As of September 30, 2024 and December 31, 2023, interest receivable recognized on these loans was zero and $ 3.4 million, respectively.

Loan Risk Rating

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:

The Company assesses the risk factors of each performing loan and assigns each performing loan a risk rating between 1 and 5, which is an average of the numerical ratings in the following categories:

(i) sponsor capability and financial condition;

2 unchanged sentences

and (iv) loan to value.

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

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

Risk Rating Description

3 unchanged sentences

5 Highest risk

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

Notes to Unaudited Consolidated Financial Statements

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

June 30, 2024

September 30, 2024

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

7 unchanged sentences

4 128,472,822 40.6 % — — 24,045,000 28,910,000 — 75,517,822

14 316,298,935 100.0 % $ 30,519,366 $ 22,590,634 $ 75,102,920 $ 58,336,766 $ 28,242,755 $ 101,506,494

Allowance for credit losses ( 33,187,448 )

Total, net of allowance for

credit losses $ 384,352,194

Notes to Unaudited Consolidated Financial Statements

Total carrying value, net $ 283,111,487

December 31, 2023

9 unchanged sentences

Allowance for credit losses ( 56,976,025 )

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

Total carrying value, net $ 456,472,258

_______________

(1) Amount included two loans that are currently in maturity default with total amortized costs of $ 53.0 million.

The Company expects to recover the principal and interest payments in full and therefore, no specific allowance for loan losses was recorded on these two loans.

Equity Investment in Unconsolidated Investments

8 unchanged sentences

Accordingly, the equity interest in RESOF is accounted for as an equity method investment.

Notes to Unaudited Consolidated Financial Statements

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Ownership Interest Carrying Value Unfunded Commitment Ownership Interest Carrying Value Unfunded Commitment

Equity investment in RESOF 14.9 % $ 42,651,437 $ 14,777,811 14.9 % $ 18,196,583 $ 37,444,080

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

1 unchanged sentence

Distributions received from RESOF $ 1,233,430 $ 718,469 $ 2,918,307 $ 5,428,139

Notes to Unaudited Consolidated Financial Statements

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

Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Investments at fair value (cost of $ 439,251,438 and $ 196,129,031 , respectively)

9 unchanged sentences

Partners’ capital $ 280,849,472 $ 118,248,930

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

2 unchanged sentences

Net investment income 12,434,160 5,522,775 27,726,087 14,904,307

Unrealized appreciation (depreciation) on

investments 2,576,304 ( 288,031 ) 2,048,392 ( 883,942 )

Unrealized (depreciation) appreciation

on investments ( 625,086 ) 533,266 1,423,306 ( 350,676 )

Provision for income tax — — — ( 138,944 )

2 unchanged sentences

Equity Investment in Joint Ventures

The Company beneficially owns equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities, and indirectly, together with other non-affiliated entities, a non-real estate operating company.

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

Accordingly, the equity interests in the joint ventures are accounted for as equity method investments.

Notes to Unaudited Consolidated Financial Statements

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

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

9 unchanged sentences

N/A 100.0 % 5,065,920 — % —

XS Acquisition Holdco LLC (4)

Third parties 50.0 % 2,271,699 — % $ —

$ 22,875,282 $ 18,974,743

2 unchanged sentences

The Company’s portion of the distribution was $ 2.8 million.

Notes to Unaudited Consolidated Financial Statements

(2) In May 2024, the Company contributed $ 50,000 to this entity for the purpose of investing in opportunistic equity and debt securities.

This entity is jointly owned with two related parties managed by the Manager.

(3) In June 2024, the Company made a $ 20.0 million capital commitment to this fund that has indirectly invested, together with other non-affiliated entities, in a non-real estate operating company.

As of June 30, 2024, the total amount contributed was $ 5.0 million.

The Company determined it is not a primary beneficiary of the fund and therefore accounts for the investment using the equity method of accounting.

Three Months Ended June 30, Six Months Ended June 30,

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

As of September 30, 2024, the total amount contributed was $ 5.0 million.

The Company determined it is not a primary beneficiary of the entity and therefore accounts for the investment using the equity method of accounting.

(4) In September 2024, the Company purchased preferred and common units in an entity that invests in another non-real estate operating company.

The preferred units carry interest at an annual rate of 15 %, of which 10 % is paid in cash and 5 % is accrued.

The Company determined it is not a primary beneficiary of the entity and therefore accounts for the investment using the equity method of accounting.

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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Amounts provided are the total amounts attributable to the joint ventures and do not represent the Company’s proportionate share.

June 30, 2024 December 31, 2023

Additionally, amounts as of and for the three and nine months ended September 30, 2024 did not include the financial information of XS Acquisition Holdco LLC because this entity is still in the process of finalizing its purchase price allocation.

September 30, 2024 December 31, 2023

Net investments in real estate $ 200,009,486 $ 223,039,486

5 unchanged sentences

Members’ capital $ 59,775,511 $ 49,623,535

Three Months Ended June 30, Six Months Ended June 30,

Notes to Unaudited Consolidated Financial Statements

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

5 unchanged sentences

Unrealized loss ( 230,430 ) ( 995,658 ) ( 1,814,507 ) ( 2,245,640 )

Net income (loss) $ 253,391 $ ( 2,685,557 ) $ ( 3,926,594 ) $ ( 6,255,737 )

Net loss $ ( 4,441,530 ) $ ( 2,873,932 ) $ ( 8,368,124 ) $ ( 9,129,669 )

Other Equity Investments

3 unchanged sentences

Because the Company shares residual profit from the sale of underlying property with the borrower, the Company accounts for the investment using the equity method of accounting.

As of June 30, 2024, the Company's investment had a carrying value of $ 14.7 million.

For both the three and six months ended June 30, 2024, the Company recorded $ 0.1 million in equity income from TCC Boundary Partners LLC and did not receive any distributions.

As of September 30, 2024, the Company's investment had a carrying value of $ 15.3 million.

For both the three and nine months ended September 30, 2024, the Company recorded $ 0.6 million and $ 0.7 million, respectively, in equity income from TCC Boundary Partners LLC and did not receive any distributions.

Real Estate Owned, Net

3 unchanged sentences

Subsequent to the lease termination, the Company entered into a new lease with another tenant for the same space.

Notes to Unaudited Consolidated Financial Statements

2023 — During the three and six months ended June 30, 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.

Additionally, during the six months ended June 30, 2023, the Company entered into the following investments:

2023 — During the nine months ended September 30, 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.

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

Additionally, during the nine months ended September 30, 2023, the Company made the following investments:

Location Number of

4 unchanged sentences

$ 132,087,234

Notes to Unaudited Consolidated Financial Statements

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

18 unchanged sentences

$ 132,087,234

Notes to Unaudited Consolidated Financial Statements

Real Estate Owned, Net

1 unchanged sentence

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

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

11 unchanged sentences

Total real estate $ 132,150,992 $ ( 5,768,913 ) $ 126,382,079 $ 132,580,612 $ ( 2,825,790 ) $ 129,754,822

Notes to Unaudited Consolidated Financial Statements

Real Estate Operating Revenues and Expenses

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

13 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

6 unchanged sentences

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

Notes to Unaudited Consolidated Financial Statements

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

4 unchanged sentences

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

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Operating lease cost $ 519,750 $ 1,559,250

Notes to Unaudited Consolidated Financial Statements

Supplemental non-cash information related to the ground lease was as follows:

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Amounts included in the measurement of lease liability:

15 unchanged sentences

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair

Notes to Unaudited Consolidated Financial Statements

value measurement.

In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

As of June 30, 2024 and December 31, 2023, the Company had not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, equity securities, secured financing agreements, unsecured notes payable and obligations under participation agreements.

As of September 30, 2024 and December 31, 2023, the Company had not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, equity securities, secured financing agreements, unsecured notes payable and obligations under participation agreements.

Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable.

1 unchanged sentence

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 and included in Other assets in the consolidated balance sheet.

From time to time, the Company may invest in short-term equity securities, which are presented at fair value and included in Other assets in the consolidated balance sheets.

The Company may also invest in short term debt securities, which are classified as available-for sale securities, which are presented at fair value and included in Marketable securities in the

Notes to Unaudited Consolidated Financial Statements

consolidated balance sheets.

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

5 unchanged sentences

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

June 30, 2024

September 30, 2024

Fair Value Measurements

19 unchanged sentences

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

Notes to Unaudited Consolidated Financial Statements

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

Six Months Ended June 30,

Nine Months Ended September 30,

Marketable Securities Derivatives Marketable Securities Derivatives

6 unchanged sentences

Ending balance $ 1,134,314 $ 3,647 $ 7,054,491 $ 212,754

Notes to Unaudited Consolidated Financial Statements

Financial Instruments Not Carried at Fair Value

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:

June 30, 2024 December 31, 2023

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

September 30, 2024 December 31, 2023

Level Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value

3 unchanged sentences

participation

Allowance for loan losses — ( 34,905,309 ) — — ( 56,976,025 ) —

3 39,414,869 39,608,554 39,796,109 38,444,357 38,558,485 38,881,033

Total loans 312,894,965 283,111,487 284,482,854 509,460,826 456,472,258 457,339,949

9 unchanged sentences

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

The Company estimated that its other financial assets and liabilities, not included in the tables above, had fair values that approximated their carrying values at both June 30, 2024 and December 31, 2023 due to their short-term nature.

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 September 30, 2024 and December 31, 2023 due to their short-term nature.

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

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 ).

Notes to Unaudited Consolidated Financial Statements

The following tables present information about assets for which the Company recorded an impairment charge and that were measured at fair value on a non-recurring basis:

Three Months Ended June 30,

Fair Value Impairment Charges Fair Value Impairment Charges

Impairment Charges

Real estate and intangibles $ — $ — $ 27,603,118 $ 11,765,540

$ — $ 11,765,540

Six Months Ended June 30,

Fair Value Impairment Charges Fair Value Impairment Charges

There were no impairment charges for the three months ended September 30, 2024 and 2023, and the nine months ended September 30, 2024.

The following table presents information about assets for which the Company recorded an impairment charge and that were measured at fair value on a non-recurring basis for the nine months ended September 30, 2023:

Nine Months Ended

September 30, 2023

Fair Value Impairment Charges

Impairment Charges

Real estate and intangibles $ 27,603,118 $ 11,765,540

$ — $ 11,765,540

There were no impairment charges for the three and six months ended June 30, 2024.

Impairment charges, and their related triggering events and fair value measurements, recognized during the three and six months ended June 30, 2023 were as follows:

Real Estate and Intangibles

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

During the three and six months ended June 30, 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.

During the nine months ended September 30, 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 %).

Valuation Process for Fair Value Measurement

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.

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

Notes to Unaudited Consolidated Financial Statements

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.

11 unchanged sentences

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

Notes to Unaudited Consolidated Financial Statements

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).

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.

The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of June 30, 2024 and December 31, 2023.

The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of September 30, 2024 and December 31, 2023.

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 June 30, 2024

Primary Valuation Technique Unobservable Inputs June 30, 2024

Fair Value at September 30, 2024

Primary Valuation Technique Unobservable Inputs September 30, 2024

Asset Category Minimum Maximum Weighted Average

20 unchanged sentences

_______________

(1) Amount includes $ 161.7 million and $ 154.6 million of non-performing loans ( Note 3 ) as of June 30, 2024 and December 31, 2023, respectively.

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 % as of both June 30, 2024 and December 31, 2023.

Notes to Unaudited Consolidated Financial Statements

(1) Amount includes $ 96.9 million and $ 154.6 million of non-performing loans ( Note 3 ) as of September 30, 2024 and December 31, 2023, respectively.

The fair market value estimates of these non-performing loans 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 % as of both September 30, 2024 and December 31, 2023.

These inputs are based on the location, type and nature of the property, current sales and lease comparables, anticipated real estate and capital market conditions, and management’s knowledge, experience and judgment.

4 unchanged sentences

The Company entered into the Management Agreement with the Manager whereby the Manager is responsible for its day-to-day operations.

The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with

Notes to Unaudited Consolidated Financial Statements

providing services to the Company that are included on the consolidated statements of operations:

Three Months Ended June 30, Six Months Ended June 30,

The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations:

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

18 unchanged sentences

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

Notes to Unaudited Consolidated Financial Statements

Transaction Breakup Fee

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

As of June 30, 2024 and December 31, 2023, the Company had not received any breakup fees.

As of September 30, 2024 and December 31, 2023, the Company had not received any breakup fees.

Operating Expenses

2 unchanged sentences

Pursuant to the Management Agreement, the Manager or its affiliates receives a disposition fee in the amount of 1 % of the gross sale price received by the Company from the disposition of any real estate-related loan, or any portion of, or interest in, any real estate-related loan.

Notes to Unaudited Consolidated Financial Statements

debt-related loan prior to such transaction or (ii) the amount of the fee paid by the borrower in connection with such transaction.

The disposition fee is paid concurrently with the closing of any such disposition of all or any portion of any real estate-related loan or any interest therein, which is the lesser of (i) 1 % of the principal amount of the loan or debt-related loan prior to such transaction or (ii) the amount of the fee paid by the borrower in connection with such transaction.

If the Company takes ownership of a property as a result of a workout or foreclosure of a loan, the Company will pay a disposition fee upon the sale of such property equal to 1 % of the sales price.

3 unchanged sentences

In January 2024, the promissory note was amended to (i) extend the maturity date from June 30, 2024 to April 30, 2025 and to (ii) modify the interest rate from Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days, to 15.0 %.

During the six months ended June 30, 2024 and 2023, the Company provided funding under the promissory note receivable of $ 5.0 million and $ 0.8 million, respectively, and received repayments of $ 8.5 million and zero , respectively.

As of June 30, 2024 and December 31, 2023, amount outstanding under the promissory note receivable was $ 0.3 million and $ 3.8 million, respectively, which is included in Other assets on the consolidated balance sheets.

During the nine months ended September 30, 2024 and 2023, the Company provided funding under the promissory note receivable of $ 5.0 million and $ 0.8 million, respectively, and received repayments of $ 8.8 million and zero , respectively.

As of September 30, 2024, the promissory note receivable was fully repaid.

As of December 31, 2023, amount outstanding under the promissory note receivable was $ 3.8 million, which is included in Other assets on the consolidated balance sheets.

Due from Related Parties

As of June 30, 2024 and December 31, 2023, amount due from related parties was $ 0.8 million and $ 0.7 million, primarily related to operational cash requirements the Company paid on behalf of its affiliates.

As of September 30, 2024 and December 31, 2023, amount due from related parties was $ 0.8 million and $ 0.7 million, primarily related to operational cash requirements the Company paid on behalf of its affiliates.

Promissory Note Payable

2 unchanged sentences

The promissory note matures on March 31, 2027.

As of June 30, 2024, amount outstanding under this promissory note payable was $ 34.3 million.

As of September 30, 2024, amount outstanding under this promissory note payable was $ 35.1 million.

The activity associated with this agreement is eliminated in consolidation and therefore has no impact on the Company’s consolidated financial statements.

2 unchanged sentences

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

Notes to Unaudited Consolidated Financial Statements

Distributions Paid

For the three months ended June 30, 2024 and 2023, the Company made distributions to investors totaling $ 4.7 million and $ 4.7 million, respectively, all of which were returns of capital.

For the six months ended June 30, 2024 and 2023, the Company made distributions to investors totaling $ 9.3 million and $ 9.3 million, respectively, of which $ 9.3 million and $ 8.8 million were returns of capital, respectively ( Note 10 ).

For the three months ended September 30, 2024 and 2023, the Company made distributions to investors totaling $ 4.7 million and $ 4.7 million, respectively, all of which were returns of capital.

For the nine months ended September 30, 2024 and 2023, the Company made distributions to investors totaling $ 14.0 million and $ 14.0 million, respectively, of which $ 14.0 million and $ 13.5 million were returns of capital, respectively ( Note 10 ).

Due to Manager

As of June 30, 2024 and December 31, 2023, approximately $ 2.0 million and $ 4.2 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.

As of September 30, 2024 and December 31, 2023, approximately $ 0.6 million and $ 4.2 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

1 unchanged sentence

For more information on this investment, please see Note 4 .

Notes to Unaudited Consolidated Financial Statements

Participation Agreements

9 unchanged sentences

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

June 30, 2024

September 30, 2024

Participating Interests Principal Balance Carrying Value

3 unchanged sentences

40.80 % 7,444,357 7,455,820

Allowance for credit losses — ( 251,722 )

$ 39,414,869 $ 39,608,554

5 unchanged sentences

40.80 % 7,444,357 7,406,863

Allowance for credit losses — ( 226,527 )

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

1 unchanged sentence

(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.

Notes to Unaudited Consolidated Financial Statements

Transfers of Participation Interests by the Company

The following table summarizes the investment that was subject to a PA with an investment partnership affiliated with the Manager as of June 30, 2024.

The following table summarizes the investment that was subject to a participation agreement with an investment partnership affiliated with the Manager as of September 30, 2024.

There was no such investment as of December 31, 2023.

June 30, 2024

September 30, 2024

Transfers treated as

5 unchanged sentences

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

Notes to Unaudited Consolidated Financial Statements

asset servicing fees), are based upon its pro rata participation interest in such participated investment, as specified in the participation agreement.

In September 2023, a participant who purchased interest in an investment from the Company via a participation agreement conveyed its interest in the obligation under participation agreements to the Company and the Company recognized a gain on debt extinguishment of $ 14.1 million.

This investment is held in the name of the Company, but the Participant’s rights and obligations, including interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon its pro rata participation interest in such participated investment, as specified in the participation agreement.

The Participant’s share of the investment is repayable only from the proceeds received from the related borrower/issuer of the investment and, therefore, the Participant also is subject to credit risk (i.e., risk of default by the underlying borrower/issuer).

4 unchanged sentences

Coupon Rate Effective Rate (1)

Maturity Date June 30, 2024 December 31, 2023

Maturity Date September 30, 2024 December 31, 2023

6.00 % Senior Notes Due 2026

13 unchanged sentences

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 6.00 % Senior Notes Due 2026 may be redeemed in whole or in part at any time or

Notes to Unaudited Consolidated Financial Statements

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

4 unchanged sentences

The Company’s unsecured notes payable contain certain financial covenants.

As of June 30, 2024, the Company was in compliance with such covenants.

Notes to Unaudited Consolidated Financial Statements

As of September 30, 2024, the Company was in compliance with such covenants.

Secured Financing Arrangements

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current Maturity Extended Maturity Weighted Average Interest Rate (1)

23 unchanged sentences

_______________

(1) Amount is calculated using the applicable index rate as of June 30, 2024.

(1) Amount is calculated using the applicable index rate as of September 30, 2024.

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

6 unchanged sentences

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

Notes to Unaudited Consolidated Financial Statements

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

5 unchanged sentences

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

Notes to Unaudited Consolidated Financial Statements

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

10 unchanged sentences

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 June 30, 2024, the Company was in compliance with all such covenants, as amended or waived.

As of September 30, 2024, the Company was in compliance with all such covenants, as amended or waived.

Scheduled Debt Principal Payments

Scheduled debt principal payments for each of the five calendar years following June 30, 2024 are as follows:

Scheduled debt principal payments for each of the five calendar years following September 30, 2024 are as follows:

Years Ending December 31, Total

2024 (July 1 through December 31)

2024 (October 1 through December 31)

2025 70,438,441

4 unchanged sentences

Total $ 312,922,525

Notes to Unaudited Consolidated Financial Statements

Obligations Under Participation Agreements

2 unchanged sentences

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 June 30, 2024, obligations under participation agreements were $ 15.1 million (see “Participation Agreements” in Note 7 ).

As of September 30, 2024, obligations under participation agreements were $ 15.1 million (see “Participation Agreements” in Note 7 ).

The interest rate on the obligations under participation agreements was 20.16 %.

There were no such obligations under participation agreements as of December 31, 2023.

Notes to Unaudited Consolidated Financial Statements

Commitments and Contingencies

1 unchanged sentence

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

These fundings amounted to approximately $ 27.8 million and $ 35.7 million as of June 30, 2024 and December 31, 2023, respectively.

These fundings amounted to approximately $ 23.7 million and $ 35.7 million as of September 30, 2024 and December 31, 2023, respectively.

The Company expects to maintain sufficient cash on hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on credit facilities.

1 unchanged sentence

As discussed in Note 4 , on August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $ 50.0 million to purchase limited partnership interests in RESOF.

As of June 30, 2024 and December 31, 2023, the unfunded investment commitment was $ 23.3 million and $ 37.4 million, respectively.

As of September 30, 2024 and December 31, 2023, the unfunded investment commitment was $ 14.8 million and $ 37.4 million, respectively.

Additionally, in June 2024, the Company made a $ 20.0 million capital commitment to an entity that will invest, indirectly, together with other non-affiliated entities, in a non-real estate operating company.

As of June 30, 2024, the unfunded commitment was $ 15.0 million.

As of September 30, 2024, the unfunded commitment was $ 15.0 million.

The Company enters into contracts that contain a variety of indemnification provisions.

7 unchanged sentences

The following table presents earnings per share:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

5 unchanged sentences

Loss per share - basic and diluted $ ( 0.32 ) $ ( 0.72 ) $ ( 0.88 ) $ ( 1.49 )

Notes to Unaudited Consolidated Financial Statements

Preferred Stock Classes

2 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 June 30,

Notes to Unaudited Consolidated Financial Statements

2024, there were no shares of Preferred Stock issued or outstanding.

As of September 30, 2024, there were no shares of Preferred Stock issued or outstanding.

As of December 31, 2023 there were no shares of Series A Preferred Stock (as defined below) issued and outstanding.

6 unchanged sentences

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 June 30, 2024, 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.

As of September 30, 2024, 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.

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All distributions will be made at the discretion of the Board and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors as the Board deems relevant.

For both the three months ended June 30, 2024 and 2023, the Company made distributions to investors totaling $ 4.7 million, all of which were returns of capital.

For both the six months ended June 30, 2024 and 2023, the Company made distributions to investors totaling $ 9.3 million, of which $ 9.3 million and $ 8.8 million were returns of capital, respectively.

Additionally, for the three and six months ended June 30, 2023, the Company made distributions to preferred stockholders of none and $ 3,907 , respectively.

There were no such distributions for the three and six months ended June 30, 2024.

For both the three months ended September 30, 2024 and 2023, the Company made distributions to investors totaling $ 4.7 million, all of which were returns of capital.

For the nine months ended September 30, 2024 and 2023, the Company made distributions to investors totaling $ 14.0 million and $ 14.0 million, of which $ 14.0 million and $ 13.5 million were returns of capital, respectively.

Additionally, for the three and nine months ended September 30, 2023, the Company made distributions to preferred stockholders of none and $ 3,907 , respectively.

There were no such distributions for the three and nine months ended September 30, 2024.

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 six months ended June 30, 2024 and 2023, the Company issued 838 and 143 shares of Class B Common Stock for a total of $ 9,524 and $ 1,988 pursuant to the Plan, respectively.

For the nine months ended September 30,

Notes to Unaudited Consolidated Financial Statements

2024 and 2023, the Company issued 1,338 and 341 shares of Class B Common Stock for a total of $ 14,897 and $ 4,563 pursuant to the Plan, respectively.

Subsequent Events

25 unchanged sentences

Terra Capital Partners, LLC (“Terra Capital Partners”), our sponsor;

Terra Income Fund 6, Inc.

(“Terra Fund 6” or “Terra BDC”);

Terra Secured Income Fund 5 International;

30 unchanged sentences

We may also make strategic real estate equity and non-real estate-related investments that align with our investment objectives and criteria.

As of June 30, 2024, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of 17 loans in nine states with an aggregate net principal balance of $400.3 million, a weighted average coupon rate of 12.8% and a weighted average remaining term to maturity of 0.9 years.

As of September 30, 2024, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of 14 loans in nine states with an aggregate net principal balance of $297.9 million, a weighted average coupon rate of 12.7% and a weighted average remaining term to maturity of 1.0 years.

Each of our loans was originated by Terra Capital Partners or its affiliates.

Our portfolio is diversified based on location of the underlying properties, loan structure and property type.

As of June 30, 2024, our portfolio included underlying properties located in 17 markets, across nine states and includes property types such as multifamily housing, student housing, commercial offices, medical offices, mixed-use and industrial properties.

As of September 30, 2024, our portfolio included underlying properties located in 14 markets, across nine states and includes property types such as multifamily housing, student housing, commercial offices, medical offices, mixed-use and industrial properties.

The profile of these properties ranges from stabilized and value-added properties to pre-development and construction.

5 unchanged sentences

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

On October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Merger Agreement”), Terra BDC merged with and into Terra Income Fund 6, LLC (“Terra LLC”), our wholly owned subsidiary, with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as our wholly owned subsidiary.

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

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

Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of our Class B Common Stock, $0.01 par value per share ("Class B Common Stock"), were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of October 1, 2022.

As of June 30, 2024, Terra Fund 7 and Terra Offshore REIT held approximately 8.7% and 10.1%, respectively, of our issued and outstanding Class B Common Stock.

As of September 30, 2024, Terra Fund 7 and Terra Offshore REIT held approximately 8.7% and 10.1%, respectively, of our issued and outstanding Class B Common Stock.

As previously disclosed, we continue to explore alternative liquidity transactions on an opportunistic basis to maximize stockholder value.

10 unchanged sentences

The following tables provide a summary of our net loan portfolio as of:

June 30, 2024

September 30, 2024

Fixed Rate Floating

18 unchanged sentences

_______________

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

Coupon rates shown were determined using LIBOR of 5.45%, average SOFR of 5.34% and Term SOFR of 5.34% as of June 30, 2024, and LIBOR of 5.47%, average SOFR of 5.34% and Term SOFR of 5.35% as of December 31, 2023.

(2) As of June 30, 2024 and December 31, 2023, amount included $302.6 million and $342.9 million of senior mortgages used as collateral for $192.5 million and $204.9 million of borrowings under credit facilities, respectively.

(3) As of June 30, 2024 and December 31, 2023, 13 and 14 loans, respectively, are subject to a SOFR, or Term SOFR floor, as applicable.

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

Coupon rates shown were determined using average SOFR of 5.16% and Term SOFR of 4.85% as of September 30, 2024, and average SOFR of 5.34% and Term SOFR of 5.35% as of December 31, 2023.

(2) As of September 30, 2024 and December 31, 2023, amount included $201.4 million and $342.9 million of senior mortgages used as collateral for $120.6 million and $204.9 million of borrowings under credit facilities, respectively.

(3) As of September 30, 2024 and December 31, 2023, 10 and 14 loans, respectively, are subject to a SOFR, or Term SOFR floor, as applicable.

Real Estate Ownership

In addition to our net loan portfolio, we own eight industrial buildings.

As of June 30, 2024 and December 31, 2023, the real estate and related lease intangible assets and liabilities had a net carrying value of $127.4 million and $129.8 million, respectively, and the mortgage loans payable encumbering the real estate properties had an outstanding principal amount of $74.4 million and $73.5 million, respectively.

As of September 30, 2024 and December 31, 2023, the real estate and related lease intangible assets and liabilities had a net carrying value of $126.4 million and $129.8 million, respectively, and the mortgage loans payable encumbering the real estate properties had an outstanding principal amount of $74.4 million and $73.5 million, respectively.

Equity Investments

As of both June 30, 2024 and December 31, 2023, we owned 14.9% of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.

We also beneficially own equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, a non-real estate operating company, as well as a preferred equity investment with residual profit sharing from sale of the underlying property.

As of both September 30, 2024 and December 31, 2023, we owned 14.9% of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.

We also beneficially own equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, as well as a preferred equity investment with residual profit sharing from sale of the underlying property.

These investments are accounted for using the equity method of accounting.

As of June 30, 2024 and December 31, 2023, these equity investments had total carrying value of $70.7 million and $37.2 million, respectively.

As of September 30, 2024 and December 31, 2023, these equity investments had total carrying value of $80.8 million and $37.2 million, respectively.

Book Value Per Share

We calculate our book value per share by dividing our net equity by the number of outstanding shares of our common stock, unless otherwise determined by our Board.

Our book value per share of Class B Stock Common Stock as of June 30, 2024 and December 31, 2023 was $8.98 and $9.93, respectively.

Our book value per share of Class B Stock Common Stock as of September 30, 2024 and December 31, 2023 was $8.47 and $9.93, respectively.

Portfolio Investment Activity

Net Loan Portfolio

For the three months ended June 30, 2024 and 2023, we invested $46.3 million and $7.5 million in new and add-on investments and had $54.6 million and $6.4 million of repayments, resulting in net repayments of $8.3 million and net investments of $1.1 million, respectively.

For the three months ended September 30, 2024 and 2023, we invested $15.3 million and $3.9 million in new and add-on investments and had $21.7 million and $16.5 million of repayments, resulting in net repayments of $6.4 million and $12.6 million, respectively.

Amounts are net of obligations under participation agreements and secured financing agreements.

For the six months ended June 30, 2024 and 2023, we invested $57.7 million and $33.2 million in new and add-on investments and had $82.2 million and $46.3 million of repayments, resulting in net repayments of $24.5 million and $13.1 million, respectively.

For the nine months ended September 30, 2024 and 2023, we invested $73.1 million and $37.1 million in new and add-on investments and had $103.8 million and $29.8 million of repayments, resulting in net repayments of $30.8 million and net investments of $7.3 million, respectively.

Amounts are net of obligations under participation agreements and secured financing agreements.

1 unchanged sentence

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Loan Structure Principal Balance Carrying

4 unchanged sentences

Mezzanine loans 17,444,357 17,361,795 6.5 % 17,444,357 17,245,527 3.8 %

Allowance for credit losses — (34,905,309) (9.5) % — (56,976,025) (12.5) %

Total $ 297,894,965 $ 267,971,140 100.0 % $ 509,460,826 $ 456,472,258 100.0 %

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Property Type Principal Balance Carrying

2 unchanged sentences

Office $ 116,221,158 $ 84,604,062 31.6 % $ 144,812,619 $ 106,462,535 23.3 %

Industrial 70,022,380 70,022,380 19.0 % 67,579,869 67,612,621 14.8 %

Infill land 54,870,512 56,197,733 21.0 % 52,839,509 54,024,545 11.8 %

Multifamily 55,965,163 56,118,383 20.9 % 85,660,082 84,417,184 18.5 %

Hotel - full/select service 43,222,382 43,832,428 11.9 % 43,222,382 43,801,303 9.6 %

Mixed-use 32,838,132 32,234,987 12.0 % 63,096,365 47,362,653 10.4 %

Student housing 31,000,000 31,859,506 11.9 % 31,000,000 31,758,493 7.0 %

Industrial 7,000,000 6,956,469 2.6 % 67,579,869 67,543,553 14.8 %

Hotel - full/select service — — — % 43,222,382 43,460,206 9.5 %

Infrastructure — — — % 21,250,000 21,443,089 4.7 %

Allowance for credit losses — (34,905,309) (9.5) % — (56,976,025) (12.5) %

Total $ 297,894,965 $ 267,971,140 100.0 % $ 509,460,826 $ 456,472,258 100.0 %

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Geographic Location Principal Balance Carrying

4 unchanged sentences

New York 75,517,822 43,916,695 16.4 % 90,483,672 49,041,668 10.7 %

New Jersey 85,922,380 87,067,380 23.6 % 82,419,378 83,489,049 18.3 %

Arizona 31,970,512 32,152,733 12.0 % 31,000,000 31,151,623 6.8 %

Georgia 30,244,366 30,225,371 11.3 % 74,335,828 62,564,770 13.8 %

Utah 28,000,000 28,910,000 10.8 % 49,250,000 50,293,850 11.0 %

New Jersey 22,900,000 24,045,000 9.0 % 82,419,378 83,485,543 18.3 %

Washington 22,459,274 22,360,105 8.3 % 34,052,223 33,908,737 7.4 %

Arizona 31,000,000 31,296,248 8.5 % 31,000,000 31,296,235 6.9 %

North Carolina 21,826,479 21,361,344 8.0 % 21,826,479 21,140,026 4.6 %

Massachusetts 7,000,000 6,956,469 2.6 % 7,000,000 6,930,932 1.5 %

Allowance for credit losses — (34,905,309) (9.5) % — (56,976,025) (12.5) %

Total $ 297,894,965 $ 267,971,140 100.0 % $ 509,460,826 $ 456,472,258 100.0 %

1 unchanged sentence

Our results of operations are affected by a number of factors and primarily depend on, among other things, the level of the interest income from targeted assets, the market value of our assets and the supply of, and demand for, real estate-related loans, including mezzanine loans, first mortgage loans, subordinated mortgage loans, preferred equity investments and other loans related to high quality commercial real estate in the United States, and the financing and other costs associated with our business.

Interest income and borrowing costs may vary as a result of changes in interest rates, which could impact the net

interest we receive on our assets.

Interest income and borrowing costs may vary as a result of changes in interest rates, which could impact the net interest we receive on our assets.

Our operating results may also be impacted by conditions in the financial markets and unanticipated credit events experienced by borrowers under our loan assets.

49 unchanged sentences

The following table presents the comparative results of our operations:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 Change 2024 2023 Change

8 unchanged sentences

Asset servicing fee 360,606 487,210 (126,604) 1,162,126 1,454,109 (291,983)

Provision for credit losses 2,576,325 4,652,644 (2,076,319) 4,449,436 3,802,593 646,843

(Reversal of) provision for credit losses (687,598) 27,096,841 (27,784,439) 3,761,838 30,899,434 (27,137,596)

Real estate operating expenses 586,293 1,912,322 (1,326,029) 2,059,570 4,986,446 (2,926,876)

14 unchanged sentences

agreements (779,793) (243,945) (535,848) (2,168,936) (1,353,006) (815,930)

Unrealized gain on

Unrealized (loss) gain on

investments, net (74,849) (1,040,192) 965,343 103,721 (982,384) 1,086,105

2 unchanged sentences

investments 1,025,176 41,839 983,337 2,223,759 (2,154,955) 4,378,714

Loss on repayment of loan (5,629,510) — (5,629,510) (5,629,510) — (5,629,510)

Gain on extinguishment of

debt — 14,079,379 (14,079,379) — 14,079,379 (14,079,379)

Realized loss on investments,

5 unchanged sentences

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

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023

Weighted Average Principal Amount (1)

11 unchanged sentences

Gross loans $ 301,309,122 12.7 % $ 396,644,512 12.6 %

Obligations under participation agreements — — % (13,690,945) 17.3 %

Promissory notes payable (52,264,913) 10.1 % (3,700,000) 10.9 %

8 unchanged sentences

$ 77,849,657 11.5 % $ 126,662,325 13.1 %

Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023

Weighted Average Principal Amount (1)

11 unchanged sentences

Gross loans $ 343,982,323 12.6 % $ 458,476,432 12.0 %

Obligations under participation agreements — — % (13,353,339) 17.3 %

Promissory notes payable (66,227,552) 10.1 % (912,329) 10.9 %

14 unchanged sentences

Interest Income

For the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, interest income decreased by $7.4 million and $10.9 million, respectively primarily due to a decrease in contractual interest income as a result of a decrease in the weighted average principal balance of performing loans as well as an increase in suspended interest income accrual on non-performing loans of $3.0 million and $5.4 million, respectively, partially offset by an increase in the weighted average coupon rate due to increases in the underlying index rates.

For the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, interest income decreased by $3.3 million, primarily due to a decrease in contractual interest income as a result of a decrease in the weighted average principal balance of performing loans as well as a decrease in the weighted average coupon rate due to decreases in the underlying index rates.

For the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, interest income decreased by $14.2 million, primarily due to a decrease in contractual interest income as a result of a decrease in the weighted average principal balance of performing loans as well as an increase in suspended interest income accrual on non-performing loans of $5.3 million, partially offset by an increase in the weighted average coupon rate due to increases in the underlying index rates.

Real Estate Operating Revenue

For the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, real estate operating revenue decreased by $0.1 million, primarily due to a reduction in lease revenue resulting from the disposal of the office building in October 2023, substantially offset by an increase in lease revenue contributed by the five industrial buildings acquired in May 2023.

For the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, real estate operating revenue increased by $1.3 million, primarily due to an increase in lease revenue contributed by the eight industrial buildings acquired in 2023, partially offset by a reduction in lease revenue resulting from the disposal of the office building in October 2023.

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, real estate operating revenue decreased by $1.4 million and $0.1 million, respectively, primarily due to a reduction in lease revenue resulting from the disposal of the office building in October 2023, partially offset by an increase in lease revenue contributed by the five industrial buildings acquired in May 2023.

Other Operating Income

For both the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, other operating income decreased by $0.2 million, primarily due to a decline in dividend income earned on our marketable securities.

Operating Expenses Reimbursed to Manager

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

For both the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, operating expenses reimbursed to our Manager increased by $0.2 million, primarily due to an increase in our Manager’s overhead costs.

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, operating expenses reimbursed to our Manager decreased by $1.1 million and $0.9 million, respectively, primarily due to a decrease in our Manager’s overhead costs as well as a decrease in the allocation ratio.

Asset Management Fee

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

For the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, asset management fees decreased by $0.5 million and $0.8 million, respectively, primarily due to a decrease in total assets under management primarily resulting from repayment of loans.

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, asset management fees decreased by $0.5 million and $1.3 million, respectively, primarily due to a decrease in total assets under management primarily resulting from repayment of loans.

Asset Servicing Fee

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

For the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, asset servicing fees decreased by $0.1 million and $0.2 million, respectively, primarily due to a decrease in total assets under management resulting from the repayment of loans.

Provision for Credit Losses

On January 1, 2023, we adopted the provisions of ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, asset servicing fees decreased by $0.1 million and $0.3 million, respectively, primarily due to a decrease in total assets under management resulting from the repayment of loans.

(Reversal of) Provision for Credit Losses

On January 1, 2023, we adopted the provisions of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326):

For the three and six months ended June 30, 2024, provision for credit losses was $2.6 million and $4.4 million, respectively, primarily related to the decline in fair value of collateral underlying one loan in the investment portfolio as well as a decline in modeled macroeconomic forecasts for commercial real estate.

For the three and six months ended June 30, 2023, provision for credit losses was $4.7 million and $3.8 million, respectively, primarily due to a decline in the fair value of the collateral on a loan.

For the three months ended September 30, 2024, we recorded a reversal of provision for credit losses of $(0.7) million, primarily related to an increase in modeled economic forecasts for commercial real estate and the overall shortening duration of loans in the portfolio, partially offset by a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in funding on the senior loan.

For the nine months ended September 30, 2024, provision for credit losses was $3.8 million, primarily related to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in senior funding as well as a decline in modeled macroeconomic forecasts for commercial real estate.

For the three and nine months ended September 30, 2023, provision for credit losses was $27.1 million and $30.9 million, respectively, primarily due to a decline in the fair value of the collateral on a loan.

Real Estate Operating Expenses

For the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, real estate operating expenses decreased by $1.1 million and $1.6 million, respectively, primarily due to a reduction in ground lease rent on the office building disposed of in October 2023, partially offset by an increase in real estate operating expenses related to the industrial buildings that we acquired in 2023.

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, real estate operating expenses decreased by $1.3 million and $2.9 million, respectively, primarily due the disposal of the office building in October 2023.

Depreciation and Amortization

For the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, depreciation and amortization decreased by $0.01 million, primarily due to the disposal of the office building in October 2023, substantially offset by an increase in depreciation and amortization related to 5 industrial buildings that we acquired in May 2023.

For the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, depreciation and amortization increased by $1.4 million, primarily due to the industrial buildings that we acquired in 2023, partially offset by a reduction in depreciation and amortization related to the disposal of the office building in October 2023.

For the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, depreciation and amortization decreased by $0.8 million, primarily due to the disposal of the office building in October 2023, partially offset by an increase in depreciation and amortization related to 5 industrial buildings that we acquired in May 2023.

For the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, depreciation and amortization increased by $0.6 million, primarily due to the industrial buildings that we acquired in 2023, partially offset by a reduction in depreciation and amortization related to the disposal of the office building in October 2023.

Professional Fees

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, professional fees decreased by $0.5 million and $0.6 million, respectively, primarily due to legal fees incurred in connection with a review of strategic alternatives for our company in 2023.

Impairment Charge

For both the three and six months ended June 30, 2023, we recognized 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.

There was no impairment charge recorded for the three and six months ended June 30, 2024.

For the nine months ended September 30, 2023, we recognized 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.

There was no impairment charge for the three and nine months ended September 30, 2024 and the three months ended September 30, 2023.

Interest Expense on Secured Financing

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

For the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, interest expense on secured financing decreased by $0.9 million as a result of a decrease in the weighted average principal amount outstanding, partially offset by an increase in the index rate on secured financing agreements.

For the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, interest expense on secured financing increased by $0.3 million as a result of an increase in the index rate on secured financing agreements, partially offset by a decrease in the weighted average principal amount outstanding.

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, interest expense on secured financing decreased by $0.8 million and $0.5 million, respectively, as a result of a decrease in

the weighted average principal amount outstanding, partially offset by an increase in the index rate on secured financing agreements.

Interest Expense on Unsecured Notes Payable

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

For the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, interest expense on unsecured notes payable remained substantially the same.

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, interest expense on unsecured notes payable remained substantially the same.

Interest from Obligations under Participation Agreements

For the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, interest expense from obligations under participation agreements increased by $0.2 million and $0.3 million, respectively, primarily as a result of an increase in the weighted average interest rate on the outstanding obligations under participation agreements as well as an increase in the weighted average principal amount outstanding.

Unrealized Gain on Investments, Net

For the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, unrealized gain on investments, net increased by $0.2 million and $0.1 million, respectively, primarily due to an increase in the fair value of our marketable securities at period end.

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, interest expense from obligations under participation agreements increased by $0.5 million and $0.8 million, respectively, primarily as a result of an increase in the weighted average interest rate on the outstanding obligations under participation agreements as well as an increase in the weighted average principal amount outstanding.

Unrealized (Loss) Gain on Investments, Net

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, unrealized loss on investments, net decreased by $1.0 million and $1.1 million, respectively, primarily due to an increase in the fair value of our marketable securities at period end.

Income (Loss) from Equity Investment in Unconsolidated Investments

As of both June 30, 2024 and December 31, 2023, we owned a 14.9% equity interest in RESOF, a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.

W e also beneficially owned equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, a non-real estate operating company, and a preferred equity investment with residual profit-sharing.

As of both September 30, 2024 and December 31, 2023, we owned a 14.9% equity interest in RESOF, a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.

W e also beneficially owned equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, and a preferred equity investment with residual profit-sharing.

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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$ 1,025,176 $ 41,839 $ 2,223,759 $ (2,154,955)

For the three and six months ended June 30, 2024, we recognized equity income from RESOF as RESOF continues to invest its capital and generate positive income.

For the three and six months ended June 30, 2023, we recognized equity loss from RESOF primarily due to adjustments made to equity income as a result of the dilution of our ownership interest in RESOF as new investors were admitted in 2022 and 2023.

For the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, equity loss from the joint ventures decreased primarily due to a gain on sale of a real estate property, partially offset by an increase in depreciation and amortization and interest expense recognized by the joint ventures.

For the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, equity loss from the joint ventures increased primarily due to an increase in depreciation and amortization and interest expense recognized by the joint ventures, partially offset by a gain on sale of a real estate property.

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, equity income from RESOF increased as a result of increased income associated with increased investment.

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, equity loss from the joint ventures increased primarily due to an increase in depreciation, amortization and interest expense recognized by the joint ventures.

Loss on Repayment of Loan

In August 2024, a $65.0 million senior loan was repaid, resulting in a loss on repayment of $5.6 million for the three and nine months ended September 30, 2024, which included the write-off of interest receivable of $4.8 million.

There was no such loss for the three and nine months ended September 30, 2023.

Gain on Extinguishment of Debt

In September 2023, an unrelated counterparty to a participation agreement conveyed its interest in the obligation under participation agreement to us and we recognized a gain on debt extinguishment of $14.1 million.

There was no such gain for the three and nine months ended September 30, 2024.

Realized Loss On Investments, Net

For the three and six months ended June 30, 2024, we sold a portion of our investments in marketable equity securities and recognized a net loss on sale of $0.3 million and $0.4 million, respectively.

For both the three and six months ended June 30, 2023, our held-to-maturity debt securities that we purchased at a premium was redeemed at par and we recognized a net loss investment of $0.03 million.

For the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, the resulting net loss decreased by $11.7 million and $5.0 million, respectively.

For the nine months ended September 30, 2024, we sold a portion of our investments in marketable equity securities and recognized a net loss on sale of $0.4 million.

There was no such realized loss on investments for the three months ended September 30, 2024.

For the nine months ended September 30, 2023, our held-to-maturity debt securities that we purchased at a premium was redeemed at par and we recognized a net loss investment of $0.03 million.

There was no such realized loss on investments for the three months ended September 30, 2023.

For the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, the resulting net loss decreased by $9.7 million and $14.6 million, respectively.

Financial Condition, Liquidity and Capital Resources

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Our revolving line of credit with outstanding principal balance of $34.8 million is to come due on December 31, 2024 and our Goldman Sachs Bank repurchase agreement with outstanding principal balance of $48.2 million is to come due on February 18, 2025.

We expect to either extend the facility term of the facilities or convert the facilities to a term loan with maturity co-terminus with the underlying loans and use the proceeds from the repayment of the underlying loans to repay the term loans, or refinance with another lender.

We expect to either extend the term of the facilities or convert the facilities to a term loan with maturity co-terminus with the underlying loans and use the proceeds from the repayment of the underlying loans to repay the term loans, or refinance with another lender.

Additionally, two promissory notes payable with a total outstanding principal balance of $22.3 million that is collateralized by senior loans with aggregate principal balance of $50.9 million will mature within the next twelve months.

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Summary of Financing

The table below summarizes our debt financing as of June 30, 2024:

The table below summarizes our debt financing as of September 30, 2024:

Type of Financing Maximum Amount Available Outstanding Balance Amount Remaining Available Interest Rate Maturity Date

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Cash Flows (Used in) Provided by Operating Activities

For the six months ended June 30, 2024, cash flows used in operating activities was $7.3 million, compared to cash flow from operating activities of $12.0 million for the six months ended June 30, 2023.

For the nine months ended September 30, 2024, cash flows used in operating activities was $5.6 million, compared to cash flow from operating activities of $6.0 million for the nine months ended September 30, 2023.

The decrease in operating cash flows was primarily due to a decrease in net contractual interest income.

Cash Flows Provided by (Used in) Investing Activities

For the six months ended June 30, 2024, cash flows provided by investing activities were $39.4 million, primarily related to proceeds from repayment of loans of $110.4 million and promissory note receivable of $9.0 million, partially offset by origination and purchase of loans of $42.6 million and purchase of equity interests in unconsolidated investments of $36.6 million.

For the six months ended June 30, 2023, cash flows used in investing activities were $6.8 million, primarily related to origination and purchase of loans of $63.8 million, purchase of real estate properties of $52.3 million, and purchase of held-to-maturity securities of $20.0 million, partially offset by proceeds from repayments of loans of $99.0 million, proceeds from sale of debt securities of $20.0 million and return of capital on unconsolidated investments of $10.7 million.

Cash Flows (Used in) Provided by Financing Activities

For the six months ended June 30, 2024, cash flows used in financing activities were $21.2 million, primarily related to principal repayments on secured financing of $84.8 million, distributions paid of $9.3 million and payment for financing costs of $1.1 million, partially offset by proceeds from secured financing of $58.2 million and proceeds from obligations under participation agreements of $15.0 million.

For the six months ended June 30, 2023, cash flows provided by financing activities were $16.4 million, primarily due to proceeds from mortgage loan payable of $72.6 million, and borrowings under the revolving line of credit of $57.0 million, partially offset by repayments of borrowings under repurchase agreements of $49.3 million, repayments of borrowings under revolving line of credit of $41.7 million, repayments of borrowings under the term loan of $10.0 million, and distributions paid of $9.3 million.

Cash Flows Provided by Investing Activities

For the nine months ended September 30, 2024, cash flows provided by investing activities were $117.9 million, primarily related to proceeds from repayment of loans of $206.0 million and promissory note receivable of $9.5 million, partially offset by origination and purchase of loans of $49.8 million and purchase of equity interests in unconsolidated investments of $47.2 million.

For the nine months ended September 30, 2023, cash flows provided by investing activities were $0.6 million, primarily related to proceeds from repayments of loans of $123.4 million, proceeds from sale of debt securities of $20.0 million and return of capital on unconsolidated investments of $11.3 million, partially offset by origination and purchase of loans of $73.1 million, purchase of real estate properties of $52.5 million, and purchase of debt securities of $20.0 million and purchase of marketable securities of $7.9 million.

Cash Flows Used in Financing Activities

For the nine months ended September 30, 2024, cash flows used in financing activities were $98.7 million, primarily related to principal repayments on secured financing of $159.1 million, distributions paid of $13.9 million and payment for financing costs of $1.1 million, partially offset by proceeds from secured financing of $60.7 million and proceeds from obligations under participation agreements of $15.0 million.

For the nine months ended September 30, 2023, cash flows used in financing activities were $13.5 million, primarily due to repayment of borrowing under the repurchase agreements of $72.2 million, repayment of borrowing under the revolving line of credit of $96.8 million, distributions paid of $14.0 million and repayment of borrowing under the term loan of $10.0 million, partially offset by proceeds from mortgage loan payable of $73.2 million, proceeds from borrowing under the revolving line of credit of $57.0 million, proceeds from borrowing under a note payable of $36.6 million, proceeds from borrowing under the repurchase agreements of $14.2 million and proceeds from obligations under participation agreements of $1.5 million.

Distribution Reinvestment Plan

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On January 1, 2023, we 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 (“CECL”).

The CECL model requires the

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

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

We use a model-based approach for estimating the allowance for credit losses on performing loans on a collective basis, including future funding commitments for which we do not have the unconditional right to cancel, as these loans share similar risk characteristics.

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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The promissory note matures on March 31, 2027.

As of June 30, 2024, amount outstanding under the promissory note payable was $34.3 million.

As of September 30, 2024, amount outstanding under the promissory note payable was $35.1 million.

The activity associated with this agreement is eliminated in consolidation and therefore has no impact on our consolidated financial statements.

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

As of June 30, 2024, the principal balance of our participation obligation was $15.0 million, which was a participation obligation to a related-party managed by the Manager.

As of September 30, 2024, the principal balance of our participation obligation was $15.0 million, which was a participation obligation to a related-party managed by the Manager.

The loans that are subject to participation agreements are held in our name, but each of the participant’s rights and obligations, including with respect to interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon their respective pro rata participation interest in such participated investments, as specified in the respective participation agreements.

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As such, the investments remain on our combined consolidated balance sheets and the proceeds are recorded as obligations under participation agreements.

Similarly, interest earned on the entire loan balance is recorded within “Interest income” and the

interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations.

For the three and six months ended June 30, 2024, the weighted average outstanding principal balance on obligations under participation agreements was approximately $15.0 million and $13.5 million, respectively, and the weighted average interest rate was approximately 20.3% and 18.3%, respectively.

For the three and six months ended June 30, 2023, the weighted average outstanding principal balance on obligations under participation agreements of approximately $13.5 million and $13.2 million, respectively, and the weighted average interest rate was approximately 17.1 and 17.1%, respectively.

Similarly, interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations.

For the three and nine months ended September 30, 2024, the weighted average outstanding principal balance on obligations under participation agreements was approximately $15.0 million and $14.0 million, respectively, and the weighted average interest rate was approximately 20.2% and 18.8%, respectively.

For the three and nine months ended September 30, 2023, the weighted average outstanding principal balance on obligations under participation agreements of approximately $13.7 million and $13.4 million, respectively, and the weighted average interest rate was approximately 17.3% and 17.3%, respectively.

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-Q

Item 1. Financial Statements