Terra Property Trust, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 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. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports. Evaluation of Internal Controls over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our Manager, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including both our Chief Executive Officer and Chief Investment Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on its evaluation, our management concluded that our internal control over financial reporting was effective as of the end of the fiscal year covered by this Annual Report on Form 10-K. This Annual Report on Form 10-K does not include an attestation report of our independent registered accounting firm due to a transition period established by the rules of the SEC for “emerging growth companies.” Changes in Internal Control Over Financial Reporting During the most recent fiscal quarter, there was no change in our internal controls over financial reporting, as defined under Rule 13a-15(f) under the Exchange Act, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. Item 9B. Other Information. None . Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 54 PART III Item 10. 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. The information regarding our directors and certain other matters required by Item 401 of Regulation S-K is incorporated herein by reference to our definitive proxy statement relating to our 2024 annual meeting of stockholders (the “Proxy Statement”), to be filed with the SEC within 120 days after December 31, 2024. The information regarding compliance with Section 16(a) of the Exchange Act required by Item 405 of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2024. The information regarding our Code of Business Conduct and Ethics required by Item 406 of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2024. The information regarding certain matters pertaining to our corporate governance required by Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is incorporated by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2024. Item 11. Executive Compensation. The information regarding executive compensation and other compensation related matters required by Items 402 and 407(e)(4) and(e)(5) of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2024. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The tables on our equity compensation plan information and beneficial ownership required by Items 201(d) and 403 of Regulation S-K are incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2024. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information regarding transactions with related persons, promoters and certain control persons and director independence required by Items 404 and 407(a) of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2024. Item 14. Principal Accounting Fees and Services. The information concerning principal accounting fees and services and the Audit Committee’s pre-approval policies and procedures required by Item 14 is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2024. PART IV Item 15. Exhibits and Financial Statement Schedules. The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K: (1) Financial Statements The index to our financial statements is on page F-1 of this Annual Report on Form 10-K. 55 (2) Financial Statement Schedule The index to our financial schedules is on page F-1 of this Annual Report on Form 10-K. (3) Exhibits The following exhibits are filed with this report. Documents other than those designated as being filed herewith are incorporated herein by reference. Exhibit No. Description and Method of Filing 3.1 Amended and Restated Bylaws of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019). 3.2 Second Articles of Amendment and Restatement of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on December 5, 2023). 3.3 Articles of Supplementary of Terra Property Trust, Inc. Designating 12.5% Services A Redeemable Cumulative Preferred Stock (incorporated by reference to Exhibit 3.3 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019). 4.1 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed with the SEC on March 1 5 , 2024). 4.2 Indenture, dated June 10, 2021, by and between Terra Property Trust, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A (File No. 001-40496) filed with the SEC on June 14, 2021). 4.3 First Supplemental Indenture, dated June 10, 2021, by and between Terra Property Trust, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form 8-A (File No. 001-40496) filed with the SEC on June 14, 2021). 4.4 Form of Global Note representing the notes (included in Exhibit 4.2). 4.5 Indenture, dated February 10, 2021, by and between Terra Income Fund 6, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on February 10, 2021.) 4.6 First Supplemental Indenture, dated February 10, 2021, by and between Terra Income Fund 6, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 of Terra Income Fund 6, Inc.’s Current Report on Form 8-K filed with the SEC on February 10, 2021). 4.7 Second Supplemental Indenture, dated October 1, 2022, by and among Terra Income Fund 6, Inc., Terra Merger Sub, LLC and U.S. Bank National Association, as trustee (incorporated by reference to exhibit 4.4 of Terra Income Fund 6, LLC’s Current Report on Form 8-K filed with the SEC on October 3, 2022). 10.1 Amended and Restated Management Agreement between Terra Property Trust, Inc., and Terra REIT Advisors, LLC, dated February 8, 2018 (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019). 10.2 Amended and Restated Voting Agreement by and among Terra Property Trust, Inc., Terra Secured Income Fund 5, LLC, Terra JV, LLC and Terra REIT Advisors, LLC, dated March 2, 2020 (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed with the SEC on May 15, 2020). 10.3 Contribution Agreement by and among Terra Property Trust, Terra International Fund 3 REIT, LLC and Terra Income Fund International, dated March 2, 2020 (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q (File No. 000-56117) filed with the SEC on May 15, 2020). 10.4 Contribution Agreement by and among Terra Property Trust, Terra International Fund 3 REIT, LLC and Terra Secured Income Fund 5 International, dated March 2, 2020 (incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q (File No. 000-56117) filed with the SEC on May 15, 2020). 10.5 Indenture and Credit Agreement, dated as of September 3, 2020, by and among Terra Mortgage Capital I, LLC, as Issuer, Goldman Sachs Bank USA, as initial Class A lender, and Wells Fargo Bank, National Association, as trustee, custodian, collateral agent, loan agent and note administrator (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-56117) filed with the SEC on September 17, 2020). 56 Exhibit No. 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. 000-56117) filed with the SEC on September 17, 2020). 10.7 Business Loan and Security Agreement, dated as of March 12, 2021, by and among Terra Mortgage Portfolio II, LLC, as the Borrower, and Western Alliance Bank, as the Lender (incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K filed with the SEC on March 18, 2021). 10.8 Limited Guaranty, dated as of March 12, 2021, by and among Terra Property Trust, Inc., as Guarantor, for the benefit of Western Alliance Bank (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 18, 2021). 10.9 First Amendment to Loan Documents dated as of June 9, 2021, by and among Terra Mortgage Portfolio II, LLC, as Borrower, Terra Property Trust, Inc., as Guarantor, and Western Alliance Bank, as Lender (incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022). 10.1 Uncommitted Master Repurchase Agreement dated as of November 8, 2021, by and between Terra Mortgage Capital III, LLC, as Seller, UBS AG, as Buyer (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022). 10.11 Amendment No. 1 to Uncommitted Master Repurchase Agreement, dated as of May 24, 2022, between Terra Mortgage Capital III, LLC, as Seller, and UBS AG, as Buyer (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 (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 (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). 10.16 Uncommitted Master Repurchase and Securities Contract Agreement dated as of February 18, 2022, by and between Terra Mortgage Capital I, LLC, as Seller, Goldman Sachs Bank USA, as Buyer (incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022). 10.17 Guarantee Agreement dated as of February 18, 2022, by and between Terra Property Trust, Inc., as Guarantor, in favor of Goldman Sachs Bank USA, as Buyer (incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022). 10.18 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-40496) filed with the SEC on October 3, 2022). 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). 57 Exhibit No. 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 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32** Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS** Inline XBRL Instance Document - t he instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH** Inline XBRL Taxonomy Extension Schema Document 101.CAL** Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB** Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE** Inline XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF** Inline XBRL Taxonomy Extension Definition Linkbase Document 104 Cover Page Interactive Data File Included as Exhibit 101 (embedded within the Inline XBRL document) ______________ * Filed herewith. ** Furnished herewith. Item 16. Form 10-K Summary. None. 58 Terra Property Trust, Inc. Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm KPMG LLP New York, NY PCAOB ID: 185 F- 2 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 202 4 and 20 23 F- 4 Consolidated Statements of Operations for the years ended December 31, 202 4 and 202 3 F- 5 Consolidated Statements of Cash Flows for the years ended December 31, 202 4 and 202 3 F- 6 Consolidated Statements of Changes in Equity for the years ended December 31, 202 4 and 202 3 F- 7 Notes to Consolidated Financial Statements F- 10 Schedule III — Real Estate and Accumulated Depreciation as of December 31, 202 4 F- 43 Schedule IV — Mortgage Loans on Real Estate as of December 31, 202 4 F- 44 Schedules other than those listed are omitted as they are not applicable for the required or equivalent information has been included in the consolidated financial statements or notes thereto. F-1 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Terra Property Trust, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Terra Property Trust, Inc. and subsidiaries (the Company) as of December 31, 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. generally accepted accounting principles. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for credit losses as of January 1, 2023 due to the adoption of FASB Accounting Standard Update 2016-13, Financial Instruments -Credit Losses (Topic 326): Measurement of Credit losses on Financial Instruments. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and F-2 significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KPMG LLP We have served as the Company’s auditor since 2016. New York, New York March 13, 2025 F-3 Terra Property Trust, Inc. Consolidated Balance Sheets December 31, 2024 2023 Assets Cash and cash equivalents $ 8,578,456 $ 10,674,475 Restricted cash 2,937,959 3,954,986 Cash held in escrow by lender 7,448,611 4,907,316 Marketable securities 963,178 4,961,879 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 $ 759,991 and $ 226,527 41,077,729 38,558,485 Equity interest in unconsolidated investments 106,816,146 37,171,326 Real estate owned, net ( Note 5 ) Land, building and building improvements, net 123,597,789 126,724,333 Lease intangible assets, net 5,641,030 9,869,364 Interest receivable 5,440,620 6,537,368 Due from related parties 859,267 655,263 Other assets 5,886,858 8,811,583 Total assets $ 542,819,059 $ 670,740,151 Liabilities and Equity Liabilities: Unsecured notes payable, net $ 120,424,100 $ 118,380,897 Secured financing agreements, net 205,718,782 290,525,313 Obligations under participation agreements ( Note 7 ) 18,177,106 — Interest reserve and other deposits held on investments 2,937,959 3,954,986 Lease intangible liabilities, net ( Note 5 ) 3,902,416 6,838,875 Due to Manager ( Note 7 ) 1,597,552 4,183,293 Interest payable 1,350,384 1,575,463 Accounts payable and accrued expenses 2,189,486 2,405,749 Unearned income 127,485 314,260 Other liabilities 667,723 907,507 Total liabilities 357,092,993 429,086,343 Commitments and contingencies ( Note 9 ) Equity: Preferred stock, $ 0.01 par value, 50,000,000 shares authorized and none issued — — Class A Common Stock, $ 0.01 par value, 450,000,000 shares authorized and no shares issued, as of both December 31, 2024 and December 31, 2023 — — Class B Common Stock, $ 0.01 par value, 450,000,000 shares authorized and 24,337,952 and 24,336,033 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 243,380 243,360 Additional paid-in capital 444,478,936 444,458,206 Accumulated deficit ( 258,810,775 ) ( 203,047,758 ) Accumulated other comprehensive loss ( 185,475 ) — Total equity 185,726,066 241,653,808 Total liabilities and equity $ 542,819,059 $ 670,740,151 See notes to consolidated financial statements . F-4 Terra Property Trust, Inc. Consolidated Statements of Operations and Comprehensive (Loss) Income Years Ended December 31, 2024 2023 Revenues Interest income $ 38,250,784 $ 56,140,437 Real estate operating revenue 10,740,170 11,050,716 Prepayment fee income 435,677 — Other operating income 262,863 722,881 49,689,494 67,914,034 Operating expenses Operating expenses reimbursed to Manager 7,468,132 9,234,357 Asset management fee 6,207,231 7,807,198 Asset servicing fee 1,489,674 1,857,765 Provision for credit losses 16,627,739 45,548,803 Real estate operating expenses 2,673,913 4,586,245 Depreciation and amortization 7,357,295 6,968,985 Professional fees 3,012,046 3,741,720 Directors’ fees 356,886 347,714 Other 558,638 539,957 Impairment charge — 11,765,540 45,751,554 92,398,284 Operating income (loss) 3,937,940 ( 24,484,250 ) Other income and expenses Interest expense on secured financing ( 25,052,058 ) ( 28,113,245 ) Interest expense on unsecured notes payable ( 9,836,953 ) ( 9,643,974 ) Interest expense on obligations under participation agreements ( 2,971,924 ) ( 1,353,006 ) 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 ) Gain on extinguishment of participation liability — 14,079,379 Realized loss on investments, net ( 446,009 ) ( 459,279 ) ( 41,097,895 ) ( 32,401,789 ) Net loss $ ( 37,159,955 ) $ ( 56,886,039 ) Series A preferred stock dividend declared $ — $ ( 3,907 ) 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 $ ( 1.53 ) $ ( 2.34 ) Weighted-average shares — basic and diluted 24,336,834 24,335,545 Distributions declared per common share $ 0.76 $ 0.76 See notes to consolidated financial statements. F-5 Terra Property Trust, Inc. Consolidated Statements of Changes in Equity Preferred Stock Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) $ 0.01 Par Value $ 0.01 Par Value Shares Amount Shares Amount Total Equity Balance at January 1, 2024 $ — — $ — 24,336,033 $ 243,360 $ 444,458,206 $ ( 203,047,758 ) $ — $ 241,653,808 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 ) 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 $ — — $ — 24,337,952 $ 243,380 $ 444,478,936 $ ( 258,810,775 ) $ ( 185,475 ) $ 185,726,066 Preferred Stock 12.5 % Series A Cumulative Non-Voting Preferred Stock Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit $ 0.01 Par Value $ 0.01 Par Value Shares Amount Shares Amount Shares Amount Total equity Balance at January 1, 2023 $ — 125 $ 125,000 — $ — 24,335,370 $ 243,354 $ 444,449,813 $ ( 122,935,993 ) $ 321,882,174 Cumulative effect of credit loss accounting standard effective January 1, 2023 ( Note 2 ) — — — — — — — — ( 4,619,723 ) ( 4,619,723 ) Shares issued from reinvestment of shareholder distributions — — — — — 663 6 8,393 — 8,399 Redemption of Series A Preferred Stock — ( 125 ) ( 125,000 ) — — — — — — ( 125,000 ) — — — — — — — — ( 18,602,096 ) ( 18,602,096 ) Distributions declared on common shares ($ 0.76 per share) — — — — — — — — ( 3,907 ) ( 3,907 ) Net loss — — — — — — — — ( 56,886,039 ) ( 56,886,039 ) Balance at December 31, 2023 $ — — $ — — $ — 24,336,033 $ 243,360 $ 444,458,206 $ ( 203,047,758 ) $ 241,653,808 See notes to consolidated financial statements . F-6 Terra Property Trust, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 37,159,955 ) $ ( 56,886,039 ) 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 Amortization of net purchase premiums on loans 155,727 1,124,157 Straight-line rent adjustments ( 200,926 ) ( 63,974 ) Amortization of deferred financing costs 2,649,091 2,485,026 Amortization of discount on unsecured notes payable 1,850,642 1,672,197 Amortization of above- and below-market rent intangibles ( 2,936,459 ) ( 2,135,162 ) Amortization and accretion of investment-related fees, net ( 578,756 ) ( 896,615 ) 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 ) 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: Deal deposits — 4,241,892 Interest receivable 1,096,748 ( 2,893,517 ) Due from related parties ( 204,004 ) ( 471,012 ) Other assets 1,379,815 ( 6,389,166 ) Due to Manager ( 1,474,903 ) 1,509,673 Unearned income ( 186,775 ) ( 63,758 ) Interest payable ( 225,079 ) 517,462 Accounts payable and accrued expenses ( 216,263 ) 1,121,931 Other liabilities ( 62,894 ) ( 548,471 ) Net cash (used in) provided by operating activities ( 3,258,119 ) 8,609,998 See notes to consolidated financial statements. F-7 Terra Property Trust, Inc. Consolidated Statements of Cash Flows (Continued) Years Ended December 31, 2024 2023 Cash flows from investing activities: Proceeds from repayments of loans 215,137,530 126,142,565 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 ) 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: 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 ) Change in interest reserve and other deposits held on investments ( 1,017,027 ) ( 678,218 ) Redemption of Series A Preferred Stock — ( 125,000 ) 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 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 Years Ended December 31, 2024 2023 Supplemental Disclosure of Cash Flows Information: Cash paid for interest $ 33,610,601 $ 34,435,541 Supplemental non-cash information: Reinvestment of shareholder distributions $ 20,750 $ 8,399 See notes to consolidated financial statements. F-8 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. The following table presents a summary of the total capitalized costs and the values of the net assets acquired: Total Capitalized Costs: Cash and cash equivalents $ 3,515,466 Loans held for investment 68,737,877 Equity interest in unconsolidated investment 10,149,642 Interest receivable 456,650 Other assets 429,326 $ 83,288,961 Net Assets Acquired Cash and cash equivalents $ 712,608 Other assets 33,802 Land 14,457,149 Buildings and Improvements 65,365,376 Intangible asset and liability: In-please lease 8,403,667 Below-market rent ( 4,770,870 ) Accounts payable and accrued expenses ( 912,771 ) $ 83,288,961 See notes to consolidated financial statements . F-9 Terra Property Trust, Inc. Notes to Consolidated Financial Statements December 31, 2024 Note 1. Business Terra Property Trust, Inc. ( and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) is a real estate investment trust (“REIT”) that originates, invests in and manages a diverse portfolio of real estate and real estate-related assets. The Company was incorporated under the Maryland General Corporation Law on December 31, 2015. The Company focuses primarily on commercial real estate credit investments, including first mortgage loans, subordinated loans (including B-notes, mezzanine and preferred equity) and credit facilities throughout the United States. The Company’s loans finance the acquisition, development or recapitalization of high-quality commercial real estate in the United States . The Company focuses on middle market loans in the approximately $ 10 million to $ 50 million range, which in the Company’s experience have been subject to less competition, offer higher risk-adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification . The Company may also make strategic real estate equity and non-real estate-related investments that align with its investment objectives and criteria . On January 1, 2016, Terra Secured Income Fund 5, LLC (“Terra Fund 5”), the Company’s then parent, contributed its consolidated portfolio of net assets to the Company pursuant to a contribution agreement in exchange for shares of the Company’s common stock. Upon receipt of the contribution of the consolidated portfolio of net assets from Terra Fund 5, the Company commenced its operations on January 1, 2016. On March 2, 2020, the Company engaged in a series of transactions pursuant to which the Company issued an aggregate of 4,574,470.35 shares of its common stock in exchange for the settlement of an aggregate of $ 49.8 million of participation interests in loans held by the Company, cash of $ 25.5 million and other working capital. The Company has elected to be taxed, and to qualify annually thereafter, as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with the taxable year ended December 31, 2016. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. The Company also operates its business in a manner that permits it to maintain its exemption from registration as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s investment activities are externally managed by Terra REIT Advisors, LLC (the “Manager”), a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC (“Terra Capital Partners”), pursuant to a management agreement (the “Management Agreement”), under the oversight of the Company’s board of directors (the “Board”) ( Note 7 ). The Company does not currently have any employees and does not expect to have any employees. Services necessary for the Company’s business are provided by individuals who are employees of the Manager or by individuals who were contracted by the Company or by the Manager to work on behalf of the Company pursuant to the terms of the Management Agreement. On October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Merger Agreement”), Terra Income Fund 6, Inc. (“Terra BDC”), merged with and into Terra Income Fund 6, LLC (“Terra LLC”), a wholly owned subsidiary of the Company, with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as a wholly owned subsidiary of the Company. Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of the Company’s Class B Common Stock, $ 0.01 par value per share (“Class B Common Stock”), were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of October 1, 2022. On 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.” F-10 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. On the Distribution Date, each member of Terra Fund 5 received 2,252.02 shares of the Company’s Class B Common Stock for each unit of membership interest in Terra Fund 5 held by such member. Because Terra Fund 5 previously owned its interests in the shares of Class B Common Stock indirectly through its ownership of interests in Terra JV, LLC (“Terra JV”), prior to the Distribution Date, Terra JV first distributed the shares of Class B Common Stock to Terra Fund 5 and Terra Secured Income Fund 7, LLC (“Terra Fund 7”), and Terra Fund 5 then distributed those shares to its members on the Distribution Date and Terra Fund 7 became a direct stockholder of the Company’s Class B Common Stock. As of December 31, 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. Note 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Company and its consolidated subsidiaries. The accompanying consolidated financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-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. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Company consolidates an entity when it holds a majority voting interest in an entity. The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting (see Note 4 ). VIE Model An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. Under the VIE model, limited partnerships are considered VIEs unless a limited partner holds substantive kick-out or participating rights over a general partner. The Company consolidates entities that are VIEs when the Company determines it is the primary beneficiary. Generally, the primary beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. F-11 Notes to Consolidated Financial Statements Loans Held for Investment The Company originates, acquires, and structures, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”). Loans held for investment are carried at the principal amount outstanding, adjusted for the accretion of discounts on investments and exit fees, and the amortization of premiums on investments and origination fees. The Company’s preferred equity investments, which are economically similar to mezzanine loans and subordinate to any loans but senior to common equity, are accounted for as loans held for investment. Loans are carried at amortized cost less allowance for credit losses. Amortized cost is the amount at which a financing receivable or a loan is originated or acquired, adjusted for accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash and write-offs. Allowance for Credit Losses On January 1, 2023, the Company adopted the provisions of Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses . ASC 326 mandates the use of a current expected credit loss (“CECL”) methodology for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” methodology previously required under United States generally accepted accounting principles (“U.S. GAAP”). The CECL methodology requires the consideration of possible credit losses over the life of an instrument as opposed to estimating credit losses upon the occurrence of an actual loss event under the previous “incurred loss” methodology. As permitted by ASC 326, the Company elected not to measure an allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheet), but rather write off in a timely manner by reversing interest income that would likely be uncollectible. The Company’s adoption of the ASC 326 resulted in a $ 4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to member’s capital as of January 1, 2023. Subsequent to the adoption of the CECL methodology, any increase or decrease to the allowance for credit losses is recorded in earnings on the consolidated statement of operations. Performing Loans The Company uses a model-based approach for estimating the allowance for credit losses on performing loans on a collective basis, including future funding commitments for which the Company does not have the unconditional right to cancel, as these loans share similar risk characteristics. The Company utilizes information obtained from internal and external sources relating to past events, current economic conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio. The Company utilizes a commercial mortgage-based, third-party loan loss model and because the Company does not have a meaningful history of realized credit losses on its loan portfolio, it subscribes to a database service to provide historical proxy loan loss information. The Company employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. The Company has chosen to incorporate a weighted average macroeconomic forecast that encompasses baseline, upside and downside scenarios, into its allowance for credit losses on performing loans estimate during the reasonable and supportable forecast period which is currently eight quarters. The Company selects certain economic variables from a group of independent variables such as Commercial Real Estate Price Index, unemployment and interest rate which are included in the model as part of macroeconomic forecast and updated regularly based on current economic trends. The specific loan level information input into the model includes loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. Based on the inputs, the loan loss model determines a loan loss rate through the generation of a probability of default (PD) and loss given default (LGD) for each loan. The allowance for credit losses on performing loans is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. A significant amount of judgment is applied in selecting inputs and analyzing results produced by the models to determine the allowance for credit losses on performing loans. Changes in such estimates can significantly affect the expected credit losses. Beyond the Company’s reasonable and supportable forecast period, the Company reverts to historical loss information on a straight-line basis over the remaining contractual loan term, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. The determination of the performing loans credit loss estimate considers historical loss information and current economic conditions for each loan, reversion period and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and F-12 Notes to Consolidated Financial Statements plausible outcomes for the U.S. economy. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed. The Company also performs a qualitative assessment and applies qualitative adjustments as necessary, usually due to limitations of the loan loss model. The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the Company to determine the amount of the expected loss more accurately and reasonably for these investments. The Company also evaluates the contractual life of its loans to determine if changes are needed for certain contractual extension options, renewals, modifications, and prepayments. Unfunded Commitments Some of the Company’s performing loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL methodology because the Company does not have an unconditional right to cancel such commitments. The allowance for credit losses related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets. This allowance for credit losses is estimated using the same method outlined above for the Company’s outstanding performing loan balances and increases or decreases are also recorded in earnings on the consolidated statements of operations. Non-Performing Loans During the loan review process, all non-performing loans are evaluated for collectability, which includes both loans in default and loans where we do not expect to collect all amounts due for both principal and interest according to the contractual terms of the loan. The Company removes these loans from the model-based approach described above and analyzes them separately. The credit loss reserve for these loans is calculated as any excess of the amortized cost of the loan over (i) the present value of expected future cash flows discounted at the appropriate discount rate or (ii) the fair value of collateral, if repayment is expected solely from the collateral. Loans Not Secured by Real Estate As of 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, 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. The Company classifies distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceed cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities. The Company evaluates its equity interest in unconsolidated investments on a periodic basis to determine if there are any indicators that the value of its equity investments may be impaired and whether or not that impairment is other-than-temporary. To the extent an impairment has occurred and is determined to be other-than-temporary, the Company measures the charge as the excess of the carrying value of its investment over its estimated fair value, which is determined by calculating its share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint venture agreements. Equity Securities Without Readily Determinable Fair Value The Company accounts for its equity securities without readily determinable fair value at cost, which is included in other assets on the consolidated balance sheets. The Company has elected the measurement alternative and therefore will evaluate F-13 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 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 classified as held for trading. Changes in the fair value of equity securities are recognized in earnings. Real Estate Owned, Net Real estate acquired is recorded at its estimated fair value at acquisition and is shown net of accumulated depreciation and impairment charges. Acquisition of properties generally are accounted for as asset acquisitions. Under asset acquisition accounting, the costs to acquire real estate, including transaction costs, are accumulated and then allocated to individual assets and liabilities acquired based upon their relative fair value. The Company allocates the purchase price of its real estate acquisitions to land, building, tenant improvements, acquired in-place leases, intangibles for the value of any above or below market leases at fair value and to any other identified intangible assets or liabilities. The Company amortizes the value allocated to in-place leases over the remaining lease term, which is reported in depreciation and amortization expense on its consolidated statements of operations. The value allocated to above or below market leases are amortized over the remaining lease term as an adjustment to rental income. Real estate assets are depreciated using the straight-line method over their estimated useful lives: buildings and improvements - not to exceed 40 years, and tenant improvements - shorter of the lease term or life of the asset. Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful life. Management reviews the Company’s real estate for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate assets. If impaired, the real estate asset will be written down to its estimated fair value. Leases The Company determines if an arrangement is a lease at inception. Operating leases in which the Company is the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s lease typically does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made in advance and excludes lease incentives if there were any. The Company’s lease term may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense 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. F-14 Notes to Consolidated Financial Statements Revenue Recognition Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Interest Income: Interest income is accrued based upon the outstanding principal amount and contractual terms of the loans and preferred equity investments that the Company expects to collect, and it is accrued and recorded on a daily basis. Discounts and premiums on investments purchased are accreted or amortized over the expected life of the respective loan using the effective yield method, and are included in interest income in the consolidated statements of operations. Loan origination fees and exit fees, net of portions attributable to obligations under participation agreements, are capitalized and amortized or accreted to interest income over the life of the investment using the effective yield method. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of interest and principal becomes not probable. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. The Company holds loans in its portfolio that may contain paid-in-kind (“PIK”) interest provisions. The PIK interest, which represents contractually deferred interest that is added to the principal balance that is due at maturity, is recorded on the accrual basis. Real Estate Operating Revenues: Real estate operating revenue is derived from leasing of space to various types of tenants. The leases are for fixed terms of varying length and generally provide for annual rent increases and expense reimbursements to be paid in monthly installments. Lease revenue, or rental income from leases, is recognized on a straight-line basis over the term of the respective leases. Additionally, the Company recorded above- and below-market lease intangibles, which are included in real estate owned, net, in connection with the acquisition of the real estate properties. These intangible assets and liabilities are amortized to lease revenue over the remaining contractual lease term. Other Revenues: Prepayment fee income is recognized as prepayments occur. All other income is recognized when earned. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments, with original maturities of ninety days or less when purchased, as cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains all of its cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation. Restricted cash represents cash held as additional collateral by the Company on behalf of the borrowers related to the investments in loans or preferred equity instruments for the purpose of such borrowers making interest and property-related operating payments. Restricted cash is not available for general corporate purposes. The related liability is recorded in “ Interest reserve and other deposits held on investments ” on the consolidated balance sheets. Cash held in escrow by lender represents amounts funded to an escrow account for debt services and tenant improvements. Cash held in escrow is restricted and is not available for general corporate purposes. The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s consolidated balance sheets to the total amount shown in its consolidated statements of cash flows as of: December 31, 2024 2023 Cash and cash equivalents $ 8,578,456 $ 10,674,475 Restricted cash 2,937,959 3,954,986 Cash held in escrow by lender 7,448,611 4,907,316 Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 18,965,026 $ 19,536,777 F-15 Notes to Consolidated Financial Statements Participation Interests Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. For the investments for which participation has been granted, the interest earned on the entire loan balance is recorded within “ Interest income ” and the interest related to the participation interest is recorded within “ Interest expense from obligations under participation agreements ” in the consolidated statements of operations. Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes not probable. See “ Obligations Under Participation Agreements ” in Note 8 for additional information. Secured Financing Agreements, Net The Company's secured financing agreements include two master repurchase agreements, a revolving line of credit, non-recourse property mortgages, note-on-note financing arrangements, secured borrowing and a term loan. The Company accounts for borrowings under these financing arrangements as secured transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. See “ Secured Financing Arrangements ” in Note 8 for additional information. Fair Value Measurements U.S. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, unsecured notes, mortgage loan payable, term loan payable, repurchase agreement payment and revolving line of credit. Such financial instruments are carried at amortized cost, less impairment, where applicable. Marketable securities are financial instruments that are reported at fair value. Deferred Financing Costs Deferred financing costs represent fees and expenses incurred in connection with obtaining financing for investments. These costs are presented in the consolidated balance sheets as a direct deduction of the debt liability to which the costs pertain. These costs are amortized using the effective interest method and are included in interest expense on the applicable borrowings in the consolidated statements of operations over the life of the borrowings. Income Taxes The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2016. In order to qualify as a REIT, the Company is required, among other things, to distribute dividends equal to at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax) beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. Any gains from the sale of foreclosed properties within two years are subject to U.S. federal and state income taxes at regular corporate rates. As of 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. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its consolidated statements of operations. For the years ended December 31, 2024 and 2023, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s 2021-2024 federal tax returns remain subject to examination by the Internal Revenue Service. F-16 Notes to Consolidated Financial Statements Earnings Per Share 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. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates, and those differences could be material. Segment Information The Company’s primary business is originating, acquiring and structuring real estate-related loans related to high quality commercial real estate. From time to time, the Company may assume control of properties acquired in connection with foreclosures or deed in lieu of foreclosure, or it may acquire operating real estate properties that meet its investment criteria. The Company operates as one segment, which is also its sole reportable segment, focused on mezzanine loans, senior loans and preferred equity investments, and to a lesser extent, owning and managing real estate. The Company’s chief operating decision maker (“CODM”) is its senior management team, comprised of its chief executive officer who is also the chief investment officer, chief operating officer, chief financial officer, chief originations officer and the head of asset management of the Manager. The Company generates its revenue primarily from originating, acquiring, investing in, and managing real estate-related debt investments. The CODM evaluates the performance of any real estate owned assets with that of its real estate-related debt investments. Additionally, the Company seeks to enhance its returns on equity by utilizing leverage, and generally finance its real estate-related investments with leverage obtained through a variety of sources, including secured and unsecured debt instruments. The CODM evaluates performance and allocates resources based on consolidated net income (loss), which is also reported as consolidated net income (loss) on the Company’s consolidated statement of operations. The Company’s consolidated net income (loss) is primarily derived through the difference between the interest income earned on its loans and the cost at which its to finance them. Accordingly, interest expense, as reported on its consolidated statement of operations, is its most significant segment expense. Additionally, the measure of segment assets is reflected on the balance sheet as total consolidated assets. The CODM uses consolidated net income (loss) to make key operating decisions, such as identifying attractive investment opportunities, evaluating underwriting standards, determining the appropriate level of leverage to enhance returns on equity and deciding on the sources of financing. Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update “ASU” 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 intends to improve reportable segment disclosure requirements, enhance interim disclosure requirements and provide new segment disclosure requirements for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods 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. F-17 Notes to Consolidated Financial Statements Note 3. Loans Held for Investment The Company elected the practical expedient under ASC 326 to exclude accrued interest from amortized cost. As of December 31, 2024 and 2023, accrued interest receivable of $ 5.4 million and $ 6.5 million, respectively, is included in interest receivable on the consolidated balance sheets, and is excluded from the amortized cost of loans held for investment. Portfolio Summary The following table provides a summary of the Company’s loan portfolio as of: December 31, 2024 December 31, 2023 Fixed Rate Floating Rate (1)(2)(3) Total Fixed Rate Floating Rate (1)(2)(3) Total Number of loans 2 11 13 5 16 21 Principal balance $ 12,680,463 $ 304,574,560 $ 317,255,023 $ 53,998,648 $ 455,462,178 $ 509,460,826 Carrying value $ 12,106,695 $ 262,542,450 $ 274,649,145 $ 54,095,173 $ 402,377,085 $ 456,472,258 Fair value $ 11,740,671 $ 264,796,547 $ 276,537,218 $ 53,435,742 $ 403,904,207 $ 457,339,949 Weighted-average coupon rate (4) 8.50 % 13.18 % 13.04 % 13.03 % 13.05 % 13.05 % Weighted-average remaining term (years) (5) 2.68 0.84 0.91 1.18 0.70 0.77 _______________ (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, Net Loans Held for Investment through Participation Interests, Net Total Balance, January 1, 2024 $ 417,913,773 $ 38,558,485 $ 456,472,258 Principal repayments received ( 216,137,530 ) — ( 216,137,530 ) 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 ) Net amortization of premiums on loans ( 155,727 ) — ( 155,727 ) Accrual, payment and accretion of investment-related fees and other, net ( 304,112 ) 44,518 ( 259,594 ) Provision for credit losses ( 16,271,158 ) ( 533,464 ) ( 16,804,622 ) Balance, December 31, 2024 $ 233,571,416 $ 41,077,729 $ 274,649,145 _______________ (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. F-18 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 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 ) 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, net ( 1,049,981 ) ( 5,608 ) ( 1,055,589 ) Provision for credit losses ( 45,491,949 ) ( 99,618 ) ( 45,591,567 ) Balance, December 31, 2023 $ 417,913,773 $ 38,558,485 $ 456,472,258 _______________ (1) In May 2023, the Company settled $ 68.7 million of senior loans in exchange for ownership interest in the underlying real estate properties ( Note 5 ). (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. Portfolio Information The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans. Carrying value represents the amortized cost of loan, net of applicable allowance for credit losses. December 31, 2024 December 31, 2023 Loan Structure Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total First mortgages $ 207,985,740 $ 209,496,879 76.3 % $ 365,465,500 $ 354,004,530 77.6 % Preferred equity investments 94,224,551 50,114,256 18.2 % 126,550,969 85,222,201 18.6 % Mezzanine loans 15,044,732 15,038,010 5.5 % 17,444,357 17,245,527 3.8 % Total $ 317,255,023 $ 274,649,145 100.0 % $ 509,460,826 $ 456,472,258 100.0 % December 31, 2024 December 31, 2023 Property Type Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total Office $ 116,539,650 $ 72,991,791 26.6 % $ 144,812,619 $ 106,462,535 23.3 % Multifamily 60,969,051 60,662,514 22.1 % 85,660,082 84,417,184 18.5 % Infill land 56,307,815 57,050,952 20.8 % 52,839,509 54,024,545 11.8 % 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 % Total $ 317,255,023 $ 274,649,145 100.0 % $ 509,460,826 $ 456,472,258 100.0 % F-19 Notes to Consolidated Financial Statements December 31, 2024 December 31, 2023 Geographic Location Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total United States 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 % Georgia 30,562,858 30,586,450 11.1 % 74,335,828 62,564,770 13.7 % Utah 28,000,000 28,910,000 10.5 % 49,250,000 50,293,850 11.0 % Washington 26,894,593 26,907,157 9.8 % 34,052,223 33,908,737 7.4 % 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 % 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 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 F-20 Notes to Consolidated Financial Statements 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 ) — 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 ) Allowance for credit losses, end of period $ 54,642,777 $ 2,333,248 $ 326,907 $ 57,302,932 Accrued Interest Receivable The Company elected not to measure a CECL reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely manner. If the Company determines it has uncollectible accrued interest receivable, it generally would reverse the accrued and unpaid interest against interest income and no longer accrue for interest. For the 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 performing loan and assigns each performing loan a risk rating between 1 and 5, which is an average of the numerical ratings in the following categories: (i) sponsor capability and financial condition; (ii) loan and collateral performance relative to underwriting; (iii) quality and stability of collateral cash flows and/or reserve balances; and (iv) loan to value. Based on a 5-point scale, the Company’s performing loans are rated “1” through “5”, from less risk to greater risk, as follows: Risk Rating Description 1 Very low risk 2 Low risk 3 Moderate/average risk 4 Higher risk 5 Highest risk Additionally, as discussed in Note 2 , during the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, or if a loan is in maturity default, the Company considers that loan non-performing. F-21 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 Loan Risk Rating Number of Loans Amortized Cost % of Total Amortized Cost by Year Originated 2024 2023 2022 2021 2020 Prior 1 — $ — — % $ — $ — $ — $ — $ — $ — 2 1 7,000,000 2.2 % — — — — — 7,000,000 3 5 132,919,643 41.4 % 30,812,857 27,121,997 — 58,945,052 — 16,039,737 4 3 81,168,702 25.3 % — — 52,494,051 — 28,674,651 — 5 — — — % — — — — — — Non-performing (1) 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 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 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 — — — — 5 — — — % — — — — — — Non-performing 6 209,297,064 40.7 % — 60,612,621 — — 58,200,770 90,483,673 21 513,448,283 100.0 % $ 10,809,959 $ 156,850,913 $ 97,514,884 $ 27,810,327 $ 120,043,223 $ 100,418,977 Allowance for credit losses ( 56,976,025 ) Total carrying value, net $ 456,472,258 Note 4. Equity Interest in Unconsolidated Investments The Company owns interests in a limited partnership, joint ventures and a preferred equity investment with profit-sharing feature. The Company accounts for its interests in these investments under the equity method of accounting ( Note 2 ). Equity Interest in a Limited Partnership On August 3, 2020, the Company entered into a subscription agreement with Mavik Real Estate Special Opportunities Fund, LP (“RESOF”) whereby the Company committed to fund up to $ 50.0 million to purchase a limited partnership interest in RESOF. RESOF ’s primary investment objective is to generate attractive risk-adjusted returns by purchasing performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). The general partner of RESOF is Mavik Real Estate Special Opportunities Fund GP, LLC , which is a subsidiary of the Company’s sponsor, Terra Capital Partners . The Company evaluated its equity interest in RESOF and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in RESOF is accounted for as an equity method investment. F-22 Notes to Consolidated Financial Statements 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, 2024 2023 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: December 31, 2024 2023 Investments at fair value (cost of $ 465,401,329 and $ 196,129,031 , respectively) $ 468,862,953 $ 199,032,013 Other assets 34,769,227 16,502,225 Total assets 503,632,180 215,534,238 Secured financing agreements, net of financing costs 100,033,166 44,762,534 Obligations under participation agreement (proceeds of $ 51,754,396 and $ 38,444,357 , respectively) 73,672,431 38,881,032 Other liabilities 14,114,335 13,641,742 Total liabilities 187,819,932 97,285,308 Partners’ capital $ 315,812,248 $ 118,248,930 Years Ended December 31, 2024 2023 Total investment income $ 62,645,656 $ 33,998,655 Total expenses 22,725,966 13,694,107 Net investment income 39,919,690 20,304,548 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 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. F-23 Notes to Consolidated Financial Statements The following tables present a summary of the Company’s equity interest in the joint ventures: December 31, 2024 December 31, 2023 Entity Co-owner Beneficial Ownership Interest Carrying Value Beneficial Ownership Interest Carrying Value LEL Arlington JV LLC Third party/Affiliate 27.2 % $ 5,761,522 27.2 % $ 7,024,245 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 % 5,590,427 610 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 VI-B LLC (3) 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) 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, 2024 2023 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. December 31, 2024 2023 Net investments in real estate $ 196,206,089 $ 223,039,486 Other assets 100,379,328 18,362,425 Total assets 296,585,417 241,401,911 Secured financing agreements 210,398,952 187,269,209 Other liabilities 8,948,512 4,509,167 Total liabilities 219,347,464 191,778,376 Members’ capital $ 77,237,953 $ 49,623,535 F-24 Notes to Consolidated Financial Statements Years Ended December 31, 2024 2023 Revenues $ 19,133,332 $ 17,055,616 Operating expenses ( 13,968,721 ) ( 8,535,636 ) Depreciation and amortization expense ( 7,889,130 ) ( 7,225,448 ) Interest expense ( 15,465,374 ) ( 10,762,003 ) 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 ) 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. Note 5. Real Estate Owned, Net Real Estate Activities 2024 — In January 2024, a lease for a space in one of the industrial properties was terminated and the Company received a termination fee of $ 0.03 million. In connection with the lease termination, the Company wrote off the related unamortized in-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. In October 2023, the Company conveyed its interest in the office building to the lender by deed-in-lieu of foreclosure and recognized a loss on disposal of real estate of $ 4.2 million. Accordingly, the Company no longer owns the multi-tenant office building. Additionally, during the year ended December 31, 2023, the Company made the following investments: Property Location Number of Properties Date of Acquisition Property Type Total Capitalized Costs Texas, United States 3 3/24/2023 Industrial $ 48,798,273 Texas, United States 5 5/25/2023 Industrial 83,288,961 $ 132,087,234 F-25 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. The following table presents an allocation of the total capitalized costs: Total Capitalized Costs: Cash and cash equivalents $ 52,313,739 Loans held for investment 68,737,877 Equity interest in unconsolidated investment 10,149,642 Interest receivable 456,650 Other assets 429,326 $ 132,087,234 Net Assets Acquired Cash and cash equivalents $ 712,608 Other assets 33,802 Land 23,785,004 Buildings and Improvements 104,613,728 Intangible assets and liabilities: In-place lease (weighted-average expected life of 3.95 years) 12,719,000 Below-market rent (weighted-average expected life of 3.98 years) ( 8,864,137 ) Accounts payable and accrued expenses ( 912,771 ) $ 132,087,234 Real Estate Owned, Net Real estate owned is comprised of eight industrial buildings located in Texas with lease intangible assets and liabilities. The following table presents the components of real estate owned, net as of: December 31, 2024 December 31, 2023 Cost Accumulated Depreciation/Amortization Net Cost Accumulated Depreciation/Amortization Net Real estate: Land $ 23,785,004 $ — $ 23,785,004 $ 23,785,004 $ — $ 23,785,004 Building and building improvements 104,924,745 ( 5,140,431 ) 99,784,314 104,915,714 ( 1,986,016 ) 102,929,698 Tenant improvements 29,585 ( 1,114 ) 28,471 25,032 ( 15,401 ) 9,631 Total real estate 128,739,334 ( 5,141,545 ) 123,597,789 128,725,750 ( 2,001,417 ) 126,724,333 Lease intangible assets: In-place lease 12,060,731 ( 6,419,701 ) 5,641,030 12,719,000 ( 2,849,636 ) 9,869,364 Total intangible assets 12,060,731 ( 6,419,701 ) 5,641,030 12,719,000 ( 2,849,636 ) 9,869,364 Lease intangible liabilities: Below-market rent ( 8,649,073 ) 4,746,657 ( 3,902,416 ) ( 8,864,138 ) 2,025,263 ( 6,838,875 ) 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 F-26 Notes to Consolidated Financial Statements Real Estate Operating Revenues and Expenses The following table presents the components of real estate operating revenues and expenses that are included in the consolidated statements of operations: Years Ended December 31, 2024 2023 Real estate operating revenues: Lease revenue $ 8,295,021 $ 8,721,719 Other operating income 2,445,149 2,328,997 Total $ 10,740,170 $ 11,050,716 Real estate operating expenses: Utilities $ 49,825 $ 207,700 Real estate taxes 1,119,689 692,411 Repairs and maintenances 326,395 696,873 Management fees 253,133 299,177 Lease expense, including amortization of above-market ground lease — 1,542,858 Other operating expenses 924,871 1,147,226 Total $ 2,673,913 $ 4,586,245 The following table presents the amortization of intangibles that is included in the consolidated statements of operations: Years Ended December 31, 2024 2023 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 Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at December 31, 2024 are as follows: Years Ending December 31, Total 2025 $ 4,574,352 2026 4,227,301 2027 2,985,780 2028 2,628,279 2029 1,540,697 Thereafter 1,373,686 Total $ 17,330,095 F-27 Notes to Consolidated Financial Statements Scheduled Annual Net Amortization of Intangibles Based on the intangible assets and liabilities recorded at December 31, 2024, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows: Years Ending December 31, Net Decrease in Real Estate Operating Revenue (1) Increase in Depreciation and Amortization (1) Total 2025 $ ( 2,130,433 ) $ 2,097,043 $ ( 33,390 ) 2026 ( 1,248,315 ) 1,688,116 439,801 2027 ( 523,668 ) 803,214 279,546 2028 — 603,870 603,870 2029 — 218,891 218,891 Thereafter — 229,896 229,896 Total $ ( 3,902,416 ) $ 5,641,030 $ 1,738,614 _______________ (1) Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to lease revenues; and amortization of in-place lease intangibles is included in depreciation and amortization. Supplemental Ground Lease Disclosures 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. The component of lease expense for the ground lease was as follows: Year Ended December 31, 2023 Operating lease cost $ 1,645,875 Supplemental non-cash information related to the ground lease was as follows: Year Ended December 31, 2023 Amounts included in the measurement of lease liability: Operating cash flows from an operating lease $ 1,645,875 Right-of-use asset obtained in exchange for lease obligations: Operating lease $ 1,645,875 Note 6. Fair Value Measurements The Company follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows: F-28 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. Level 2 — Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, rate of prepayment, loss severities, credit risks and default rates) or other market corroborated inputs. Level 3 — Significant unobservable inputs are based on the best information available in the circumstances, to the extent observable inputs are not available, including the Company’s own assumptions used in determining the fair value of investments. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. As of 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. Financial Instruments Carried at Fair Value on a Recurring Basis 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. Changes in the fair value of debt securities are reported in other comprehensive income until the securities are realized. As discussed in Note 8 , in March 2023, the Company entered into a loan agreement with a lender to provide financing for the acquisition of real estate properties ( Note 5 ). In connection with the financing, the Company purchased an interest rate cap for $ 258,500 to effectively cap the related index rate at 5.0 %. The interest rate cap met all the criteria of a derivative under ASC 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 Unrealized gain (loss) on investments, net on the consolidated statements of operations. The following tables present fair value measurements of marketable securities and derivatives, by major class according to the fair value hierarchy as of: December 31, 2024 Fair Value Measurements Level 1 Level 2 Level 3 Total Money market fund (1) $ 2,360,936 $ — $ — $ 2,360,936 Marketable securities - debt securities 963,178 — — 963,178 Derivative - interest rate cap (2) — 75 — 75 Total $ 3,324,114 $ 75 $ — $ 3,324,189 F-29 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 Derivative - interest rate cap (2) — 83,807 — 83,807 Total $ 7,206,871 $ 83,807 $ — $ 7,290,678 ______________ (1) Amount is included in cash and cash equivalents on the consolidated balance sheets. (2) Amount is included in other assets on the consolidated balance sheets. The following table presents the activities of the marketable securities and derivatives: Years Ended December 31, 2024 2023 Marketable Securities Derivatives Marketable Securities Derivatives Beginning balance $ 4,961,879 $ 83,807 $ 147,960 $ — Purchases — — 7,905,211 258,500 Proceeds from sale ( 3,551,098 ) — ( 2,422,095 ) — 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 Financial Instruments Not Carried at Fair Value The following table presents the carrying value, which represents the amortized cost of loan, net of applicable allowance for credit losses, and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of: December 31, 2024 December 31, 2023 Level Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value Assets: Loans Loans held for investment 3 $ 275,802,476 $ 233,571,416 $ 234,665,528 $ 471,016,469 $ 417,913,773 $ 418,458,916 Loans held for investment acquired through participation 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 Liabilities: Unsecured notes payable 1 $ 123,500,000 $ 120,424,100 $ 88,764,850 $ 123,500,000 $ 118,380,897 $ 98,020,050 Secured financing agreements 3 207,593,942 205,718,782 206,731,436 293,413,757 290,525,313 293,413,757 Obligations under participation agreements 3 18,000,000 18,177,106 18,254,853 — — — 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. F-30 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 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 ). 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: Year Ended December 31, 2023 Fair Value Impairment Charges Impairment Charges Real estate and intangibles $ 27,004,389 $ 11,765,540 $ 11,765,540 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 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. Valuation Process for Fair Value Measurement 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. In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, which may include available current market data on applicable yields of comparable debt/preferred equity instruments; market credit spreads and yield curves; the investment’s yield; covenants of the investment, including prepayment provisions; the ability of our borrowers and investees to make payments and their net operating income and debt-service coverage ratio; construction progress reports and construction budget analysis; the nature, quality and realizable value of any collateral (and loan-to-value ratio); the forces that influence the local markets in which the asset (the collateral) is purchased and sold, such as capitalization rates, occupancy rates, rental rates and replacement costs; and the anticipated duration of each real estate-related loan investment. The Manager designates a valuation committee to oversee the entire valuation process of the Company’s Level 3 investments. The valuation committee is comprised of members of the Manager’s senior management, deal and portfolio management teams, who meet on a quarterly basis, or more frequently as needed, to review the Company investments being valued as well as the inputs used in the proprietary valuation model. Valuations determined by the valuation committee are supported by pertinent data and, in addition to a proprietary valuation model, are based on market data, industry accepted third-party valuation models and discount rates or other methods the valuation committee deems to be appropriate. Because there is no readily available market for these investments, the fair values of these investments are approved in good faith by the Company’s board of directors (which is made up exclusively of independent directors). 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. F-31 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. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values. Fair Value at December 31, 2024 Primary Valuation Technique Unobservable Inputs December 31, 2024 Asset Category Minimum Maximum Weighted Average Assets: Loans held for investment, net (1) $ 234,665,528 Discounted cash flow Discount rate 8.85 % 14.78 % 9.99 % Loans held for investment acquired through 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 Liabilities: Secured financing agreements $ 206,731,436 Discounted cash flow Discount rate 6.33 % 11.28 % 12.17 % Obligation under participation agreement 18,254,853 Discounted cash flow Discount rate 14.78 % 14.78 % 14.78 % Total Level 3 Liabilities $ 224,986,289 Fair Value at December 31, 2023 Primary Valuation Technique Unobservable Inputs December 31, 2023 Asset Category Minimum Maximum Weighted Average Assets: 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 participation, net 38,881,033 Discounted cash flow Discount rate 15.30 % 18.35 % 17.76 % Total Level 3 Assets $ 457,339,949 Liabilities: 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. 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. (2) Fair market value is based on purchase price. Note 7. Related Party Transactions Management Agreement The Company entered into the Management Agreement with the Manager whereby the Manager is responsible for its day-to-day operations. The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations: Years Ended December 31, 2024 2023 Origination and extension fee expense (1) $ 1,334,709 $ 2,312,656 Asset management fee 6,207,231 7,807,198 Asset servicing fee 1,489,674 1,857,765 Operating expenses reimbursed to Manager 7,468,132 9,234,357 Disposition fee (2) 907,224 1,451,063 Total $ 17,406,970 $ 22,663,039 F-32 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 on the consolidated statements of operations. (2) Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations. Origination and Extension Fee Expense Pursuant to the Management Agreement, the Manager or its affiliates receives an origination fee in the amount of 1 % of the amount used to originate, fund, acquire or structure real estate-related investments, including any third-party expenses related to such loans. In the event that the term of any real estate-related loan held by the Company is extended, the Manager also receives an extension fee equal to the lesser of (i) 1 % of the principal amount of the loan being extended or (ii) the amount of fee paid to the Company by the borrower in connection with such extension. Asset Management Fee Under the terms of the Management Agreement, the Manager or its affiliates provides the Company with certain investment management services in return for a management fee. The Company pays a monthly asset management fee at an annual rate of 1 % of the aggregate funds under management, which includes the loan origination price or aggregate gross acquisition price, as defined in the Management Agreement, for each real estate related loan and cash held by the Company. Asset Servicing Fee The Manager or its affiliates receives from the Company a monthly servicing fee at an annual rate of 0.25 % of the aggregate gross origination price or acquisition price, as defined in the Management Agreement, for each real estate-related loan held by the Company. Transaction Breakup Fee In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of December 31, 2024 and 2023, the Company had not received any breakup fees. Operating Expenses The Company reimburses the Manager for operating expenses incurred in connection with services provided to the operations of the Company, including the Company’s allocable share of the Manager’s overhead, such as rent, employee costs, utilities, and technology costs. Disposition Fee Pursuant to the Management Agreement, the Manager or its affiliates receives a disposition fee in the amount of 1 % of the gross sale price received by the Company from the disposition of any real estate-related loan, or any portion of, or interest in, any real estate-related loan. The disposition fee is paid concurrently with the closing of any such disposition of all or any portion of any real estate-related loan or any interest therein, which is the lesser of (i) 1 % of the principal amount of the loan or debt-related loan prior to such transaction or (ii) the amount of the fee paid by the borrower in connection with such transaction. If the Company takes ownership of a property as a result of a workout or foreclosure of a loan, the Company will pay a disposition fee upon the sale of such property equal to 1 % of the sales price. 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 F-33 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. Upon any termination of the Management Agreement by the Company as discussed above, the Company will pay the Manager, on the date on which such termination is effective, a termination fee in an amount equal to three times the average annual fees of all types and expense reimbursements received by or owed to the Manager pursuant to the Management Agreement during the 24-month period immediately preceding such termination (the “Termination Fee”), calculated as of the end of the most recently completed monthly prior to the date of such termination. The Company may also terminate the Management Agreement, effective upon 30 calendar days’ prior written notice from the Board to the Manager, without payment of any Termination Fees or other penalties, upon (i) the material breach of the Management Agreement by the Manager or its affiliates that continues for 30 days after written notice thereof to the Manager (or 45 days after delivery of written notice thereof if the Manager takes diligent steps to cure such breach within 30 days of delivery of the written notice), (ii) any fraud or other criminal conduct, gross negligence or breach of fiduciary duty by the Manager or its affiliates in connection with the Management Agreement, as determined by a final, non-appealable judgment of a court of competent jurisdiction, (iii) the Manager’s bankruptcy, insolvency or dissolution, or (iv) an Internalization Event (as defined in the Management Agreement). No Termination Fee or other penalty is payable upon such a termination by the Company. The Manager may terminate the Management Agreement, effective upon 60 days’ prior written from the Manager to the Company, if the Company breaches the Management Agreement and such breach continues for 30 days after written notice thereof. The Company will pay the Manager the Termination Fee upon such termination by the Manager. Due From Affiliate On December 1, 2022, the Company entered into a revolving promissory note receivable with Mavik Special Opps Co-Investments, LP, an affiliate of the Company. The promissory note receivable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days. In January 2024, the promissory note was amended to (i) extend the maturity date from June 30, 2024 to April 30, 2025 and to (ii) modify the interest rate from Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days, to 15.0 %. During the 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. F-34 Notes to Consolidated Financial Statements Cost Sharing and Reimbursement Agreement The Company and Terra LLC have entered into a cost sharing and reimbursement agreement effective October 1, 2022, pursuant to which Terra LLC is responsible for its allocable share of the Company’s expenses, including fees paid by the Company to the Manager based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on the Company’s consolidated financial statements. Distributions Paid For the 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 As of December 31, 2024 and 2023, approximately $ 1.6 million and $ 4.2 million, respectively, was due to the Manager, as reflected on the consolidated balance sheets, primarily related to the present value of the disposition fees on individual loans due to the Manager. Mavik Real Estate Special Opportunities Fund, LP On August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $ 50.0 million to purchase limited partnership interests in RESOF. For more information on this investment, please see Note 4 . Participation Agreements In the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the “Participants”). The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity. ASC 860, Transfers and Servicing (“ASC 860”) , establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (see “ Participation Interests ” in Note 2 and “ Obligations Under Participation Agreements ” in Note 8 ). Participation Interests Purchased by the Company From time to time, the Company may purchase investments from affiliates pursuant to participation agreements. In accordance with the terms of each participation agreement, each Participant’s rights and obligations, as well as the proceeds received from the related borrower/issuer of the loan, are based upon their respective pro rata participation interest in the loan. The table below lists the participation interests purchased by the Company pursuant to participation agreements as of: December 31, 2024 Participating Interests Principal Balance Carrying Value Mesa AZ Industrial Owner, LLC (1) 38.27 % $ 33,407,815 $ 33,005,953 UNJ Sole Member, LLC (1) 40.80 % 8,044,732 8,071,776 $ 41,452,547 $ 41,077,729 F-35 Notes to Consolidated Financial Statements December 31, 2023 Participating Interests Principal Balance Carrying Value Mesa AZ Industrial Owner, LLC (1) 38.27 % $ 31,000,000 $ 31,151,622 UNJ Sole Member, LLC (1) 40.80 % 7,444,357 7,406,863 $ 38,444,357 $ 38,558,485 ________________ (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. 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 Transfers treated as obligations under participation agreements Principal Carrying Value % Transferred Principal Carrying Value Asano Bankers Hill, LLC (1) $ 18,567,296 $ 18,577,448 96.9 % $ 18,000,000 $ 18,177,106 ________________ (1) Participant is a certain separately managed account, an investment partnership managed by the Manager. This investment is held in the name of the Company, but the Participant’s rights and obligations, including interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon its pro rata participation interest in such participated investment, as specified in the participation agreement. The Participant’s share of the investment is repayable only from the proceeds received from the related borrower/issuer of the investment and, therefore, the Participant also is subject to credit risk (i.e., risk of default by the underlying borrower/issuer). Pursuant to the participation agreement with this entity, the Company receives and allocates the interest income and other related investment income to the Participant based on its pro rata participation interest. The Participant pays any expenses, including any fees to the Manager, only on its pro rata participation interest, subject to the terms of the governing fee arrangements. 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. Note 8. Debt Unsecured Notes Payable The following table presents a summary of the Company’s unsecured notes payable outstanding as of: Coupon Rate Effective Rate (1) Maturity Date December 31, 2024 December 31, 2023 6.00 % Senior Notes Due 2026 6.00 % 6.86 % 6/30/2026 $ 85,125,000 $ 85,125,000 7.00 % Senior Notes Due 2026 (2) 7.00 % 10.41 % 3/31/2026 38,375,000 38,375,000 Total principal amount 123,500,000 123,500,000 Unamortized issue discount ( 902,312 ) ( 1,444,813 ) Unamortized purchase discount (2) ( 1,853,316 ) ( 3,161,457 ) Unamortized deferred financing costs ( 320,272 ) ( 512,833 ) Unsecured notes payable, net $ 120,424,100 $ 118,380,897 _______________ F-36 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 and recorded a purchase discount of $ 4.6 million, representing the difference between the carrying value and the fair value of the notes on the date of the merger. The 6.00 % Senior Notes Due 2026 On June 10, 2021, the Company issued $ 78.5 million in aggregate principal amount of its 6.00 % notes due 2026, and on June 25, 2021, the underwriters partially exercised their option to purchase an additional $ 6.6 million of the notes (collectively the “ 6.00 % Senior Notes Due 2026”). The 6.00 % Senior Notes Due 2026 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after June 10, 2023, at a redemption price equal to 100 % of the outstanding principal amount thereof, plus accrued and unpaid interest. The 7.00 % Senior Notes Due 2026 On February 10, 2021, Terra BDC issued $ 34.8 million in aggregate principal amount of 7.00 % fixed-rate notes due 2026, and on February 26, 2021, the underwriters exercised the option to purchase an additional $ 3.6 million of the notes (collectively the “ 7.00 % Senior Notes Due 2026”). In connection with the BDC Merger, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the outstanding 7.00 % Senior Notes Due 2026. The 7.00 % Senior Notes Due 2026 may be redeemed in whole or in part at any time or from time to time at Terra LLC’s option on or after February 10, 2023, at a redemption price equal to 100 % of the outstanding principal amount thereof, plus accrued and unpaid interest. Covenant Compliance The Company’s unsecured notes payable contain certain financial covenants. As of December 31, 2024, the Company was in compliance with such covenants. F-37 Notes to Consolidated Financial Statements Secured Financing Arrangements The following table is a summary of the Company’s secured financing agreements in place as of: December 31, 2024 December 31, 2023 Current Maturity Extended Maturity Weighted Average Interest Rate (1) Pledged Asset Carrying Value Maximum Facility Size Principal Amount Principal Amount Repurchase Agreements: Goldman Sachs Bank facility (2)(3) February 2025 February 2027 8.07 % $ 68,013,876 $ 48,188,441 $ 48,188,441 $ 75,455,624 UBS AG facility (2)(4) November 2024 (5) (4) — — — 18,480,000 Total 68,013,876 48,188,441 48,188,441 93,935,624 Non-Recourse Financing: Promissory notes payable (2)(6) March 2025 - March 2026 March 2026 - March 2027 9.80 % 79,862,157 N/A 40,694,390 63,509,518 Property mortgages - fixed rate June 2028 June 2028 6.25 % 78,480,600 N/A 40,250,000 40,250,000 Property mortgages - variable rate (7) 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 Other Secured Financing: Revolving line of credit (2)(8) December 2024 June 2025 7.68 % 33,005,952 16,361,111 16,361,111 47,461,730 Term loan (9)(10) 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 $ 383,004,450 $ 92,549,552 207,593,942 293,413,757 Unamortized deferred financing costs and other ( 1,875,160 ) ( 2,888,444 ) Secured financing agreements, net $ 205,718,782 $ 290,525,313 _______________ (1) Amount is calculated using the applicable index rate as of December 31, 2024. (2) These facilities were used to finance the Company’s senior loan investments. (3) Interest rate is based on Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 2.0 % to 5.00 %. In March 2024, the Company amended the Goldman Sachs Bank facility agreement to extend the maturity date to February 18, 2025 and to reduce the minimum interest coverage ratio covenant. 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 %. In February 2024, the outstanding balance was repaid. In March 2024, the Company amended the side letter to the UBS AG facility agreement to reduce the maximum amount available under this facility to zero. In connection with this amendment, UBS AG waived the payment of any fees and the meeting of any representations, warranties or covenants for the period commencing on December 31, 2023 until such time as there are amounts outstanding under the UBS AG facility agreement. (5) The maturity of this facility can be extended annually on mutually agreeable terms. (6) Interest rate is based on Term SOFR plus a spread ranging from 4.75 % to 5.98 % with a combined floor rate ranging from 9.0 % to 11.28 %. (7) Interest rate is based on Term SOFR plus a spread of 3.5 % with a Term SOFR floor of 3.75 %. (8) Interest rate is based on Term SOFR + 3.5 % with a combined floor of 7.0 %. 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 F-38 Notes to Consolidated Financial Statements 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, 2024 2023 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 The Company seeks to mitigate risks associated with its repurchase agreements by managing risk related to the credit quality of its assets, interest rates, liquidity, the rate of prepayment and market value. The margin call provisions under the repurchase facilities provide the lender with certain rights in the event of a decline in the credit of the underlying assets purchased. To monitor credit risk associated with the performance and value of its loans and investments, the Company’s asset management team regularly reviews its investment portfolios and is in regular contact with its borrowers, monitoring performance of the collateral and enforcing its rights as necessary. The Company further seeks to manage risks associated with the repurchase agreements by matching the maturities and interest rate characteristics of its loans with the related repurchase agreement. Covenant Compliance The Company’s secured financing agreements contain certain financial tests and covenants. In the event of a default or any breach of covenant of a related agreement, the lender has the right to accelerate all amounts due, charge interest at a default rate, retain all cash flow from the loans originated and/or sell such loans in a private sale on terms possibly unfavorable to the Company. As of December 31, 2024, the Company was in compliance with all such covenants, as amended or waived. Scheduled Debt Principal Payments Scheduled debt principal payments for each of the five calendar years following December 31, 2024 are as follows: Years Ending December 31, Total 2025 $ 38,611,111 2026 159,944,390 2027 92,288,441 2028 40,250,000 2029 — Thereafter — 331,093,942 Unamortized deferred financing costs and other ( 4,951,060 ) Total $ 326,142,882 Obligations Under Participation Agreements As discussed in Note 2 , the Company follows the guidance in ASC 860 when accounting for loan participations. Such guidance requires the transferred interests meet certain criteria in order for the transaction to be recorded as a sale. Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. As of December 31, 2024, obligations under participation agreements were $ 18.2 million (see “Participation Agreements” in Note 7 ). The interest rate on the obligations F-39 Notes to Consolidated Financial Statements under participation agreements was 19.53 %. There were no such obligations under participation agreements as of December 31, 2023. Note 9. Commitments and Contingencies Unfunded Commitments on Loans Held for Investment Certain of the Company’s loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These fundings amounted to approximately $ 18.7 million and $ 35.7 million as of December 31, 2024 and 2023, respectively. The Company expects to maintain sufficient cash on hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on credit facilities. Unfunded Investment Commitment As discussed in Note 4 , on August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $ 50.0 million to purchase limited partnership interests in RESOF. As of December 31, 2024 and 2023, the unfunded investment commitment was $ 10.1 million and $ 37.4 million, respectively. Other The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. The Manager has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote. Additionally, from time to time, we and individuals employed by us and our Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our borrowers and investees. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that such proceedings will have a material effect upon our financial condition or results of operations. See Note 7 for a discussion of the Company’s commitments to the Manager. Note 10. Equity Earnings Per Share The following table presents earnings per share: Years Ended December 31, 2024 2023 Net loss $ ( 37,159,955 ) $ ( 56,886,039 ) Series A preferred stock dividend declared — ( 3,907 ) Net loss allocable to common stock $ ( 37,159,955 ) $ ( 56,889,946 ) Weighted-average shares outstanding - basic and diluted 24,336,834 24,335,545 Loss per share - basic and diluted $ ( 1.53 ) $ ( 2.34 ) Preferred Stock Classes Preferred Stock The Company’s charter gives it authority to issue 50,000,000 shares of preferred stock, $ 0.01 par value per share (“Preferred Stock”). The 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, 2024 and 2023, there were no shares of Preferred Stock issued or outstanding. Series A Preferred Stock On November 30, 2016, the Board classified and designated 125 shares of Preferred Stock as a separate class of Preferred Stock to be known as the 12.5 % Series A Redeemable Cumulative Preferred Stock, $ 1,000 liquidation value per share (“Series A Preferred Stock”). In December 2016, the Company sold 125 shares of the Series A Preferred Stock for $ 125,000 . The Series F-40 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. Common Stock On October 1, 2022, in connection with the BDC Merger, the Company amended its charter to increase the shares authorized from 500,000,000 to 950,000,000 , consisting of 450,000,000 shares of Class A Common Stock, $ 0.01 par value per share (“Class A Common Stock”), 450,000,000 shares of Class B Common Stock, and 50,000,000 shares of Preferred Stock. Concurrently, 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders and each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the BDC Merger was automatically changed into one issued and outstanding share of Class B Common Stock. As of December 31, 2024, Terra Fund 7 and Terra Offshore REIT held 8.7 % and 10.1 %, respectively, of the issued and outstanding shares of the Company’s common stock. The Class B Common Stock rank equally with and have identical preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as each other share of the Company’s common stock, except as set forth below with respect to conversion. In connection with the potential liquidity transactions discussed in Note 1 , on December 1, 2023, the Company amended its articles of amendment and restatement (the “A&R Articles”) to provide the Board with greater flexibility to pursue a direct listing. In connection with a listing of shares of Class A Common Stock on a national securities exchange, the outstanding shares of Class B Common Stock will be convertible on a one -for-one basis into listed shares of Class A Common Stock, subject to certain conversion terms and holding periods. Currently, there are no outstanding shares of Class A Common Stock. The A&R Articles also incorporate the provisions generally required by state regulators in order to become a non-traded REIT and publicly sell shares of the Company’s stock not listed on an exchange. These non-traded REIT provisions will spring into effect and become operative if the Company ultimately decides to register and sell shares in a non-traded REIT format. Distributions The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with U.S. GAAP, to its stockholders each year to comply with the REIT provisions of the Internal Revenue Code. All distributions will be made at the discretion of the Board and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors as the Board deems relevant. For the 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. The following table presents distributions per share, declared and paid during the years ended December 31, 2024 and 2023, reported for federal tax purposes and serves as a designation of capital gain distributions, if applicable, pursuant to Section 857(b)(3)(C) of the Internal Revenue Code and Treasury Regulation § 1.857-6(e): Years Ended December 31, 2024 2023 Ordinary income $ — $ — Capital gain — — Return of capital 0.76 0.76 $ 0.76 $ 0.76 Dividend Reinvestment Plan On January 20, 2023, the Board adopted a distribution reinvestment plan (the “Plan”), pursuant to which the Company’s stockholders may elect to reinvest cash distributions payable by the Company in additional shares of Class A Common Stock and Class B Common Stock, at the price per share determined pursuant to the Plan. For the 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. F-41 Notes to Consolidated Financial Statements Note 11. Subsequent Events Management has evaluated subsequent events through the date the consolidated financial statements were available to be issued. Management has determined that there are no material events that would require adjustment to, or disclosure in, the Company’s consolidated financial statements. F-42 Terra Property Trust, Inc. Schedule III – Real Estate and Accumulated Depreciation As of December 31, 2024 Initial Costs Cost Capitalized Subsequent to Acquisition Increase (Decrease) in Net Investment Gross Amount at Period End Description Encumbrance Land Building and Building Improvements Land Building and Building Improvements Total Accumulated Depreciation Date of Construction Date Acquired Life Used for Depreciation Industrial buildings in Dallas, TX $ 40,250,000 $ 14,457,149 $ 65,365,376 $ 142,940 $ — $ 14,457,149 $ 65,508,316 $ 79,965,465 $ 3,235,529 1970; 1978; 1980 May 2023 30 - 35 years Industrial buildings in Dallas, TX 34,100,000 9,327,855 39,248,353 197,661 — 9,327,855 39,446,014 48,773,869 1,906,016 1975; 1977; 1988 March 2023 35 - 38 years $ 74,350,000 $ 23,785,004 $ 104,613,729 $ 340,601 $ — $ 23,785,004 $ 104,954,330 $ 128,739,334 $ 5,141,545 At December 31, 2024, the aggregate cost of real estate for federal income tax purposes was $ 108.8 million. The changes in total real estate assets and accumulated depreciation are as follows: Reconciliation of Real Estate Asset Reconciliation of Accumulated Depreciation Year Ended December 31, 2024 Year Ended December 31, 2024 Balance, beginning of year $ 128,725,750 Balance, beginning of year $ 2,001,417 Additions during the year: Additions during the year: 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 F-43 Terra Property Trust, Inc. Schedule IV – Mortgage Loans on Real Estate As of December 31, 2024 Description (1) Number of Loans Property Type/Location Contractual Interest Rate (2) Maximum Maturity Date (3) 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: Loan A (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: Loan B Office/Georgia 9.3 % July 2027 Interest Only — 30,562,858 30,586,450 — Loan C (6) Land/New Jersey 16.5 % March 2024 Interest Only — 22,900,000 24,045,000 $ 22,900,000 Loan D (7) 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 Preferred equity investments individually > 3% of carrying amount of total loans: Loan J (9) Office/New York 12.7 % July 2022 Interest Only — 69,976,792 26,396,345 69,976,792 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: Preferred equity investment (12) 1 Multifamily/New York 12.3 % August 2021 Interest Only — 5,680,463 5,140,463 5,680,463 94,224,551 50,114,256 75,657,255 Total loans (13) $ 317,255,023 $ 274,649,145 $ 126,557,255 ___________________________ (1) All of the Company’s loans have a prepayment provision. (2) For all floating rate loans, contractual interest rate was determined using the applicable benchmark rate as of December 31, 2024. (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. F-44 (5) Participation interest is with Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager. The Company acquired these investments through participation agreements. See “ Participation Agreements ” in Note 7 in the accompanying notes to the consolidated financial statements. (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. F-45 Terra Property Trust, Inc. Notes to Schedule IV - Mortgage Loans on Real Estate December 31, 2024 Reconciliation of Mortgage Loans on Real Estate Year Ended December 31, 2024 Balance, beginning of year $ 456,472,258 Additions during the period: New mortgage loans 57,163,870 Deductions during the period: Collections of principal ( 216,137,530 ) Amortization of premium ( 155,727 ) Accrual, payment and accretion of investment-related fees and other, net ( 259,594 ) Provision for loan losses ( 16,804,622 ) Loss on repayment of loan ( 5,629,510 ) Balance, end of year $ 274,649,145 F-46 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 13, 2025 TERRA PROPERTY TRUST, INC. By: /s/ Vikram S. Uppal Vikram S. Uppal Chief Executive Officer and Chief Investment Officer (Principal Executive Officer) By: /s/ Gregory M. Pinkus Gregory M. Pinkus Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Vikram S. Uppal Chairman of the Board, Chief Executive Officer and Chief Investment Officer March 13, 2025 Vikram S. Uppal (Principal Executive Officer) /s/ Gregory M. Pinkus Chief Financial Officer, Treasurer and Secretary March 13, 2025 Gregory M. Pinkus (Principal Financial and Accounting Officer) /s/ Roger H. Beless Director March 13, 2025 Roger H. Beless /s/ Michael L. Evans Director March 13, 2025 Michael L. Evans /s/ Adrienne M. Everett Director March 13, 2025 Adrienne M. Everett /s/ Spencer E. Goldenberg Director March 13, 2025 Spencer E. Goldenberg /s/ Gaurav Misra Director March 13, 2025 Gaurav Misra 59