What changed in this filing

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Item 1A. Risk Factors

2026-03-19 compared with 2025-03-14 · 100 added, 82 removed, 700 unchanged (21% of the section changed)

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Before making an investment decision, you should carefully consider the following risk factors together with all of the other information contained in this Annual Report on Form 10-K.

The risks set forth below are not the only risks we face, and we may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable.

The risks set forth below are not the only risks we face, and the risks to which we are exposed may change or evolve over time.

We may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable.

If any of the following risks occur, our results of operations, financial condition and cash flows could be materially adversely affected.

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We expect we will enter into a new management agreement with our Manager or an affiliate of our Manager.

The base management fees, incentive distributions or other amounts that would be payable to our Manager in the case of any such transaction are expected to be market-based fees determined in the case of any initial public offering by discussions between our Manager and the underwriters involved in the initial public offering.

The recurring management fees, incentive distributions or other amounts that would be payable to our Manager in the case of any such transaction are expected to be market-based fees determined in the case of any initial public offering by discussions between our Manager and the underwriters involved in the initial public offering.

Any such fees are expected to be paid in lieu of the fees currently payable to our Manager.

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Sales of substantial amounts of common stock or the perception that such sales could occur may adversely affect the prevailing market price for our common stock.

As of December 31, 2024, Terra Fund 7 and Terra Offshore REIT held approximately 8.7% and 10.1% of our issued and outstanding Class B Common Stock, respectively.

Our principal stockholders, which are currently controlled by affiliates of our Manager, own a significant amount of our outstanding shares of common stock.

Terra Fund 7 and Terra Offshore REIT hold approximately 8.7% and 10.1% of our issued and outstanding Class B Common Stock, respectively.

As of December 31, 2025, Terra Fund 7 and Terra Offshore REIT hold approximately 8.7% and 10.1% of our issued and outstanding Class B Common Stock, respectively.

Our Manager also serves as manager to Terra Offshore REIT.

As a result, our Manager and its affiliates (for the period that such shares continue to be held by Terra Fund 7 and Terra Offshore REIT and not distributed to

their respective equity owners), subject to a voting agreement as described below, hold significant voting power over matters submitted to our stockholders for approval, including:

our Manager and its affiliates (for the period that such shares continue to be held by Terra Fund 7 and Terra Offshore REIT and not distributed to their respective equity owners), subject to a voting agreement as described below, hold significant voting power over matters submitted to our stockholders for approval, including:

• the election and removal of directors;

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Our Manager’s loss estimates may not prove accurate, as actual results may vary from estimates.

In the event that our Manager underestimates the losses relative to the price we pay for a particular investment, we may experience losses with respect to such investment, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.

In certain cases, our Manager has underestimated the losses relative to the price we pay for a particular investment, and if such underestimation were to continue, we could experience losses with respect to such investment, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.

Further, from time to time and in the ordinary course of business, our Manager may make exceptions to our predetermined loan underwriting guidelines.

Loans originated with exceptions may result in a higher number of delinquencies and defaults, which could have a material and adverse effect on our results of operations, financial condition and cash flows.

Loans originated with exceptions have resulted and may continue to result in a higher number of delinquencies and defaults, which could have a material and adverse effect on our results of operations, financial condition and cash flows.

Deficiencies in appraisal quality in the mortgage loan origination process may result in increased principal loss severity.

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Models and data are used to value potential targeted assets.

In the event models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential risks.

For example, by relying on incorrect models and data, especially valuation models, our Manager may be induced to buy certain targeted assets at prices that are too high, to sell certain other

assets at prices that are too low or to miss favorable opportunities altogether.

In the event models and data prove to be incorrect, misleading or incomplete, any

decisions made in reliance thereon expose us to potential risks.

For example, by relying on incorrect models and data, especially valuation models, our Manager may be induced to buy certain targeted assets at prices that are too high, to sell certain other assets at prices that are too low or to miss favorable opportunities altogether.

Similarly, any hedging based on faulty models and data may prove to be unsuccessful.

If any of the aforementioned occur, such event could have a material adverse effect on our results of operations, financial condition and cash flows.

The use of artificial intelligence by us, our Manager, our borrowers or third-party service providers could expose us to operational, legal, regulatory and competitive risks.

Artificial intelligence (“AI”) and machine learning technologies are increasingly being adopted across financial services, commercial real estate finance, data analytics, valuation, underwriting and cybersecurity.

We, our Manager, our borrowers and third-party service providers may use or rely on AI-based tools in connection with investment analysis, underwriting, asset management, valuation models, cybersecurity, data processing or other business functions.

The use of AI involves risks and challenges, including the potential for inaccurate or biased outputs, flawed assumptions, data privacy or confidentiality breaches, cybersecurity vulnerabilities, intellectual property concerns and evolving legal and regulatory requirements.

If AI-based tools or models are improperly designed, implemented or supervised, or if underlying data is incorrect, misleading or incomplete, their use could result in flawed investment decisions, operational disruptions, regulatory scrutiny, litigation exposure or reputational harm.

In addition, the legal and regulatory frameworks governing AI continue to evolve, and future laws, regulations or enforcement actions could limit permissible uses of AI, increase compliance costs or impose liability for outcomes that may be difficult to predict or control.

Our inability, or the inability of our Manager or service providers, to effectively manage the risks associated with AI or adapt to rapid technological change could adversely affect our business, financial condition and results of operations.

Changes in interest rates could adversely affect the demand for our target loans, the value of our loans, CMBS and other real-estate debt or equity assets and the availability and yield on our targeted assets.

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We cannot assure you that the competitive pressures we may face will not have a material adverse effect on our results of operations, financial condition and cash flows.

Also, as a result of this competition, desirable investments in our targeted assets

may be limited in the future and we may not be able to take advantage of attractive investment opportunities from time to time, as we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objectives.

Also, as a result of this competition, desirable investments in our targeted assets may be limited in the future and we may not be able to take advantage of attractive investment opportunities from time to time, as we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objectives.

Our loans are dependent on the ability of the commercial property owner to generate net income from operating the property, which may result in the inability of such property owner to repay a loan, as well as the risk of foreclosure.

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• acts of God, terrorism, social and political unrest, armed conflict, geopolitical events and civil disturbances.

We may, in certain cases, provide a defaulting borrower with concessions that we would not typically offer.

These modifications may include interest rate reductions, principal adjustments, term extensions, deferral of payments, or the capitalization of interest.

We have, in certain cases, provided a defaulting borrower with concessions that we would not typically offer and may continue to do so in the future.

Modifications may include interest rate reductions, principal adjustments, term extensions, deferral of payments, or the capitalization of interest.

Such adjustments are intended to mitigate potential losses and avoid foreclosure or asset repossession.

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In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.

our operations, in addition to having a substantial negative effect on our anticipated return on the foreclosed mortgage loan.

If property securing or underlying loans become real estate owned as a result of foreclosure, we bear the risk of not being able to sell the property and recovering our investment and of being exposed to the risks attendant to the ownership of real property.

Foreclosure can be an expensive and lengthy process, and foreclosing on certain properties where we directly hold the mortgage loan and the borrower’s default under the mortgage loan is continuing could result in actions that could be costly to our operations, in addition to having a substantial negative effect on our anticipated return on the foreclosed mortgage loan.

If property securing or underlying loans become real estate owned as a result of foreclosure, we bear the risk of not being able to sell the property and recovering our investment at all or on a timely basis, and of being exposed to the risks attendant to the ownership of real property.

Our loan portfolio may at times be concentrated in certain property types or secured by properties concentrated in a limited number of geographic areas, which increases our exposure to economic downturn with respect to those property types or geographic locations.

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Therefore, our portfolio of assets may, at times, be concentrated in certain property types that are subject to higher risk of foreclosure, or secured by properties concentrated in a limited number of geographic locations.

Our loans are concentrated in California, New York, Arizona, Georgia and Utah representing approximately 17.7%, 25.3%, 11.2%, 10.2% and 9.4%, respectively, of our net loan portfolio as of December 31, 2024.

Additionally, we own eight industrial buildings in Texas.

Our loans are concentrated in New York, California, Georgia, New Jersey and Arizona representing approximately 39.5%, 18.8%, 16.5%, 11.9% and 9.2%, respectively, of our net loan portfolio as of December 31, 2025.

Additionally, we own four industrial buildings in Texas.

If economic conditions in these or in any other state in which we have a significant concentration of borrowers were to deteriorate, such adverse conditions could have a material and adverse effect on our business by reducing demand for new financings, limiting the ability of customers to repay existing loans and impairing the value of our real estate collateral and real estate owned properties.

Further, our loans are concentrated in office, multifamily and infill land property types representing approximately 38.9%, 20.4% and 18.8%, respectively, of our net loan portfolio as of December 31, 2024.

Further, our loans are concentrated in office, infill land and multifamily property types representing approximately 52.9%, 21.1% and 19.7%, respectively, of our net loan portfolio as of December 31, 2025.

As a result, a downturn in any particular industry in which we are heavily invested may significantly impact the aggregate returns we realize.

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In addition, from time to time, there have been proposals to base property taxes on commercial properties on their current market value, without any limit based on purchase price.

In California, pursuant to an existing state law commonly referred to as Proposition 13, properties are reassessed to market value only at the time of change in ownership or completion of construction, and thereafter, annual property reassessments are limited to 2% of previously assessed values.

As a result, Proposition 13 generally results in significant below-market assessed values over time.

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If successful, a repeal of Proposition 13 could substantially increase the assessed values and property taxes for our customers in California which in turn could limit their ability to borrow funds.

To the extent that our portfolio is concentrated in any region, or by type of property, downturns relating generally to such region, type of borrower or security may result in defaults on a number of our assets within a short time period, which may reduce our net income, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.

reduce our net income, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.

We expect that a significant portion of the mortgage loans invested in by us may be development mortgage loans on infill land, which are speculative in nature.

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Rating agencies may assign a lower than expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our loans and CMBS assets in the future.

In addition, we may originate or acquire assets with no rating or with below investment grade ratings.

In addition, we may originate or acquire assets with no

rating or with below investment grade ratings.

If the rating agencies take adverse action with respect to the rating of our loans and CMBS assets or if our unrated assets are illiquid, the value of these loans and CMBS assets could significantly decline, which would adversely affect the value of our investment portfolio and could result in losses upon disposition or the failure of borrowers to satisfy their debt service obligations to us.

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In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk of loss of principal.

Our investments in B-notes are generally subject to losses.

The B-notes in which we may invest may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us.

Investments we may make in B-notes are generally subject to losses.

The B-notes in which we may invest from time to time may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us.

As part of our whole loan origination platform, we may retain from whole loans we originate or acquire, subordinate interests referred to as B-notes.

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Cybersecurity risk and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could have an adverse effect on our results of operations, financial condition and cash flows.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, security or availability of our information resources.

These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.

The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance cost, litigation and damage to our relationships.

The result of these incidents may include additional regulatory scrutiny and exposing us to civil litigation, enforcement actions, government fines, sanctions, or penalties (which may not be covered by our insurance policies), increased expenses and lost revenue, disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance cost, litigation and damage to our relationships.

As our reliance on technology has increased, so have the risks posed to our information systems both internal and those provided by our Manager, Terra Capital Partners, its affiliates and third-party service providers.

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However, these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations or confidential information will not be negatively impacted by such an incident.

While we believe our cybersecurity risk management processes are reasonable and appropriate, they may not be effective against all emerging or future threats.

Our acquisitions and the integration of acquired businesses subject us to various risks and may not result in all of the cost savings and benefits anticipated, which could adversely affect our financial condition or results of operations.

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For example, we completed the BDC Merger in October 2022.

targets may not have a history of synergistic business operations, practices or, if applicable, investment criteria and strategies.

Acquisition targets may not have a history of synergistic business operations, practices or, if applicable, investment criteria and strategies.

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

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federal, state and local laws may affect certain mortgage-related assets in which we invest and could materially increase our cost of doing business.

Various bankruptcy legislation has been proposed that, among other provisions, could allow judges to modify the terms of residential mortgages in bankruptcy proceedings, could hinder the ability of the servicer to foreclose promptly on defaulted mortgage loans or permit limited assignee liability for certain violations in the mortgage loan origination process, any or all of which could adversely affect our business or result in us being held responsible for violations in the mortgage loan origination process even where we were not the originator of the loan.

Various bankruptcy legislation may be proposed that, among other provisions, could allow judges to modify the terms of residential mortgages in bankruptcy proceedings, could hinder the ability of the servicer to foreclose promptly on defaulted mortgage loans or permit limited assignee liability for certain violations in the mortgage loan origination process, any or all of which could adversely affect our business or result in us being held responsible for violations in the mortgage loan origination process even where we were not the originator of the loan.

We do not know what impact this type of legislation, which has been primarily, if not entirely, focused on residential mortgage originations, would have on the commercial loan market.

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The CECL accounting standard requires us to make certain estimates and judgements, which may be difficult to determine and may have a material adverse effect on our financial condition and results of operations.

In June 2016, the FASB issued an Accounting Standards Update (“ASU”), Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which replaces the “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model.

The new CECL standard became effective for us on January 1, 2023.

We follow the provisions of Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses , which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.

Under the CECL model, we are required to present certain financial assets carried at amortized cost, such as performing loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected.

The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter.

This differs significantly from the “incurred loss” model required under current U.S.

GAAP, which delays recognition until it is probable a loss has been incurred.

This differs significantly from the “incurred loss” model required previously under U.S.

GAAP, which delayed recognition until it is probable a loss had been incurred.

Under the CECL model, if we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, financial condition and results of operations.

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Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.

Under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company.”

Under the JOBS Act, our independent registered public

accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company.”

In addition, we are also a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act.

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government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.

The value of the “investment

securities” held by an issuer must be less than 40% of the value of such issuer’s total assets on an unconsolidated basis (exclusive of U.S.

The value of the “investment securities” held by an issuer must be less than 40% of the value of such issuer’s total assets on an unconsolidated basis (exclusive of U.S.

government securities and cash items).

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Any modifications to these tax laws or their interpretations could negatively affect our stockholders.

The Tax Cuts and Jobs Act, enacted on December 22, 2017, introduced substantial changes to U.S.

federal income tax laws for businesses and their owners, and further legislative changes remain possible.

Specifically, the tax treatment of REITs could be altered at any time through legislative, regulatory, or judicial action, possibly with retroactive application.

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We cannot assure you that a third-party unaffiliated with us would not be able to provide such services to us at a lower price.

The base management fees we pay our Manager may reduce its incentive to devote its time and effort to seeking attractive assets for our portfolio because the fees are payable regardless of our performance.

We pay our Manager base management fees regardless of the performance of our portfolio.

Our Manager’s entitlement to the base management fee, which is not based upon performance metrics or goals, might reduce its incentive to devote its time and effort to seeking assets that provide attractive risk-adjusted returns for our portfolio.

We would be required to pay the Manager the base management fee in a particular period even if we experienced a net loss or a decline in the value of our portfolio during that period.

The recurring asset management and asset servicing fees we pay our Manager may reduce its incentive to devote its time and effort to seeking attractive assets for our portfolio because the fees are payable regardless of our performance.

We pay our Manager recurring asset management and asset servicing fees regardless of the performance of our portfolio.

Our Manager’s entitlement to these recurring fees, which is not based upon performance metrics or goals, might reduce its incentive to devote its time and effort to seeking assets that provide attractive risk-adjusted returns for our portfolio.

We would be required to pay our Manager these recurring fees in a particular period even if we experienced a net loss or a decline in the value of our portfolio during that period.

In addition, our Manager is entitled to certain transaction-based fees, including origination and extension fees, disposition fees and transaction breakup fees, which may incentivize our Manager to recommend or pursue originations, acquisitions, dispositions, loan modifications, extensions or other transactions, even if such transactions do not result in improved financial performance or results of operations.

We cannot predict the amounts of compensation to be paid to the Manager.

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In addition, we have entered into a cost sharing and reimbursement agreement with Terra LLC, effective October 1, 2022, pursuant to which Terra LLC will be responsible for its allocable share of our expenses, including fees paid by us to our Manager.

Because key employees of our Manager are given broad discretion to determine when to consummate a transaction, we will rely on these key persons to dictate the level of our business activity.

Because key employees of our Manager are given broad discretion to determine when to consummate a transaction, we will rely on these key persons to dictate

the level of our business activity.

Fees paid to our Manager reduce funds available for payment of distributions to our stockholders and principal and interest payments on our outstanding indebtedness.

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We currently have outstanding indebtedness and expect to deploy moderate amounts of additional leverage as part of our operating strategy.

Our governing documents contain no limit on the amount of debt we may incur, and, subject to compliance with financial covenants under our borrowings, including under the term loan, the unsecured notes, the repurchase agreement and the revolving line of credit, we may significantly increase the amount of leverage we utilize at any time without approval of

our stockholders.

Depending on market conditions, additional borrowings may include credit facilities, senior notes (including both a reopening of the unsecured notes or the issuance of a new series), repurchase agreements, additional first mortgage loans and securitizations.

Our governing documents contain no limit on the amount of debt we may incur, and, subject to compliance with financial covenants under our borrowings, including under the term loan, the unsecured notes and the secured borrowings, we may significantly increase the amount of leverage we utilize at any time without approval of our stockholders.

Depending on market conditions, additional borrowings may include credit facilities, senior notes, repurchase agreements, additional first mortgage loans and securitizations, and offers to exchange outstanding indebtedness.

In addition, we may divide the loans we originate into senior and junior tranches and dispose of the more senior tranches as an additional means of providing financing to our business.

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We may pursue and not be able to successfully complete securitization transactions, which could limit potential future sources of financing and could inhibit the growth of our business.

We may use additional credit facilities, senior notes (including both a reopening of the unsecured notes or the issuance of a new series), term loans, repurchase agreements, first mortgage loans or other borrowings to finance the origination and/or structuring of real estate-related loans until a sufficient quantity of eligible assets has been accumulated, at which time we may decide to refinance these short-term facilities or repurchase agreements through the securitization market which could include the creation of CMBS, collateralized debt obligations (“CDOs”), or the private placement of loan participations or other long-term financing.

We may use additional credit facilities, senior notes, term loans, repurchase agreements, first mortgage loans or other borrowings to finance the origination and/or structuring of real estate-related loans until a sufficient quantity of eligible assets has been accumulated, at which time we may decide to refinance these short-term facilities or repurchase agreements through the securitization market which could include the creation of CMBS, collateralized debt obligations (“CDOs”), or the private placement of loan participations or other long-term financing.

If we employ this strategy, we are subject to the risk that we would not be able to obtain, during the period that our short-term financing arrangements are available, a sufficient amount of eligible assets to maximize the efficiency of a CMBS, CDO or private placement issuance.

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The repurchased loans typically can only be financed at a steep discount to their repurchase price, if at all.

They are also typically sold at a significant discount to the unpaid principal balance (“UPB”).

They are also typically sold at a significant discount to the unpaid principal balance.

Significant repurchase activity could have a material adverse effect on our results of operations, financial condition and cash flows.

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These restrictive covenants and operating restrictions could have a material adverse effect on our operating results, cause us to lose our REIT status, restrict our ability to finance or securitize new originations and acquisitions, force us to liquidate collateral and negatively affect our financial condition and our ability to pay dividends.

We have received waivers of certain covenants in our debt agreements, but there can be no assurance we will receive similar waivers in the future.

For additional information concerning these waivers, see “ Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition, Liquidity and Capital Resources — Summary of Financing ” included in this Annual Report on Form 10-K.

In the past, we have received waivers of certain covenants in our debt agreements, but there can be no assurance we will receive similar waivers in the future.

The breach of any of these covenants, if not cured within any applicable cure period, could result in a default, including a cross-default, and acceleration of certain of our indebtedness.

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This could increase our financing costs and reduce our access to liquidity, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.

Limited participation in the exchange offers described in the Registration Statement could result in Terra LLC defaulting on the 7.00% Senior Notes Due 2026 that remain outstanding after such exchange offers are completed.

Participation in the exchange offers described in the Registration Statement may be limited.

If only a small portion of the 7.00% Senior Notes Due 2026 are exchanged pursuant to the applicable exchange offer, a significant amount of 7.00% Senior Notes Due 2026 could remain outstanding after such exchange offers are completed.

We intend to repay the 6.00% Senior Notes Due 2026, and intend to cause Terra LLC, our wholly owned subsidiary, to repay the 7.00% Senior Notes Due 2026, through ordinary course loan repayments, real estate owned and loan sales, receipt of distributions from equity interests in unconsolidated investments, deferral of asset management fees and operating expenses reimbursement payments to the Manager and may also use debt or equity capital sources or facilities, including exchange offers described in the Registration Statement.

However, Terra LLC has limited liquidity.

As previously disclosed, Terra LLC had cash and cash equivalents of approximately $0.4 million as of December 31, 2025.

In addition, we are not a guarantor of the 7.00% Senior Notes Due 2026 and have no contractual obligation to lend or contribute funds to Terra LLC to enable it to repay those notes.

As a result, unless we provide additional liquidity, Terra LLC may not have sufficient liquidity to repay those notes when due and could default on those obligations.

In that event, as of March 31, 2026, there would be a payment default at final maturity under the 7.00% Senior Notes Due 2026.

Any notes issued by us in the exchange offers and any of the Company’s 6.00% Senior Notes Due 2026 that remain outstanding would not have the benefit of any cross-default protection arising from such a payment default by Terra LLC in respect of any 7.00% Senior Notes Due 2026 that remain outstanding.

Any payment default by Terra LLC could materially adversely affect us and the holders of our common stock.

Terra LLC is our wholly owned subsidiary, and a default, restructuring or bankruptcy proceeding involving Terra LLC could (i) impair the value of our investment in Terra LLC, (ii) adversely affect our access to capital and our ability to obtain financing on acceptable terms, if at all, and (iii) materially adversely affect our business, financial condition, results of operations and cash flows.

Limited participation in the exchange offers described in the Registration Statement could result in us defaulting on the 6.00% Senior Notes Due 2026 that remain outstanding after such exchange offers are completed.

Participation in the exchange offers described in the Registration Statement may be limited.

If only a small portion of the 6.00% Senior Notes Due 2026 are exchanged pursuant to the applicable exchange offer, a significant amount of the 6.00% Senior Notes Due 2026 could remain outstanding after such exchange offers are completed.

However, there can be no assurance that we will have sufficient liquidity or be able to obtain additional financing to repay or refinance any 6.00% Senior Notes Due 2026 that remain outstanding at their maturity on June 30, 2026.

Our ability to repay or refinance these notes will depend on a number of factors, including our ability to generate liquidity though ordinary course loan repayments, asset sales and distributions, deferral of management fees and expense reimbursement payments to the Manager, our available liquidity, our ability to access capital markets, the performance and valuation of our assets and general market conditions.

If we are unable to obtain additional financing, refinance the notes or otherwise generate sufficient liquidity prior to maturity, we could default on the 6.00% Senior Notes Due 2026, which could materially adversely affect our business, financial condition, results of operations and cash flows.

An increase in our borrowing costs relative to the interest we receive on our leveraged assets may have a material adverse effect on our results of operations, financial condition and cash flows.

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We may enter into hedging transactions that could expose us to contingent liabilities in the future and adversely impact our financial condition.

Subject to maintaining our qualification as a REIT, part of our strategy may involve entering into hedging transactions that could require us to fund cash payments in certain circumstances (such as the early termination of a hedging instrument caused by an event of default or other early termination event).

by an event of default or other early termination event).

The amount due would be equal to the unrealized loss of the open swap positions with the respective counterparty and could also include other fees and charges, and these economic losses will be reflected in our results of operations.

We may also be required to provide margin to our counterparties to collateralize our obligations under hedging agreements.

Our ability to fund these obligations will depend on the liquidity of our assets and access

to capital at the time.

Our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time.

The need to fund these obligations could have a material adverse effect on our results of operations, financial condition and cash flows.

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In order to meet the REIT qualification requirements, we may hold some of our assets or engage in certain activities that would otherwise be nonqualifying for REIT purposes through a TRS or other subsidiary corporation that will be subject to corporate-level income tax at regular rates.

In addition, although the BDC Merger was intended to be treated as a “reorganization” within the meaning of Section 368(a) of the Code for U.S.

federal income tax purposes, if the BDC Merger is determined not to have qualified as a reorganization, or if Terra BDC is determined to have failed to qualify as a REIT, we could be subject to additional tax liabilities.

In addition, we would inherit any liability with respect to unpaid taxes of Terra BDC for any periods prior to the BDC Merger for which Terra BDC did not qualify as a REIT.

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The remainder of our investment in securities (other than government securities, TRS securities and securities that are qualifying real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.

In addition, in general, no more than 5% of the value of our total assets (other than government securities, TRS securities and securities that are qualifying real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more TRSs, and no more than 25% of the value of our assets can consist of debt instruments issued by publicly offered REITs that are not otherwise secured by real property.

In addition, in general, no more than 5% of the value of our total assets (other than government securities, TRS securities and securities that are qualifying real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our assets can consist of debt instruments issued by publicly offered REITs that are not otherwise secured by real property.

Furthermore, for taxable years ending before January 1, 2026, no more than 20% of the value of our total assets can be represented by securities of one or more TRSs.

For taxable years beginning on or after January 1, 2026, no more than 25% of the value of our total assets can be represented by securities of one or more TRSs.

If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.

As a result, we may be required to liquidate from our portfolio, or contribute to a TRS, otherwise attractive investments, and may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source of income or asset diversification requirements for qualifying as a REIT.

Thus, compliance with the REIT requirements may hinder our

ability to make, and, in certain cases, maintain ownership of certain attractive investments.

These actions could have the effect of reducing our income, which could have a material adverse effect on our results of operations, financial condition and cash flows.

Thus, compliance with the REIT requirements may hinder our ability to make, and, in certain cases, maintain ownership of certain attractive investments.

These actions could have the effect

of reducing our income, which could have a material adverse effect on our results of operations, financial condition and cash flows.

Our preferred equity and mezzanine loan investments may fail to qualify as real estate assets for purposes of the REIT gross income and asset tests, which could jeopardize our ability to qualify as a REIT.

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federal, state and local income tax on its taxable income, and its after-tax net income will be available for distribution to us but is not required to be distributed to us.

Overall, no more than 20% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs.

We intend to limit the aggregate value of the stock and securities of our TRSs, if any, to less than 20% of the value of our total assets (including such TRS stock and securities).

Overall, for taxable years ending before January 1, 2026, no more than 20% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs.

For taxable years beginning on or after January 1, 2026, no more than 25% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs.

We intend to limit the aggregate value of the stock and securities of our TRSs, if any, to less than 20% or 25%, as applicable, of the value of our total assets (including such TRS stock and securities).

Furthermore, we will monitor the value of our respective investments in our TRSs for the purpose of ensuring compliance with TRS ownership limitations.

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The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.

To the extent we form a TRS, we will scrutinize all of our transactions with such TRS to ensure that they are entered into on arm’s length terms to avoid incurring the 100% excise tax.

To the extent we form a TRS, we will

scrutinize all of our transactions with such TRS to ensure that they are entered into on arm’s length terms to avoid incurring the 100% excise tax.

We may engage in transactions with a TRS, in which case we intend to conduct our affairs so that we will not be subject to the 100% excise tax with respect to transactions with such TRS and so that we will comply with all other requirements applicable to our ownership of TRSs.

There can be no assurance, however, that we will be able to comply with the 20% limitation discussed above or to avoid application of the 100% excise tax discussed above.

There can be no assurance, however, that we will be able to comply with the TRS limitation discussed above or to avoid application of the 100% excise tax discussed above.

Legislative, regulatory or administrative changes could adversely affect us.

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Disruptions and uncertainty in the financial and banking sectors, including due to regional bank failures and decreased consumer confidence in the banking system, may hinder our ability to access capital on reasonable terms or at all.

and global financial and banking sectors have experienced periods of increased turmoil and volatility in the recent past and may experience similar periods of disruption in the future due to factors beyond our control.

Such periods of increased turmoil and volatility may adversely impact liquidity in the financial markets and make financings less attractive or, in some cases,

global financial and banking sectors have experienced periods of increased turmoil and volatility in the recent past and may experience similar periods of disruption in the future due to factors beyond our control.

Such periods of increased turmoil and volatility may adversely impact liquidity in the financial markets and make financings less attractive or, in some cases, unavailable.

If our financing counterparties become capital constrained, tighten their lending standards or become insolvent, they may be unable or unwilling to fulfill their commitments to us.

A material disruption to the banking system and financial markets could result in liquidity issues across the sector, which could adversely impact our access to capital and our cost of borrowing and adversely affect us, our business or our results of operations.

Continued concerns over U.S.

fiscal and political policy could, among other things, lead to future downgrades of the U.S.

government’s sovereign credit rating and contribute to a U.S.

economic slowdown, which could have a material adverse effect on our business, financial condition and results of operations.

In recent years, financial markets were affected by significant uncertainty relating to the stability of U.S.

Continued uncertainty over U.S.

fiscal and political policy could adversely affect financial markets and our business.

In recent years, financial markets have been affected by significant uncertainty relating to the stability of U.S.

fiscal and political policy.

On August 1, 2023, Fitch Ratings Inc.

For example, on August 1, 2023, Fitch Ratings Inc.

downgraded the U.S.

government’s sovereign credit rating to AA+, down one notch from its highest rating of AAA, citing the country’s growing debt obligations, deterioration in governance and political polarization.

Concerns related to political turmoil, federal borrowing and the federal budget deficit have increased the possibility of future credit rating downgrades and economic slowdowns in the U.S.

Any continuing uncertainty, together with the continuing U.S.

debt and budget deficit concerns, could contribute to a U.S.

economic slowdown.

government’s sovereign credit rating to AA+, down one notch from its highest rating of AAA, citing the country’s growing debt obligations and political polarization.

Ongoing concerns over federal budgeting, debt ceilings, fiscal policy priorities and political polarization continues to contribute to market volatility.

The impact of U.S.

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Continued adverse economic conditions could have a material adverse effect on our business, financial condition and results of operations.

Cybersecurity risk and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of the security, confidentiality, or integrity of our company, employee, customer or third-party confidential information and/or damage to our reputation or business relationships, any of which could negatively impact our financial results.

Cybersecurity risk and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of the security, confidentiality, integrity, or availability of our company, employee, customer or third-party confidential information and/or damage to our reputation or business relationships, any of which could negatively impact our financial results.

Risk of a cyber incident or disruption, particularly through cyber-attacks or cyber intrusions, including by computer hackers, nation-state affiliated actors and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

The result of these incidents may include disrupted operations, misstated or unreliable financial data, misappropriation of assets, liability for stolen assets or information, increased cybersecurity protection and insurance cost, increased expenses and lost revenue, regulatory enforcement, governmental fines, sanctions, or penalties (which may not be covered by our insurance policies), civil litigation and damage to our relationships and reputation.

These risks require continuous and likely increasing attention and other resources from us to, among other actions, identify and quantify these risks, upgrade and expand our technological capabilities, systems and processes to adequately address them.

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We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations or confidential information will not be negatively impacted by such an incident.

Further, the SEC has recently adopted rules requiring public companies to disclose material cybersecurity incidents that they experience on a Current Report on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy and governance.

Further, the SEC has adopted rules requiring public companies to disclose material cybersecurity incidents that they experience on a Current Report on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy and governance.

These new reporting requirements became effective for us on June 15, 2024.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors