What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-03-14 compared with 2024-03-15 · 484 added, 641 removed, 1108 unchanged (50% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including both our Chief Executive Officer and Chief Investment Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023.

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024.

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

11 unchanged sentences

Changes in Internal Control Over Financial Reporting

During the most recent fiscal quarter, there was no change in our internal controls over financial reporting, as defined under

Rule 13a-15(f) under the Exchange Act, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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

Other Information.

Management Agreement Amendment

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

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

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

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

1 unchanged sentence

Directors, Executive Officers and Corporate Governance.

We have adopted an Insider Trading Policy that applies to all of our directors, officers, employees, associates and independent contractors as well as the officers, employees and affiliates of our Manager.

The information regarding our executive officers required by Item 401 of Regulation S-K is located under Part I, Item 1 within the caption “Information About our Executive Officers” of this annual report on Form 10-K.

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Description and Method of Filing

2.1 Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated January 1, 2016 (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form 10 (File No.

000-56117) filed with the SEC on November 6, 2019).

2.2 Amendment No.

1 to the Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated December 31, 2016 (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form 10 (File No.

000-56117) filed with the SEC on November 6, 2019).

2.3 Agreement and Plan of Merger, dated February 28, 2020, by and among Terra Property Trust, Inc., Terra Property Trust 2, Inc.

and Terra Secured Income Fund 7, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No.

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

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

with the SEC on May 5, 2022).

3.1 Amended and Restated Bylaws of Terra Property Trust, Inc.

2 unchanged sentences

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

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

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

3.3 Articles of Supplementary of Terra Property Trust, Inc.

1 unchanged sentence

000-56117) filed with the SEC on December 16, 2019).

4.1* Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934.

4.1 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed with the SEC on March 1 5 , 2024).

4.2 Indenture, dated June 10, 2021, by and between Terra Property Trust, Inc.

4 unchanged sentences

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

Description and Method of Filing

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

14 unchanged sentences

000-56117) filed with the SEC on September 17, 2020).

Description and Method of Filing

10.6 Guaranty, dated as of September 3, 2020, by and among Terra Property Trust, Inc., as guarantor, for the benefit of Goldman Sachs Bank USA (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No.

5 unchanged sentences

10.11 Amendment No.

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

1 to Uncommitted Master Repurchase Agreement, dated as of May 24, 2022, between Terra Mortgage Capital III, LLC, as Seller, and UBS AG, as Buyer (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 15, 2024).

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

10.13 Amendment No.

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

1 to Guarantee Agreement, dated as of March 10, 2022, between Terra Property Trust, Inc., as Guarantor, and UBS AG, as Buyer (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 15, 2024).

10.14 Amendment No.

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

2 to Guarantee Agreement, dated as of November 14, 2023, between Terra Property Trust, Inc., as Guarantor, and UBS AG, as Buyer (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 15, 2024).

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

Description and Method of Filing

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

2 unchanged sentences

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

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

10.20 Waiver and Amendment No.

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

10.19 Amendment to Amended and Restated Management Agreement, dated March 11, 2024, between Terra Property Trust, Inc., and Terra REIT Advisors, LLC (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the SEC on May 13, 2024).

10.20 Fifth Amendment to Loan Documents and Waiver, dated as of March 7, 2024, between Terra Mortgage Portfolio II, LLC, as Borrower, and Terra Property Trust, Inc., as Guarantor, and Western Alliance Bank, as Lender (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the SEC on May 13 2024).

10.21 Continuing Guaranty, dated as of March 7, 2024, by Terra Property Trust, Inc., as Guarantor, in favor of Western Alliance Bank (incorporated by reference to Exhibit 10.

3 to the Quarterly Report on Form 10-Q filed with the SEC on May 13, 2024).

10.22 First Amendment to Uncommitted Master Repurchase and Securities Contract Agreement and Other Transaction Documents, dated as of March 7, 2024, among Terra Mortgage Capital I, LLC, as Seller, Terra Property Trust, Inc., as Guarantor, and Goldman Sachs Bank USA, as Buyer (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q filed with the SEC on May 13, 2024).

Description and Method of Filing

10.23 Amendment No.

1 to Pricing Letter, dated as of March 7, 2024, between Terra Mortgage Capital III, LLC, as Seller, and UBS AG, as Buyer (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q filed with the SEC on May 13, 2024).

10.24 Waiver Letter, dated as of March 7, 2024, from UBS AG, as Buyer, to Terra Mortgage Capital III, LLC, as Seller, and Terra Property Trust, Inc., as Guarantor (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed with the SEC on May 13, 2024).

10.25 Sixth Amendment to Loan Documents, dated as of June 26, 2024, between Terra Mortgage Portfolio II, LLC, as Borrower, and Terra Property Trust, Inc., as Guarantor, and Western Alliance Bank, as Lender (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the SEC on August 9, 2024).

10.26 Security Agreement, Dated as of June 26, 2024, between Terra Mortgage Portfolio II, LLC as Assignor, and Western Alliance Bank, As Lender (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the SEC on August 9, 2024).

19* Terra Property Trust, Inc.

Insider Trading Policy.

21.1 * Subsidiaries

32 unchanged sentences

We have audited the accompanying consolidated balance sheets of Terra Property Trust, Inc.

and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in equity, and cash flows for the years then ended, and the related notes and financial statement schedules III and IV (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive (loss) income, changes in equity, and cash flows for the years then ended, and the related notes and financial statement schedules III and IV (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

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Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audits also included evaluating the accounting principles used and

significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

8 unchanged sentences

Marketable securities 963,178 4,961,879

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

and $ 25,471,890

Loans held for investment, net of allowance for credit losses of $ 45,381,465 and $ 56,749,498

233,571,416 417,913,773

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

credit losses of $ 226,527 and none

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

of $ 759,991 and $ 226,527

41,077,729 38,558,485

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

Equity interest in unconsolidated investments 106,816,146 37,171,326

Real estate owned, net ( Note 5 )

1 unchanged sentence

Lease intangible assets, net 5,641,030 9,869,364

Operating lease right-of-use asset — 27,378,786

Deal deposit — 4,241,892

Interest receivable 5,440,620 6,537,368

Due from related parties 859,267 655,263

Other assets 5,886,858 8,811,583

5 unchanged sentences

Interest reserve and other deposits held on investments 2,937,959 3,954,986

Operating lease liability — 27,378,786

Lease intangible liabilities, net ( Note 5 )

9 unchanged sentences

Preferred stock, $ 0.01 par value, 50,000,000 shares authorized and none issued

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

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

December 31, 2023 and 2022, respectively

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

shares issued, at both December 31, 2023 and 2022

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

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

Class B Common Stock, $ 0.01 par value, 450,000,000 shares authorized and 24,337,952

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

and 2022, respectively

and 24,336,033 shares issued and outstanding as of December 31, 2024 and

December 31, 2023, respectively

243,380 243,360

1 unchanged sentence

Accumulated deficit ( 258,810,775 ) ( 203,047,758 )

Accumulated other comprehensive loss ( 185,475 ) —

Total equity 185,726,066 241,653,808

2 unchanged sentences

Terra Property Trust, Inc.

Consolidated Statements of Operations

Consolidated Statements of Operations and Comprehensive (Loss) Income

Years Ended December 31,

11 unchanged sentences

Depreciation and amortization 7,357,295 6,968,985

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

Professional fees 3,012,046 3,741,720

1 unchanged sentence

Other 558,638 539,957

Impairment charge — 11,765,540

45,751,554 92,398,284

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

Operating income (loss) 3,937,940 ( 24,484,250 )

Other income and expenses

2 unchanged sentences

Interest expense on obligations under participation agreements ( 2,971,924 ) ( 1,353,006 )

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

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

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

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

Unrealized gain (loss) on investments, net 100,149 ( 316,573 )

Income (loss) from equity interest in unconsolidated investments 2,738,410 ( 2,383,938 )

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

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

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

Gain on extinguishment of participation liability — 14,079,379

Realized loss on investments, net ( 446,009 ) ( 459,279 )

( 41,097,895 ) ( 32,401,789 )

2 unchanged sentences

Net loss allocable to common stock $ ( 37,159,955 ) $ ( 56,889,946 )

Other comprehensive loss

Unrealized loss on available-for-sale debt securities ( 185,475 ) —

( 185,475 ) —

Comprehensive loss $ ( 37,345,430 ) $ ( 56,889,946 )

Per share data

Loss per share — basic and diluted

6 unchanged sentences

Consolidated Statements of Changes in Equity

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

Class A Common Stock Class B Common Stock Additional

Capital Accumulated Deficit

Preferred Stock Class A Common Stock Class B Common Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss)

$ 0.01 Par Value

Shares Amount Shares Amount Shares Amount Total equity

Shares Amount Shares Amount Total Equity

Balance at January 1, 2024 $ — — $ — 24,336,033 $ 243,360 $ 444,458,206 $ ( 203,047,758 ) $ — $ 241,653,808

Cumulative effect of credit loss accounting standard effective

January 1, 2023 ( Note 2 )

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

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

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

Shares issued from reinvestment of shareholder

distributions — — — 1,919 20 20,730 — — 20,750

Distributions declared on common shares ($ 0.76 per share)

— — — — — — ( 18,603,062 ) — ( 18,603,062 )

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

Net loss — — — — — — ( 37,159,955 ) — ( 37,159,955 )

Other comprehensive loss:

Unrealized loss on available-for-sale debt securities — — — — — — — ( 185,475 ) ( 185,475 )

Balance at December 31, 2024

1 unchanged sentence

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

Common Stock Class A Common Stock Class B Common Stock Additional

Class A Common Stock Class B Common Stock Additional

Capital Accumulated Deficit

1 unchanged sentence

$ 0.01 Par Value

Shares Amount Shares Amount Shares Amount Shares Amount Total equity

Shares Amount Shares Amount Shares Amount Total equity

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

Common stock converted into newly

authorized Class B Common Stock

prior to the BDC Merger ( Note 11 )

Cumulative effect of credit loss accounting standard

effective January 1, 2023 ( Note 2 )

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

Shares issued in connection with the

BDC Merger ( Note 3 )

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

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

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

Distributions declared on common

shares ($ 0.78 per share)

Distributions declared on common shares ($ 0.76 per share)

— — — — — — — — ( 3,907 ) ( 3,907 )

Distributions declared on preferred

shares — — — — — — — — — — ( 15,624 ) ( 15,624 )

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

6 unchanged sentences

Net loss $ ( 37,159,955 ) $ ( 56,886,039 )

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

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization 7,357,295 6,968,985

Provision for credit losses 16,627,739 45,548,803

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

Amortization of net purchase premiums on loans 155,727 1,124,157

5 unchanged sentences

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

Impairment charge — 11,765,540

Loss on repayment of loan 5,629,510 —

Loss on disposal of real estate — 4,211,153

Gain on extinguishment of participation liability — ( 14,079,379 )

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

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

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

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

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

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

Realized loss on investments, net 446,009 459,279

Unrealized (gain) loss on investments, net ( 100,149 ) 316,573

Distributions received from equity interest in unconsolidated investments 5,633,878 7,008,461

(Income) loss from equity interest in unconsolidated investments ( 2,738,410 ) 4,188,976

Changes in operating assets and liabilities:

1 unchanged sentence

Interest receivable 1,096,748 ( 2,893,517 )

Due from related party — 2,421,388

Due from related parties ( 204,004 ) ( 471,012 )

Other assets 1,379,815 ( 6,389,166 )

4 unchanged sentences

Other liabilities ( 62,894 ) ( 548,471 )

Net cash provided by operating activities 8,609,998 403,768

Net cash (used in) provided by operating activities ( 3,258,119 ) 8,609,998

See notes to consolidated financial statements.

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

Years Ended December 31,

Cash flows from investing activities:

Proceeds from repayments of loans 215,137,530 126,142,565

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

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

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

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

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

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

Origination, purchase and funding of loans ( 57,163,870 ) ( 78,883,295 )

Purchase of equity interests in unconsolidated investments ( 65,617,196 ) ( 7,307,806 )

Distributions received in excess of equity income 3,076,908 —

Repayments of promissory note receivable 9,624,408 —

Funding for promissory note receivable ( 4,962,369 ) ( 3,844,797 )

Proceeds from sale of marketable securities 3,551,098 2,422,095

Purchase of marketable securities — ( 7,905,211 )

Purchase of equity securities ( 2,002,353 ) —

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

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

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

Cash acquired in purchase of real estate — 712,608

Capital expenditures on real estate — ( 132,506 )

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

Cash and restricted cash acquired in connection with the BDC Merger — 24,582,565

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

Distributions in excess of equity income — 923,200

Proceeds from repayment of promissory note receivable — 386,395

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

Net cash used in investing activities ( 10,041,784 ) ( 49,136,489 )

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

Years Ended December 31,

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

Net cash provided by (used in) investing activities 101,644,156 ( 10,041,784 )

Cash flows from financing activities:

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

Principal repayments on secured financing ( 177,525,167 ) ( 205,265,764 )

Proceeds from secured financing 81,284,441 211,017,859

Proceeds from obligations under participation agreements 18,000,000 1,494,422

Distributions paid ( 18,582,312 ) ( 18,597,604 )

Payment of financing costs ( 1,117,723 ) ( 3,346,724 )

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

Change in interest reserve and other deposits held on investments ( 1,017,027 ) ( 678,218 )

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

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

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

Net cash used in financing activities ( 98,957,788 ) ( 15,501,029 )

Net decrease in cash, cash equivalents and restricted cash ( 571,751 ) ( 16,932,815 )

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

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

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

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

$ 18,965,026 $ 19,536,777

4 unchanged sentences

Reinvestment of shareholder distributions $ 20,750 $ 8,399

Supplemental Non-Cash Investing Activities:

See notes to consolidated financial statements.

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

Supplemental non-cash investing and financing information:

2024 — In December 2024, through a series of transactions, a wholly owned subsidiary of the Company issued a $ 10.0 million term loan payable to an equity investment in exchange for the satisfaction of the remaining funding commitment ( Note 4 , Note 8 ).

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

3 unchanged sentences

Loans held for investment 68,737,877

Equity investment in unconsolidated investment 10,149,642

Equity interest in unconsolidated investment 10,149,642

Interest receivable 456,650

9 unchanged sentences

Accounts payable and accrued expenses ( 912,771 )

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

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

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

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

Total Consideration

Fair value of Terra Property Trust, Inc.

shares of common stock issued $ 71,054,620

Cash paid for fractional shares 12,920

Transaction costs 2,283,785

Assets Acquired and Liabilities Assumed at Fair Value

Loans held for investment 77,562,528

Loans held for investment acquired through participation 36,793,313

Interest receivable 1,367,044

Other assets 55,465

Term loan payable ( 25,000,000 )

Unsecured notes payable ( 33,770,000 )

Obligations under participation agreements ( 6,114,979 )

Interest reserve and other deposits held on investments ( 260,614 )

Due to manager ( 682,541 )

Interest payable ( 53,186 )

Accounts payable and accrued expenses ( 740,824 )

Other liabilities ( 387,446 )

Net assets acquired excluding cash and restricted cash 48,768,760

Cash and restricted cash acquired $ 24,582,565

See notes to consolidated financial statements .

7 unchanged sentences

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

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

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

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

5 unchanged sentences

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

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

The Company’s investment activities are externally managed by Terra REIT Advisors, LLC (the “Manager”), a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC (“Terra Capital Partners”), pursuant to a management agreement (the “Management Agreement”), under the oversight of the Company’s board of directors (the “Board”) ( Note 7 ).

The Company does not currently have any employees and does not expect to have any employees.

1 unchanged sentence

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

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

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

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

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

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

Notes to Consolidated Financial Statements

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

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

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

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

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

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As of December 31, 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.

Notes to Consolidated Financial Statements

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

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

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

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

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

Summary of Significant Accounting Policies

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

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

The accompanying consolidated financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-K 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.

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Generally, the primary beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

Notes to Consolidated Financial Statements

Loans Held for Investment

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

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

Notes to Consolidated Financial Statements

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

Amortized cost is the amount at which a financing receivable or a loan is originated or acquired, adjusted for accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash and write-offs.

Allowance for Credit Losses

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

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

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

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

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

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

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

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

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

A significant amount of judgment is applied in selecting inputs and analyzing results produced by the models to determine the allowance for credit losses on performing loans.

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

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

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

The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and

Notes to Consolidated Financial Statements

plausible outcomes for the U.S.

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

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

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

Notes to Consolidated Financial Statements

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

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

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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.

During the loan review process, all non-performing loans are evaluated for collectability, which includes both loans in default and loans where we do not expect to collect all amounts due for both principal and interest according to the contractual terms of the loan.

The Company removes these loans from the model-based approach described above and analyzes them separately.

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

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

Loans Not Secured by Real Estate

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

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

Allowance for Loan Losses Prior to 2023

Prior to the adoption of the CECL methodology on January 1, 2023, the Company recorded an allowance for loan losses using the incurred loss methodology equal to (i) 1.5 % of the aggregate carrying amount of loans rated as a “4”, plus (ii) 5 % of the aggregate carrying amount of loans rated as a “5”, plus (iii) non-performing loan reserves, if any.

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

(i) sponsor capability and financial condition;

(ii) loan and collateral performance relative to underwriting;

(iii) quality and stability of collateral cash flows and/or reserve balances;

and (iv) loan to value.

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

Risk Rating Description

1 Very low risk

3 Moderate/average risk

4 Higher risk

5 Highest risk

Equity Investment in Unconsolidated Investments

As of December 31, 2024 and 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 Interest in Unconsolidated Investments

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

Notes to Consolidated Financial Statements

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

The Company classifies distributions received from equity method investments using the cumulative earnings approach.

Distributions received are considered returns on the investment and classified as cash inflows from operating activities.

If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceed cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.

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

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

Held-to-Maturity Debt Securities

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

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

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

Equity Securities Without Readily Determinable Fair Value

The Company accounts for its equity securities without readily determinable fair value at cost, which is included in other assets on the consolidated balance sheets.

The Company has elected the measurement alternative and therefore will evaluate

Notes to Consolidated Financial Statements

whether the security continues to qualify for the alternative at each reporting period.

The Company evaluates its equity security without readily determinable fair value on a periodic basis to determine if there is an observable price change in an orderly transaction for similar investments or if there are any indicators that the value of its equity security may be impaired.

The Company will make fair value adjustments, if any, or reductions for any impairment to derive the carrying value of the investment..

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.

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

The Company previously owned an office building that was subject to a ground lease whereby the Company was the lessee (or a tenant) to the ground lease.

As of October 19, 2023, in connection with the deed in lieu of foreclosure discussed in Note 5 , the Company is no longer a party to the ground lease and the related ROU assets and liabilities were written off.

Notes to Consolidated Financial Statements

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

Revenue Recognition

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Outstanding interest receivable is assessed for recoverability.

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

The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of interest and principal becomes not probable.

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

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For the investments for which participation has been granted, the interest earned on the entire loan balance is recorded within “ Interest income ” and the interest related to the participation interest is recorded within “ Interest expense from obligations under participation agreements ” in the consolidated statements of operations.

Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes doubtful.

Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes not probable.

See “ Obligations Under Participation Agreements ” in Note 8 for additional information.

Secured Financing Agreements, Net

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

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

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

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federal and state income taxes at regular corporate rates.

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

As of December 31, 2024, the Company had 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.

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Earnings Per Share

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

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

The Company has a simple equity capital structure with only common stock outstanding as of December 31, 2024 and 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.

Income per basic share of common stock is calculated by dividing net income allocable to common stock by the weighted-average number of shares of common stock issued and outstanding during such period.

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The Company’s primary business is originating, acquiring and structuring real estate-related loans related to high quality commercial real estate.

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

The Company operates in a single segment focused on mezzanine loans, other loans and preferred equity investments, and to a lesser extent, owning and managing real estate.

From time to time, the Company may assume control of properties acquired in connection with foreclosures or deed in lieu of foreclosure, or it may acquire operating real estate properties that meet its investment criteria.

The Company operates as one segment, which is also its sole reportable segment, focused on mezzanine loans, senior loans and preferred equity investments, and to a lesser extent, owning and managing real estate.

The Company’s chief operating decision maker (“CODM”) is its senior management team, comprised of its chief executive officer who is also the chief investment officer, chief operating officer, chief financial officer, chief originations officer and the head of asset management of the Manager.

The Company generates its revenue primarily from originating, acquiring, investing in, and managing real estate-related debt investments.

The CODM evaluates the performance of any real estate owned assets with that of its real estate-related debt investments.

Additionally, the Company seeks to enhance its returns on equity by utilizing leverage, and generally finance its real estate-related investments with leverage obtained through a variety of sources, including secured and unsecured debt instruments.

The CODM evaluates performance and allocates resources based on consolidated net income (loss), which is also reported as consolidated net income (loss) on the Company’s consolidated statement of operations.

The Company’s consolidated net income (loss) is primarily derived through the difference between the interest income earned on its loans and the cost at which its to finance them.

Accordingly, interest expense, as reported on its consolidated statement of operations, is its most significant segment expense.

Additionally, the measure of segment assets is reflected on the balance sheet as total consolidated assets.

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

Recent Accounting Pronouncements

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

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

ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses.

In April 2019, the FASB issued additional amendments to clarify the scope of ASU 2016-13 and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things.

In May 2019, the FASB issued ASU 2019-05 — Targeted Transition Relief, which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis.

In October 2019, the FASB decided that for smaller reporting companies, ASU 2016-13 and related amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company meets the definition of a smaller reporting company under the regulation of the Securities and Exchange Commission.

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

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

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

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

In July 2017, the U.K.

Financial Conduct Authority, which regulates the LIBOR administrator, ICE Benchmark Administration Limited (“IBA”), announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021, which was subsequently delayed to June 30, 2023.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).

The amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

In January 2021, the FASB issued ASU No.

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

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

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

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

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

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

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

Notes to Consolidated Financial Statements

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

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

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

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

Following the consummation of the BDC Merger, former Terra BDC stockholders owned approximately 19.9 % of the common equity of the Company.

The Company and Terra BDC prepared their respective financial statements in accordance with generally accepted accounting principles in the United States.

The BDC Merger is accounted for using the acquisition method of accounting, with the Company being treated as the accounting acquirer.

In identifying the Company as the acquiring entity for accounting purposes, the Company and Terra BDC took into account a number of factors, including the relative size of the merging companies, which entity issues additional shares in conjunction with the BDC Merger, the relative voting interests of the respective stockholders after consummation of the BDC Merger, and the composition of the Board and senior management of the combined company after consummation of the BDC Merger.

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

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

Notes to Consolidated Financial Statements

The following table summarizes the total consideration and the fair values of assets acquired and liabilities assumed in the BDC Merger:

Total Consideration

Fair value of Terra Property Trust shares of common stock issued

Cash paid for fractional shares 12,920

Transaction costs 2,283,785

Assets Acquired and Liabilities Assumed at Fair Value

Cash and cash equivalents $ 24,321,951

Restricted cash 260,614

Loans held for investment 77,562,528

Loans held for investment acquired through participation 36,793,313

Interest receivable 1,367,044

Other assets 55,465

Term loan payable ( 25,000,000 )

Unsecured notes payable ( 33,770,000 )

Obligations under participation agreements ( 6,114,979 )

Interest reserve and other deposits held on investments ( 260,614 )

Due to manager ( 682,541 )

Interest payable ( 53,186 )

Accounts payable and accrued expenses ( 740,824 )

Other liabilities ( 387,446 )

Net assets acquired $ 73,351,325

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

Net Gain on Extinguishment of Participation Liability

As discussed in Note 8 , in the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties.

As a result of the BDC Merger, the obligations under participation agreements with Terra BDC totaling $ 37.0 million were effectively extinguished and the Company recognized a net gain of $ 3.4 million, representing the difference between the carrying value of the Company’s obligations under participation agreements and the fair value of Terra BDC’s investments acquired through participation agreements.

Appointment of Directors

As of the Effective Time and in accordance with the Merger Agreement, the size of the Board was increased by three members and each of Spencer Goldenberg, Adrienne Everett and Gaurav Misra (each a “Terra BDC Designee”, and collectively, the “Terra BDC Designees”) were elected to the Board to fill the vacancies created by such increase, with each Terra BDC Designee to serve until the Company’s next annual meeting of stockholders and until his or her successor is duly elected and qualifies.

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

Indemnification Agreements

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

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

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update “ASU” 2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

ASU 2023-07 intends to improve reportable segment disclosure requirements, enhance interim disclosure requirements and provide new segment disclosure requirements for entities with a single reportable segment.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods with fiscal years beginning after December 15, 2024.

ASU 2023-07 is to be adopted retrospectively to all prior periods presented.

The Company adopted this ASU on December 31, 2024.

The adoption of the standard has not impacted the Company's financial statements but has resulted in incremental disclosures, which are included within “Segment Information” above.

In December 2023, the FASB issued ASU 2023-09 “Improvements to Income Tax Disclosures” (“ASU 2023-09”).

ASU 2023-09 intends to improve the transparency of income tax disclosures.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively.

The Company is currently assessing the impact of this guidance;

however, it does not expect the adoption of this standard to have a material impact to its consolidated financial statements.

Notes to Consolidated Financial Statements

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

WMC Merger Agreement

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

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

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

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

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

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

Loans Held for Investment

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Fair value $ 11,740,671 $ 264,796,547 $ 276,537,218 $ 53,435,742 $ 403,904,207 $ 457,339,949

Weighted-average coupon rate 12.95 % 12.92 % 12.93 % 13.82 % 11.23 % 11.59 %

Weighted-average coupon

8.50 % 13.18 % 13.04 % 13.03 % 13.05 % 13.05 %

Weighted-average remaining

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2.68 0.84 0.91 1.18 0.70 0.77

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

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

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

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

Notes to Consolidated Financial Statements

_______________

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

Coupon rates shown were determined using the average SOFR of 4.53 % and Term SOFR of 4.33 % as of December 31, 2024 and average SOFR of 5.34 % and Term SOFR of 5.35 % as of December 31, 2023.

(2) As of December 31, 2024 and 2023, amount included $ 208.0 million and $ 342.9 million of senior mortgages used as collateral for $ 123.2 million and $ 204.9 million of borrowings under secured financing agreements, respectively ( Note 8 ).

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

(4) Excludes nonperforming loans for which recovery of interest income was not probable.

(5) Represents current effective maturity as of December 31, 2024 and 2023, exclusive of any extension available.

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

Cumulative effect of credit loss accounting standard effective

January 1, 2023 ( Note 2 )

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

Principal repayments received ( 216,137,530 ) — ( 216,137,530 )

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

Settlement of loans (1)(2)

Origination, purchase and funding of loans 54,155,680 3,008,190 57,163,870

Loss on repayment of loan (1)

( 5,629,510 ) — ( 5,629,510 )

6 unchanged sentences

_______________

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

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

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

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

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

(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 Consolidated Financial Statements

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

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

Cumulative effect of credit loss accounting standard effective

January 1, 2023 ( Note 2 )

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

Origination, purchase and funding of loans 78,883,295 — 78,883,295

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

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

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

Settlement of loans in exchange for real estate properties (1)(2) ( Note 5 )

( 70,737,874 ) — ( 70,737,874 )

Accrual, payment and accretion of investment-related fees and other,

3 unchanged sentences

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

Notes to Consolidated Financial Statements

_______________

(1) In May 2023, the Company settled $ 68.7 million of senior loans in exchange for ownership interest in the underlying real estate properties ( Note 5 ).

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

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

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:

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.

December 31, 2024 December 31, 2023

3 unchanged sentences

Mezzanine loans 15,044,732 15,038,010 5.5 % 17,444,357 17,245,527 3.8 %

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

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

Total $ 317,255,023 $ 274,649,145 100.0 % $ 509,460,826 $ 456,472,258 100.0 %

3 unchanged sentences

Multifamily 60,969,051 60,662,514 22.1 % 85,660,082 84,417,184 18.5 %

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

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

Infill land 56,307,815 57,050,952 20.8 % 52,839,509 54,024,545 11.8 %

Hotel - full/select service 43,222,382 43,801,303 9.6 % 43,222,382 43,758,804 7.0 %

Mixed-use 48,438,507 48,067,655 17.5 % 63,096,365 47,362,653 10.4 %

Student housing 28,000,000 28,910,000 10.5 % 31,000,000 31,758,493 7.0 %

Industrial 7,000,000 6,966,233 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 — ( 56,976,025 ) ( 12.5 ) % — ( 25,471,890 ) ( 4.1 ) %

Total $ 317,255,023 $ 274,649,145 100.0 % $ 509,460,826 $ 456,472,258 100.0 %

Notes to Consolidated Financial Statements

December 31, 2024 December 31, 2023

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California $ 71,006,023 $ 71,273,115 26.0 % $ 119,093,246 $ 117,955,109 25.9 %

Arizona 33,407,815 33,005,952 12.0 % 31,000,000 31,151,623 6.8 %

New York 75,657,255 31,536,808 11.5 % 90,483,672 49,041,668 10.7 %

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

Georgia 30,562,858 30,586,450 11.1 % 74,335,828 62,564,770 13.7 %

1 unchanged sentence

Washington 26,894,593 26,907,157 9.8 % 34,052,223 33,908,737 7.4 %

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

New Jersey 22,900,000 24,045,000 8.8 % 82,419,378 83,485,543 18.4 %

North Carolina 21,826,479 21,418,430 7.8 % 21,826,479 21,140,026 4.6 %

Massachusetts 7,000,000 6,966,233 2.5 % 7,000,000 6,930,932 1.5 %

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

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

Total $ 317,255,023 $ 274,649,145 100.0 % $ 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, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.

The adoption of ASU

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.

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 $ 18.7 million and $ 35.7 million as of December 31, 2024 and 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 model-based approach and analyzes them separately for recoverability.

As of December 31, 2024 and 2023, the Company had four and six non-performing loans with total carrying value, excluding specific allowance, of $ 99.7 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 specific allowance for credit losses of $ 44.1 million and $ 54.6 million as of December 31, 2024 and 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:

Year Ended December 31, 2024

Allowance on Non-Performing Loans Allowance on Performing Loans Total

Funded Unfunded

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

Provision for (reversal of provision for) credit losses 17,116,862 ( 312,240 ) ( 176,883 ) 16,627,739

Charge-offs ( 27,639,192 ) — — ( 27,639,192 )

Allowance for credit losses, end of period $ 44,120,447 $ 2,021,008 $ 150,024 $ 46,291,479

Notes to Consolidated Financial Statements

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

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

Years Ended December 31,

Year Ended December 31, 2023

Allowance on Non-Performing Loans Allowance on Performing Loans 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 )

Provision for credit losses (1)

Cumulative effect of credit loss accounting

standard effective January 1, 2023 ( Note 2 )

— 4,250,052 369,671 4,619,723

Provision for (reversal of provision for) credit losses 47,508,371 ( 1,916,804 ) ( 42,764 ) 45,548,803

Charge-offs ( 18,337,484 ) — — ( 18,337,484 )

( 18,337,484 ) —

Recoveries — —

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

_______________

(1) Prior to the adoption of the CECL model on January 1, 2023, the Company recorded an allowance for credit losses equal to (i) 1.5 % of the aggregate carrying amount of loans rated as a “4”, plus (ii) 5 % of the aggregate carrying amount of loans rated as a “5”, plus (iii) non-performing loan reserves, if any.

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

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

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

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

Year Ended December 31, 2023

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

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

Reversal of provision for credit losses ( 42,764 )

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

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

Accrued Interest Receivable

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

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

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

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

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

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

Non-Performing Loans

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

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

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

Please see “Note 7.

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

For the year ended December 31, 2024, the Company reversed $ 0.7 million of accrued interest income because such income was deemed uncollectible.

For the year ended December 31, 2023, the Company did no t reverse any interest income accrual because all accrued interest income was deemed collectible.

For the years ended December 31, 2024 and 2023, the Company suspended interest income accrual of $ 21.4 million and $ 18.4 million on five and five loans, respectively, because recovery of such income was not probable.

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

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.

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;

1 unchanged sentence

(iii) quality and stability of collateral cash flows and/or reserve balances;

Notes to Consolidated Financial Statements

(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:

and (iv) loan to value.

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

Risk Rating Description

3 unchanged sentences

5 Highest risk

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

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 Consolidated Financial Statements

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

December 31, 2024

8 unchanged sentences

4 99,702,255 31.1 % — — 24,045,000 — — 75,657,255

13 320,790,600 100.0 % $ 30,812,857 $ 27,121,997 $ 76,539,051 $ 58,945,052 $ 28,674,651 $ 98,696,992

Allowance for credit losses ( 46,141,455 )

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

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

December 31, 2022

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

Total carrying value, net $ 274,649,145

_______________

(1) Amount included two loans that are 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.

December 31, 2023

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

2023 2022 2021 2020 2019 Prior

1 — $ — — % $ — $ — $ — $ — $ — $ —

2 1 7,000,000 1.4 % — — — — — 7,000,000

Non-performing (1)

3 13 278,296,080 54.2 % 10,809,959 77,383,153 97,514,884 27,810,327 61,842,453 2,935,304

4 1 18,855,139 3.7 % — 18,855,139 — — — —

Allowance for credit losses ( 25,471,890 )

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

5 — — — % — — — — — —

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

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

Troubled Debt Restructuring

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

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

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

Notes to Consolidated Financial Statements

Company is entitled to receive waterfall profit upon a sale.

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

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

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

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

Number of loans modified 1

Pre-modified recorded carrying value $ 40,072,138

Post-modified recorded carrying value (1)

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

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

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

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

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

Equity Investment in Unconsolidated Investments

The Company owns interests in a limited partnership and three joint ventures.

Allowance for credit losses ( 56,976,025 )

Total carrying value, net $ 456,472,258

Equity Interest in Unconsolidated Investments

The Company owns interests in a limited partnership, joint ventures and a preferred equity investment with profit-sharing feature.

The Company accounts for its interests in these investments under the equity method of accounting ( Note 2 ).

The Company classifies distributions received from equity method investments using the cumulative earnings approach.

Distributions received are considered returns on the investment and classified as cash inflows from operating activities.

If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.

Equity Investment in a Limited Partnership

Equity Interest in a Limited Partnership

On August 3, 2020, the Company entered into a subscription agreement with Mavik Real Estate Special Opportunities Fund, LP (“RESOF”) whereby the Company committed to fund up to $ 50.0 million to purchase a limited partnership interest in RESOF.

2 unchanged sentences

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

As of December 31, 2023 and 2022, the unfunded commitment was $ 37.4 million and $ 22.4 million, respectively.

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

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

As of December 31, 2023 and 2022, the Company owned 14.9 % and 27.9 % of the equity interest in RESOF, respectively.

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

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

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

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

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

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

Notes to Consolidated Financial Statements

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

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

December 31, 2024 December 31, 2023

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

Equity interest in RESOF 14.9 % $ 48,171,168 $ 10,065,613 14.9 % $ 18,196,583 $ 37,444,080

Years Ended December 31,

Income from equity interest in RESOF $ 6,977,386 $ 1,125,790

Distributions received from RESOF $ 5,633,878 $ 6,631,106

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

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

As of December 31,

Investments at fair value (cost of $ 465,401,329 and $ 196,129,031 , respectively)

2 unchanged sentences

Total assets 503,632,180 215,534,238

Revolving line of credit, net of financing costs 44,762,534 14,795,985

Secured financing agreements, net of financing costs 100,033,166 44,762,534

Obligations under participation agreement (proceeds of $ 51,754,396 and

8 unchanged sentences

Net investment income 39,919,690 20,304,548

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

Unrealized appreciation on investments 3,469,865 1,137,701

Provision for income tax — ( 138,944 )

Net increase in partners’ capital resulting from operations $ 43,389,555 $ 21,303,305

Equity Investment in Joint Ventures

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

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

Equity Interest in Joint Ventures

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

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.

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

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

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

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

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

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

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

Notes to Consolidated Financial Statements

The following table presents a summary of the Company’s equity investment in unconsolidated investments as of:

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

December 31, 2024 December 31, 2023

1 unchanged sentence

LEL Arlington JV LLC Third party/Affiliate 27.2 % $ 5,761,522 27.2 % $ 7,024,245

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

LEL NW 49th JV LLC (1)

Third party/Affiliate — % — 27.2 % 1,619,157

TCG Corinthian FL Portfolio

JV LLV Third party/Affiliate 30.6 % 5,694,696 30.6 % 5,590,427

Windy Hill PV Five CM, LLC (1)

Third party 42.4 % 4,740,914 N/A —

SF-Dallas Industrial, LLC (2)

N/A N/A — N/A 10,013,691

610 Walnut Investors LLC Third party 33.6 % 2,672,379 42.4 % 4,740,914

MASPEN MS I LLC (2)

Affiliates 2.4 % 62,878 — % —

Axar Special Opportunity Fund

N/A 100.0 % 20,957,270 — % —

XS Acquisition Holdco LLC (4)

Third parties 46.0 % 7,599,187 — % —

$ 42,747,932 $ 18,974,743

_______________

(1) This investment was acquired in November 2023.

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

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

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

(1) In June 2024, this joint venture sold its underlying real estate property and distributed proceeds to the members.

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

(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 an entity that has indirectly invested, together with other non-affiliated entities, in a non-real estate operating company.

Through November 2024, $ 10.0 million of the commitment was funded.

In December 2024, through a series of transactions, a wholly owned subsidiary of the Company issued a $ 10.0 million term loan payable to the entity in exchange for the satisfaction of the remaining funding commitment to this entity ( Note 8 ).

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

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

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

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

Years Ended December 31,

Loss from equity interest in the joint ventures $ ( 5,483,997 ) $ ( 3,509,728 )

Distributions received from the joint ventures $ 3,076,909 $ —

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

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

As of December 31,

Net investments in real estate $ 196,206,089 $ 223,039,486

1 unchanged sentence

Total assets 296,585,417 241,401,911

Mortgage loan payable 187,269,209 147,740,645

Secured financing agreements 210,398,952 187,269,209

Other liabilities 8,948,512 4,509,167

1 unchanged sentence

Members’ capital $ 77,237,953 $ 49,623,535

Notes to Consolidated Financial Statements

Years Ended December 31,

3 unchanged sentences

Interest expense ( 15,465,374 ) ( 10,762,003 )

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

Gain on sale of real estate 4,816,477 —

Unrealized loss ( 1,653,894 ) ( 3,835,179 )

Net loss $ ( 15,027,310 ) $ ( 13,302,650 )

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

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

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

Notes to Consolidated Financial Statements

Other Equity Investments

In June 2024, the Company entered into a preferred equity agreement with TCC Boundary Partners LLC.

The investment carries interest at an annual rate of 15.0 % and matures on June 30, 2029.

Additionally, the Company will receive distributions in the event that net proceeds from the sale of underlying property exceed certain internal rate of return thresholds.

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

As of December 31, 2024, the Company's investment had a carrying value of $ 15.9 million.

For the year ended December 31, 2024, the Company recorded $ 1.2 million in equity income from TCC Boundary Partners LLC and did not receive any distributions.

Real Estate Owned, Net

Real Estate Activities

2024 — In January 2024, a lease for a space in one of the industrial properties was terminated and the Company received a termination fee of $ 0.03 million.

In connection with the lease termination, the Company wrote off the related unamortized in-place lease of $ 0.3 million and unamortized below-market rent of $ 0.1 million.

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

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

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

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

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

Location Number of

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$ 132,087,234

Notes to 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.

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Loans held for investment 68,737,877

Equity investment in unconsolidated investment 10,149,642

Equity interest in unconsolidated investment 10,149,642

Interest receivable 456,650

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$ 132,087,234

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

Notes to Consolidated Financial Statements

Real Estate Owned, Net

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

Real estate owned is comprised of eight industrial buildings located in Texas with lease intangible assets and liabilities.

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

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Tenant improvements 29,585 ( 1,114 ) 28,471 25,032 ( 15,401 ) 9,631

Furniture and fixtures — — — 236,000 ( 220,267 ) 15,733

Total real estate 128,739,334 ( 5,141,545 ) 123,597,789 128,725,750 ( 2,001,417 ) 126,724,333

1 unchanged sentence

In-place lease 12,060,731 ( 6,419,701 ) 5,641,030 12,719,000 ( 2,849,636 ) 9,869,364

Above-market rent — — — 156,542 ( 77,540 ) 79,002

Total intangible assets 12,060,731 ( 6,419,701 ) 5,641,030 12,719,000 ( 2,849,636 ) 9,869,364

1 unchanged sentence

Below-market rent ( 8,649,073 ) 4,746,657 ( 3,902,416 ) ( 8,864,138 ) 2,025,263 ( 6,838,875 )

Above-market ground lease — — — ( 8,896,270 ) 575,705 ( 8,320,565 )

Total intangible liabilities ( 8,649,073 ) 4,746,657 ( 3,902,416 ) ( 8,864,138 ) 2,025,263 ( 6,838,875 )

Total real estate $ 132,150,992 $ ( 6,814,589 ) $ 125,336,403 $ 132,580,612 $ ( 2,825,790 ) $ 129,754,822

Notes to Consolidated Financial Statements

Real Estate Operating Revenues and Expenses

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Total $ 2,673,913 $ 4,586,245

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

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

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

The ground lease provided for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9 % of the fair market value of the land.

The next rent reset on the ground lease is scheduled for November 1, 2025.

The Company was litigating with

Notes to Consolidated Financial Statements

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

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

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

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

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

Years Ended December 31,

Net amortization of above- and below-market rent intangibles (1)

$ ( 2,936,459 ) $ ( 2,135,162 )

Amortization of in-place lease intangibles (2)

$ 4,228,333 $ 3,714,153

_______________

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

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

Scheduled Future Minimum Rent Income

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Total $ 17,330,095

Notes to Consolidated Financial Statements

Scheduled Annual Net Amortization of Intangibles

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Supplemental Ground Lease Disclosures

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

The Company previously owned an office building that was subject to a ground lease whereby the Company was the lessee (or a tenant) to the ground lease.

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

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

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

December 31, 2022

Operating lease

Operating lease right-of-use asset $ 27,378,786

Operating lease liability $ 27,378,786

Weighted average remaining lease term — operating lease (years) 63.8

Weighted average discount rate — operating lease 7.6 %

Notes to Consolidated Financial Statements

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

Years Ended December 31,

Year Ended December 31, 2023

Operating lease cost $ 1,645,875

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

Years Ended December 31,

Year Ended December 31, 2023

Amounts included in the measurement of lease liability:

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Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:

Notes to Consolidated Financial Statements

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

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

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

As of December 31, 2024 and 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.

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

Notes to Consolidated Financial Statements

Financial Instruments Carried at Fair Value on a Recurring Basis

From time to time, the Company may invest in short-term debt and equity securities which are classified as available-for-sale securities, which are presented at fair value 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 considered trading securities, and 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 consolidated balance sheets.

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

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

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

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

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Marketable securities - debt securities 963,178 — — 963,178

Derivative - interest rate cap (2)

Total $ 3,324,114 $ 75 $ — $ 3,324,189

Notes to Consolidated Financial Statements

December 31, 2023

Fair Value Measurements

Level 1 Level 2 Level 3 Total

Money market fund (1)

$ 2,244,992 $ — $ — $ 2,244,992

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

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

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

December 31, 2022

Fair Value Measurements

Level 1 Level 2 Level 3 Total

Marketable Securities:

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

Total $ 147,960 $ — $ — $ 147,960

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

Years Ended December 31,

Marketable Securities Derivatives Marketable Securities

Marketable Securities Derivatives Marketable Securities Derivatives

Beginning balance $ 4,961,879 $ 83,807 $ 147,960 $ —

Purchases — — 7,905,211 258,500

7,905,211 258,500 136,265

Proceeds from sale ( 3,551,098 ) — ( 2,422,095 ) —

( 2,422,095 ) — ( 1,259,417 )

Reclassification of net realized (losses) gains on marketable

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

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

Reclassification of net realized loss on marketable securities

into earnings ( 446,009 ) — ( 434,254 ) —

Unrealized loss on marketable securities and derivatives ( 1,594 ) ( 83,732 ) ( 234,943 ) ( 174,693 )

Ending balance $ 963,178 $ 75 $ 4,961,879 $ 83,807

_______________

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

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

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

Notes to Consolidated Financial Statements

Financial Instruments Not Carried at Fair Value

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

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

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

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

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:

December 31, 2024 December 31, 2023

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participation

Allowance for loan losses — ( 56,976,025 ) — — ( 25,471,890 ) —

3 41,452,547 41,077,729 41,871,690 38,444,357 38,558,485 38,881,033

Total loans 317,255,023 274,649,145 276,537,218 509,460,826 456,472,258 457,339,949

Equity securities (1)

3 2,000,000 2,002,353 2,000,000 — — —

Total assets $ 319,255,023 $ 276,651,498 $ 278,537,218 $ 509,460,826 $ 456,472,258 $ 457,339,949

Unsecured notes payable 1 $ 123,500,000 $ 120,424,100 $ 88,764,850 $ 123,500,000 $ 118,380,897 $ 98,020,050

3 unchanged sentences

Total liabilities $ 349,093,942 $ 344,319,988 $ 313,751,139 $ 416,913,757 $ 408,906,210 $ 391,433,807

______________

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

Notes to Consolidated Financial Statements

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

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

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 ).

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

Year Ended December 31,

Fair Value Impairment Charge Fair Value Impairment Charge

Impairment Charge

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

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

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

There were no impairment charges for the year ended December 31, 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 year ended December 31, 2023:

December 31, 2023

Fair Value Impairment Charges

Impairment Charges

Real estate and intangibles $ 27,004,389 $ 11,765,540

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

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

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

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

In October 2023, the Company conveyed its

Notes to Consolidated Financial Statements

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

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.

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

The land was sold in June 2022.

Valuation Process for Fair Value Measurement

The fair value of the Company’s investment in equity securities, 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.

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.

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and the anticipated duration of each real estate-related loan investment.

The Manager designates a valuation committee to oversee the entire valuation process of the Company’s Level 3 loans.

The Manager designates a valuation committee to oversee the entire valuation process of the Company’s Level 3 investments.

The valuation committee is comprised of members of the Manager’s senior management, deal and portfolio management teams, who meet on a quarterly basis, or more frequently as needed, to review the Company investments being valued as well as the inputs used in the proprietary valuation model.

2 unchanged sentences

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

Notes to Consolidated Financial Statements

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

7 unchanged sentences

participation, net 41,871,690 Discounted cash flow Discount rate 15.07 % 17.03 % 16.65 %

Equity securities (2)

2,000,000 N/A N/A N/A N/A N/A

Total Level 3 Assets $ 278,537,218

Secured financing agreements $ 206,731,436 Discounted cash flow Discount rate 6.33 % 11.28 % 12.17 %

Obligation under participation agreement 18,254,853 Discounted cash flow Discount rate 14.78 % 14.78 % 14.78 %

Total Level 3 Liabilities $ 224,986,289

_______________

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

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

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

Notes to Consolidated Financial Statements

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

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

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

Fair Value at December 31, 2023

Primary Valuation Technique Unobservable Inputs December 31, 2023

Asset Category Minimum Maximum Weighted Average

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

Loans held for investment, net (1)

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

Loans held for investment acquired through

1 unchanged sentence

Total Level 3 Assets $ 457,339,949

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

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

Total Level 3 Liabilities $ 293,413,757

_______________

(1) Amount includes $ 84.5 million and $ 154.6 million of non-performing loans ( Note 3 ) as of December 31, 2024 and 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 December 31, 2024 and 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.

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

Related Party Transactions

11 unchanged sentences

Total $ 17,406,970 $ 22,663,039

_______________

Notes to Consolidated Financial Statements

(1) Origination and extension fee expense is generally offset with origination and extension fee income.

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

Any excess is deferred and amortized to interest income over the term of the loan on the consolidated statements of operations.

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

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The Company pays a monthly asset management fee at an annual rate of 1 % of the aggregate funds under management, which includes the loan origination price or aggregate gross acquisition price, as defined in the Management Agreement, for each real estate related loan and cash held by the Company.

Notes to Consolidated Financial Statements

Asset Servicing Fee

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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.

Management Agreement Amendment

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

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

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

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

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

Notes to Consolidated Financial Statements

management team or affiliates of the Manager) that either (a) there has been unsatisfactory performance by the Manager that is materially detrimental to the Company, or (b) the compensation payable to the Manager pursuant to the Management Agreement is unfair;

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

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

Notes to Consolidated Financial Statements

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

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

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

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

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

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

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

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

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 years ended December 31, 2024 and 2023, the Company provided funding under the promissory note receivable of $ 5.0 million and $ 3.8 million, respectively, and received repayments of $ 8.8 million and zero , respectively.

In July 2024, the promissory note receivable was repaid in full, and has a balance of zero as of December 31, 2024.

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 December 31, 2024 and 2023, amount due from related parties was $ 0.9 million and $ 0.7 million, primarily related to operational cash requirements the Company paid on behalf of its affiliates.

Promissory Note Payable

On January 24, 2024, the Company, as borrower, entered into a revolving promissory note payable with Terra LLC.

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

The promissory note matures on March 31, 2027.

As of December 31, 2024, amount outstanding under this promissory note payable was $ 45.1 million.

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

Notes to Consolidated Financial Statements

Cost Sharing and Reimbursement Agreement

2 unchanged sentences

Distributions Paid

For the years ended December 31, 2023 and 2022, the Company made distributions to investors totaling $ 18.6 million and $ 16.0 million, respectively, of which $ 18.6 million and $ 6.5 million were returns of capital, respectively ( Note 11 ).

For the years ended December 31, 2024 and 2023, the Company made distributions to investors totaling $ 18.6 million and $ 18.6 million, respectively, all of which were returns of capital, respectively ( Note 10 ).

Due to Manager

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

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

Notes to Consolidated Financial Statements

does not have the liquidity to do so or to achieve a certain level of portfolio diversification.

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

The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity.

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40.80 % 8,044,732 8,071,776

Allowance for credit losses — ( 226,527 )

$ 41,452,547 $ 41,077,729

Notes to Consolidated Financial Statements

December 31, 2023

Participating Interests Principal Balance Carrying Value

Havemeyer TSM LLC (1)(2)

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

Mesa AZ Industrial Owner, LLC (1)

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

(2) This loan was repaid in February 2023.

Transfers of Participation Interest by the Company

The following tables summarize the loans that were subject to participation agreements with affiliated entities and third-parties as of:

Transfers Treated as Obligations Under Participation Agreements as of

Transfers of Participation Interests by the Company

The following table summarizes the investment that was subject to a participation agreement with an investment partnership affiliated with the Manager as of December 31, 2024.

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

December 31, 2024

Principal Balance Carrying Value % Transferred Principal Balance Carrying Value

610 Walnut Investors LLC (1)

$ 18,625,738 $ 18,738,386 67.57 % $ 12,584,958 $ 12,680,594

Transfers treated as

obligations under participation agreements

Principal Carrying Value % Transferred Principal Carrying Value

Asano Bankers Hill, LLC (1)

$ 18,567,296 $ 18,577,448 96.9 % $ 18,000,000 $ 18,177,106

________________

(1) Participant was a third party.

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

These investments are held in the name of the Company, but each of the Participant’s rights and obligations, including interest income and other income ( e.g.

, exit fee, prepayment income) and related fees/expenses ( e.g.

, disposition fees, asset

Notes to Consolidated Financial Statements

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

The Participants’ share of the investments is repayable only from the proceeds received from the related borrower/issuer of the investments and, therefore, the Participants also are subject to credit risk ( i.e.

, risk of default by the underlying borrower/issuer).

Pursuant to the participation agreements with these entities, the Company receives and allocates the interest income and other related investment income to the Participants based on their respective pro rata participation interest.

The Participants pay any expenses, including any fees to the Manager, only on their respective pro rata participation interest, subject to the terms of the respective governing fee arrangements.

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

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

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

Pursuant to the participation agreement with this entity, the Company receives and allocates the interest income and other related investment income to the Participant based on its pro rata participation interest.

The Participant pays any expenses, including any fees to the Manager, only on its pro rata participation interest, subject to the terms of the governing fee arrangements.

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.

Unsecured Notes Payable

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

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

Coupon Rate Effective Rate (1)

Maturity Date 2023 2022

Maturity Date December 31, 2024 December 31, 2023

6.00 % Senior Notes Due 2026

9 unchanged sentences

_______________

Notes to Consolidated Financial Statements

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

(2) In connection with the BDC Merger, Terra LLC assumed all the obligations under the 7.00 % Senior Notes ( Note 3 ) and recorded a purchase discount of $ 4.6 million, representing the difference between the carrying value and the fair value of the notes on the date of the merger.

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

The 6.00 % Senior Notes Due 2026

3 unchanged sentences

On February 10, 2021, Terra BDC issued $ 34.8 million in aggregate principal amount of 7.00 % fixed-rate notes due 2026, and on February 26, 2021, the underwriters exercised the option to purchase an additional $ 3.6 million of the notes (collectively the “ 7.00 % Senior Notes Due 2026”).

The 7.00 % Senior Notes Due 2026 may be redeemed in whole or in part at any time or from time to time at Terra BDC’s option on or after February 10, 2023, at a redemption price equal to 100 % of the outstanding principal amount thereof, plus accrued and unpaid interest.

In connection with the BDC Merger, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the outstanding 7.00 % Senior Notes Due 2026.

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

Covenant Compliance

18 unchanged sentences

Property mortgages - variable rate (7)

April 2027 April 2028 8.85 % 48,080,330 37,000,000 33,256,885 29,252,308

April 2027 April 2028 7.83 % 46,855,803 N/A 34,100,000 33,256,885

Total 205,198,560 115,044,390 137,016,403

1 unchanged sentence

Revolving line of credit (2)(8)

March 2024 March 2025 8.70 % 81,982,990 125,000,000 47,461,730 90,135,865

December 2024 June 2025 7.68 % 33,005,952 16,361,111 16,361,111 47,461,730

Term loan (9)(10)

March 2024 March 2024 12.72 % 130,435,138 15,000,000 15,000,000 25,000,000

December 2027 December 2028 (10) 48,171,168 10,000,000 10,000,000 15,000,000

Secured borrowing November 2026 November 2026 9.85 % 28,614,894 18,000,000 18,000,000 —

Total 109,792,014 44,361,111 44,361,111 62,461,730

7 unchanged sentences

In March 2024, the Company amended the Goldman Sachs Bank facility agreement to extend the maturity date to February 18, 2025 and to reduce the minimum interest coverage ratio covenant.

In February 2025, the Company amended the facility agreement to extend the maturity date to February 18, 2027, to reduce the tangible net worth covenant and to modify the allocation of principal payments and proceeds from asset dispositions.

(4) Interest rate is based on Term SOFR plus a spread of 1.965 %.

5 unchanged sentences

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

(8) Prior to March 31, 2023 borrowings under this facility bore interest at an annual rate of LIBOR + 3.25 % with a combined floor of 4.0 %.

In connection with the transition of LIBOR, on March 31, 2023, the facility was amended and the interest rate was changed to Term SOFR + 3.35 % with a combined floor of 6.0 %.

In March 2024, the Company amended the facility agreement to waive the quarterly minimum net worth covenant for the purposes of the December 31, 2023 measurement date and to decrease the minimum net worth covenant for future quarterly measurement dates.

The amendment includes certain additional changes, including, but not limited to, extending the maturity date to September 12, 2024 with an option to extend the facility term for an additional 12 -month period, reducing the credit limit to $ 75.0 million, increasing the coupon rate and revising the minimum profitability covenant.

(9) Terra LLC assumed this facility from Terra BDC in connection with the BDC Merger.

Terra BDC pledged substantially all of its owned and thereafter acquired property as security for the obligations under the credit agreement.

On June 30, 2023, the Company amended the facility to, among other things, (i) extend the scheduled maturity date to March 31, 2024, and (ii) increase the rate on which the loans bear interest from a fixed rate of 5.625 % per annum to a floating rate based on SOFR plus 7.375 % with a SOFR floor of 5.0 %.

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

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

In March 2024, the Company amended the facility agreement to extend the maturity date to September 12, 2024 with an option to extend the facility term for an additional 12 -month period, reduce the credit limit to $ 75.0 million and increase the coupon rate.

In June 2024, the Company amended the facility agreement to extend the maturity date to December 31, 2024 and eliminate the ability to make additional revolving borrowings under the facility agreement.

In January 2025, the Company amended the facility agreement to extend the maturity date to June 30, 2025 and require an additional monthly payment of principal.

(9) In March 2024, the $ 15.0 million term loan was repaid in full.

(10) In December 2024, through a series of transactions, a wholly owned subsidiary of the Company issued a $ 10.0 million term loan payable to an entity in which the Company has an equity investment in exchange for the satisfaction of the remaining funding commitment of the Company to that entity ( Note 4 ).

This loan is interest-free until June 30, 2025, after that interest

Notes to Consolidated Financial Statements

For the years ended December 31, 2023 and 2022, approximately $ 2.5 million and $ 2.0 million, respectively, of amortization of deferred financing costs and other from secured financing agreements was included in interest expense on the consolidated statements of operations.

Additionally, for the years ended December 31, 2023 and 2022, the Company received proceeds from secured financing of $ 211.0 million and $ 286.6 million, respectively, and made repayments on secured financing of $ 205.3 million and $ 239.7 million, respectively.

is charged at a fixed rate of 9.0 % per annum.

The term loan payable is collateralized by the Company’s equity interest in RESOF and the Company serves as a guarantor under the loan.

Under the terms of the loan agreement, the Company is required to maintain certain loan-to-value ratio and investment rating.

Additionally, the Company’s interest in RESOF is only available to pay the debt under the term loan and not available to pay the debt under any other financing arrangements.

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

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

Years Ended December 31,

Amortization of deferred financing costs and others $ 2,921,917 $ 2,482,126

Proceeds from secured financing $ 81,284,441 $ 211,017,859

Repayments of secured financing $ ( 177,525,167 ) $ ( 205,265,764 )

Repurchase Agreements

3 unchanged sentences

The Company further seeks to manage risks associated with the repurchase agreements by matching the maturities and interest rate characteristics of its loans with the related repurchase agreement.

Financing Activities

During the year ended December 31, 2023, the Company entered into the following financing arrangements:

• Two property mortgages for a total of $ 73.5 million for the acquisition of eight industrial buildings;

• Three promissory notes for a total of $ 63.5 million to finance three senior loan investments.

Additionally, in October 2023, the Company conveyed its interest in an office building to the lender by deed-in-lieu of foreclosure and the related $ 27.6 million mortgage payable is effectively extinguished.

Covenant Compliance

1 unchanged sentence

In the event of a default or any breach of covenant of a related agreement, the lender has the right to accelerate all amounts due, charge interest at a default rate, retain all cash flow from the loans originated and/or sell such loans in a private sale on terms possibly unfavorable to the Company.

As of December 31, 2023, the Company was in compliance with all such covenants, as amended or waived (see footnotes to " Secured Financing Arrangements" table above).

As of December 31, 2024, the Company was in compliance with all such covenants, as amended or waived.

Scheduled Debt Principal Payments

5 unchanged sentences

2028 40,250,000

Unamortized deferred financing costs and other ( 4,951,060 )

Total $ 326,142,882

_______________

(1) Amount includes $ 75.5 million of borrowings under a repurchase agreement for which the maturity was extended to 2025 subsequent to December 31, 2023.

Amount also includes $ 47.5 million of borrowings under a revolving line of credit for which the maturity was extended to September 2024 plus an option to extend the maturity for an additional 12-month period.

Notes to Consolidated Financial Statements

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 December 31, 2023, there were no obligations under participation agreements.

As of December 31, 2022, obligations under participation agreements had a carrying value of $ 12.7 million, and the carrying value of the loans that are associated with these obligations under participation agreements was $ 18.7 million, (see “ Participation Agreements ” in Note 8 ).

The weighted-average interest rate on the obligations under participation agreements was 16.4 % as of December 31, 2022.

As of December 31, 2024, obligations under participation agreements were $ 18.2 million (see “Participation Agreements” in Note 7 ).

The interest rate on the obligations

Notes to Consolidated Financial Statements

under participation agreements was 19.53 %.

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

Commitments and Contingencies

10 unchanged sentences

The Manager has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.

As described above in Note 6 “ Real Estate Operating Revenue and Expenses” , the Company previously owned a multi-tenant office building that is subject to a ground lease.

The ground lease provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9 % of the fair market value of the land.

The next rent reset on the ground lease is scheduled for November 1, 2025.

The Company was litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent.

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

Accordingly, the Company is no longer a party to the ground lease, and has taken the necessary steps to terminate the associated litigation (styled Terra Ocean Ave., LLC v.

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

20STCV34217).

Additionally, from time to time, we and individuals employed by us and our Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our borrowers and investees.

1 unchanged sentence

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

Notes to Consolidated Financial Statements

Earnings Per Share

10 unchanged sentences

The Board may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, into one or more classes or series of stock.

As of December 31, 2023, there were no Preferred Stock issued or outstanding.

As of December 31, 2022 there were 125 shares of Series A Preferred Stock (as defined below) issued and outstanding.

As of December 31, 2024 and 2023, there were no shares of Preferred Stock issued or outstanding.

Series A Preferred Stock

1 unchanged sentence

In December 2016, the Company sold 125 shares of the Series A Preferred Stock for $ 125,000 .

The Series A Preferred Stock paid dividends at an annual rate of 12.5 % of the liquidation preference.

These dividends were cumulative and payable semi-annually in arrears on June 30 and December 31 of each year.

The Series A Preferred Stock, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company, ranked senior to common stock.

The Company, at its option, may redeem the shares, with written notice, at a redemption price of $ 1,000 per share, plus any accrued unpaid distribution through the date of the redemption.

The Series A Preferred Stock carried a redemption premium of $ 50 per share if redeemed prior to January 1, 2019.

The Series A Preferred Stock generally had no voting rights.

However, the Series A Preferred Stockholders’ voting was required if (i) authorization or issuance of any securities senior to the Series A Preferred Stock;

(ii) an amendment to the Company’s charter that has a material adverse effect on the rights and preference of the Series A Preferred Stock;

and (iii) any reclassification of the Series A Preferred Stock.

Notes to Consolidated Financial Statements

A Preferred Stock paid dividends at an annual rate of 12.5 % of the liquidation preference.

In March 2023, the Series A Preferred Stock was fully redeemed at par for a total of $ 125,000 plus accrued dividends.

As of December 31, 2024 and 2023, there were no shares of Series A Preferred Stock issued and outstanding.

On October 1, 2022, in connection with the BDC Merger, the Company amended its charter to increase the shares authorized from 500,000,000 to 950,000,000 , consisting of 450,000,000 shares of Class A Common Stock, $ 0.01 par value per share (“Class A Common Stock”), 450,000,000 shares of Class B Common Stock, and 50,000,000 shares of Preferred Stock.

2 unchanged sentences

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

Notes to Consolidated Financial Statements

In connection with the potential liquidity transactions discussed in Note 1 , on December 1, 2023, the Company amended its articles of amendment and restatement (the “A&R Articles”) to provide the Board with greater flexibility to pursue a direct listing.

7 unchanged sentences

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.

Additionally, for the years ended December 31, 2023 and 2022, the Company made distributions to preferred stockholders of $ 3,907 and $ 15,624 , respectively.

For the years ended December 31, 2024 and 2023, the Company made distributions to investors totaling $ 18.6 million and $ 18.6 million respectively, all of which all were returns of capital.

Additionally, for the year ended December 31, 2023, the Company made distributions to preferred stockholders of $ 3,907 , respectively.

There were no such distributions for the year ended December 31, 2024.

Distributions paid to stockholders consist of ordinary income, capital gains, return of capital or a combination thereof for income tax purposes.

7 unchanged sentences

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

For the year ended December 31, 2023, the Company issued 663 shares of Class B Common Stock for a total of $ 8,399 pursuant to the Plan.

For the years ended December 31, 2024 and 2023, the Company issued 1,919 and 663 shares of Class B Common Stock for a total of $ 20,750 and $ 8,399 pursuant to the Plan, respectively.

Notes to Consolidated Financial Statements

Subsequent Events

Management has evaluated subsequent events through the date the consolidated financial statements were available to be issued.

Management has determined that there are no material events other than those described in Note 9 that would require adjustment to, or disclosure in, the Company’s consolidated financial statements.

Management has determined that there are no material events that would require adjustment to, or disclosure in, the Company’s consolidated financial statements.

Terra Property Trust, Inc.

16 unchanged sentences

Additions during the year:

Acquisitions 128,398,732 Depreciation for the year 3,254,832

Capital improvements 327,018 Deductions during the year:

Deductions during the year:

Disposition (1)

( 8,409,798 )

Dispositions (1)

( 42,051,069 ) Balance, end of year $ 2,001,417

Impairment charge (1)

( 11,765,540 )

Balance, end of year $ 128,725,750

___________________________

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

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

As of December 31, 2023, the Company no longer owns the multi-tenant office building.

Capital improvements 13,584 Depreciation for the year 3,140,128

Balance, end of year $ 128,739,334 Balance, end of the year $ 5,141,545

Terra Property Trust, Inc.

4 unchanged sentences

Maximum Maturity Date (3)

Periodic Payment Terms Prior Liens Face Amount Carrying Amount Principal Amount of Mortgages Subject to Delinquent Principal or Interest

Periodic Payment Terms Prior Liens Face Amount Carrying Amount (4)

Principal Amount of Mortgages Subject to Delinquent Principal or Interest

Mezzanine loans individually > 3% of carrying amount of total loans:

Mezzanine loan 1 Student housing/California 11.0 % May 2027 Interest Only — $ 3,000,000 $ 2,935,304 $ —

Mezzanine loan 1 Industrial/Massachusetts 8.5 % September 2027 Interest Only — 7,000,000 7,000,000 —

Mezzanine loan (4)(5)

Mixed-use/California 15.0 % June 2027 Interest Only — $ 8,044,732 $ 8,071,777 —

Mezzanine loans individually < 3% of carrying amount of total loans:

Mezzanine loan 1 Industrial/Massachusetts 8.5 % September 2027 Interest Only — 7,000,000 6,966,233 —

15,044,732 15,038,010 —

First mortgages individually > 3% of carrying amount of total loans:

Office/Georgia 10.0 % August 2024 Interest Only — 56,835,827 56,835,827 56,835,827

Loan B Hotel/California 10.5 % January 2025 Interest Only — 43,222,382 43,801,303 —

Loan C (7)(8)

Industrial/New Jersey 12.8 % August 2025 Interest Only — 60,579,869 60,612,621 60,579,869

Loan D Land/New Jersey 17.3 % March 2025 Interest Only — 21,839,509 22,876,428 —

Loan E Office/California 8.9 % December 2024 Interest Only — 18,000,000 18,041,150 —

Loan F Infrastructure/Utah 14.0 % August 2025 Interest Only — 21,250,000 21,443,421 —

Loan G Mixed-use/North Carolina 13.5 % November 2024 Interest Only — 21,826,479 21,929,657 —

Loan H (4)(5)

Land/Arizona 18.1 % September 2024 Interest Only — 31,000,000 31,296,235 —

Loan I Student housing/Utah 10.4 % March 2024 Interest Only — 28,000,000 28,886,528 —

Loan J Multifamily/Washington 9.8 % April 2026 Interest Only — 23,100,000 23,210,490 —

Loan K Multifamily/California 10.9 % October 2024 Interest Only — 27,494,267 27,810,327 —

First mortgages individually < 3% of carrying amount of total loans:

First mortgages 2 Multifamily/California & Washington 9.5 %- 13.1 %

March 2027 Interest Only — 12,317,167 12,174,903 1,364,944

Loan B Office/Georgia 9.3 % July 2027 Interest Only — 30,562,858 30,586,450 —

Land/New Jersey 16.5 % March 2024 Interest Only — 22,900,000 24,045,000 $ 22,900,000

Office/California 7.8 % January 2025 Interest Only — 16,000,000 16,008,996 —

Loan E Mixed-use/North Carolina 12.4 % July 2025 Interest Only — 21,826,479 21,418,430 —

Loan F (5) (8)

Land/Arizona 17.0 % February 2025 Interest Only — 33,407,815 33,005,952 —

Loan G Student housing/Utah 9.3 % March 2024 Interest Only — 28,000,000 28,910,000 28,000,000

Loan H Multifamily/Washington 12.1 % March 2027 Interest Only — 26,894,593 26,907,157 —

Loan I Multifamily/California 13.9 % October 2025 Interest Only — 28,393,995 28,614,894 —

207,985,740 209,496,879 50,900,000

1 unchanged sentence

Office/New York 12.7 % July 2022 Interest Only — 69,976,792 26,396,345 69,976,792

Loan M Multifamily/Georgia 14.0 % June 2026 Interest Only — 17,500,001 17,766,501 —

Loan N Mixed use/California 20.3 % August 2025 Interest Only — 18,567,296 18,855,139 —

Mixed use/New York 18.0 % March 2025 Interest Only — 15,258,233 15,258,233 15,258,233

Loan K (10)(11)

Mixed use/California 19.5 % August 2025 Interest Only — 18,567,296 18,577,448 —

Preferred equity investments individually < 3% if carrying amount of total loans:

5 unchanged sentences

$ 317,255,023 $ 274,649,145 $ 126,557,255

Allowance for credit losses (13)

___________________________

Carrying value, net $ 456,472,258

___________________________

(1) All of the Company’s loans have a prepayment provision.

1 unchanged sentence

(3) Maximum maturity date assumes all extension options are exercised.

(4) Carrying value represents the amortized cost of loan, net of applicable allowance for credit losses, and excludes $ 0.2 million of allowance for credit losses related to unfunded commitments.

(5) Participation interest is with Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager.

1 unchanged sentence

See “ Participation Agreements ” in Note 7 in the accompanying notes to the consolidated financial statements.

(6) This loan is current in maturity default.

The Company recorded an allowance of credit losses of $ 11.8 million on this loan as a result of a decline in the fair value of the underlying collateral.

(7) Amount included $ 4.0 million of incremental borrowing that bears interest at an annual rate of 20.0 % until certain conditions are met, at which time the interest rate will be the same as the original loan.

(8) The interest payment on this loan is past due;

however, the Company expects to be able to collect all amounts due for both principal and interest according to the contractual terms of the loan.

(9) This loan is current in maturity default.

The Company recorded an allowance of credit losses of $ 26.4 million on this loan as a result of a decline in the fair value of the underlying collateral.

(10) This loan is current in maturity default.

The Company recorded an allowance of credit losses of $ 15.1 million on this loan and expects the sponsor to pay the remaining balance.

(11) This loan is current in maturity default.

(6) This loan is currently in maturity default.

The Company initiated a litigation to seek full repayment of the loan from the sponsor.

(7) In February 2025, this loan was repaid in full.

(8) In February 2025, the maturity of this loan was extended to March 2025

(9) This loan is currently in maturity default.

The Company recorded an allowance of credit losses of $ 43.6 million on this loan on this loan as a result of a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in funding on the senior loan.

(10) The Company sold a portion of its interest in this loan through a participation agreement to an affiliate managed by the Manager ( Note 7 ).

(11) The loan participation from the Company does not qualify for sale accounting under ASC 860 and therefore, the gross amount of this loan remains in the Company's consolidated balance sheets.

See “Obligations under Participation Agreement in Note 8 and “Transfers of Participation Interest by the Company” in Note 7 in the accompanying notes to the consolidated financial statements.

(12) This loan is currently in maturity default.

The Company initiated a litigation to seek full repayment of the loan from the sponsor.

(13) The aggregate cost for U.S.

federal income tax purposes was $ 336.8 million.

(13) Excludes $ 0.3 million of allowance for credit losses related to unfunded commitments.

Terra Property Trust, Inc.

9 unchanged sentences

Collections of principal ( 216,137,530 )

Settlement of loans ( Note 4 )

( 70,737,874 )

Amortization of premium ( 155,727 )

1 unchanged sentence

Provision for loan losses ( 16,804,622 )

Cumulative effect of credit loss accounting standard effective January 1, 2023 ( Note 2 , Note 4 )

( 4,250,052 )

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

Balance, end of year $ 274,649,145

26 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures