What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2026-03-19 compared with 2025-03-14 · 141 added, 131 removed, 327 unchanged (45% of the section changed)

17 unchanged sentences

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

As of December 31, 2024, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of 13 loans in nine states with an aggregate net principal balance of $299.3 million, a weighted average coupon rate of 12.5% and a weighted average remaining term to maturity of 1.0 years.

As of December 31, 2025, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of nine loans in seven states with an aggregate net principal balance of $192.4 million, a weighted average coupon rate of 13.4% and a weighted average remaining term to maturity of 0.7 years.

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

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

As of December 31, 2024, our portfolio included underlying properties located in 13 markets, across nine states and includes property types such as multifamily housing, student housing, commercial offices, medical offices, mixed-use and infill properties.

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

As of December 31, 2025, our portfolio included underlying properties located in nine markets, across seven states and includes property types such as multifamily housing, commercial offices, industrial, retail, mixed-use and infill properties.

The profile of these properties ranges from stabilized and value-added

properties to pre-development and construction.

Our loans are structured across mezzanine debt, first mortgages, preferred equity investments and credit facilities.

1 unchanged sentence

Through December 31, 2015, our business was conducted through a series of predecessor private partnerships.

At the beginning of 2016, we completed the

merger of these private partnerships into a single entity as part of our plan to reorganize our business as a REIT for federal income tax purposes.

At the beginning of 2016, we completed the merger of these private partnerships into a single entity as part of our plan to reorganize our business as a REIT for federal income tax purposes.

Following the REIT Formation Transaction, Terra Fund 5 contributed the consolidated portfolio of net assets of certain Terra Funds to our company in exchange for all of the shares of our common stock.

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

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

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

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

On October 1, 2022, pursuant to that certain Merger Agreement, Terra BDC merged with and into Terra LLC, our wholly owned subsidiary, with Terra LLC continuing as the surviving entity of the merger and as our wholly owned subsidiary.

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

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

2 unchanged sentences

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

One of the potential future liquidity transactions that we continue to evaluate is a “direct listing” of its Class A Common Stock, $0.01 par value per share (“Class A Common Stock”), on a national securities exchange (i.e., a listing not involving a concurrent public offering of newly issued shares).

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

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

We have elected to be taxed as a REIT for U.S.

4 unchanged sentences

Net Loan Portfolio

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

The following tables provide a summary of our net loan portfolio.

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

December 31, 2025

23 unchanged sentences

_______________

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

Coupon rates shown were determined using average SOFR of 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 credit facilities, respectively.

(3) As of December 31, 2024 and 2023, 10 and 14 loans, respectively, are 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 options available.

Real Estate Ownership

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

(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 3.79% and Term SOFR of 3.69% as of December 31, 2025 and average SOFR of 4.53% and Term SOFR of 4.33% as of December 31, 2024.

(2) As of December 31, 2025 and 2024, amount included $63.6 million and $208.0 million of senior mortgages used as collateral for $31.3 million and $123.2 million of borrowings under secured financing agreements, respectively ( Note 8 ).

(3) As of December 31, 2025 and 2024, five and ten loans, respectively, were subject to a SOFR or Term SOFR floor, as applicable.

(4) Excludes non-performing loans for which recovery of interest income was not probable.

(5) Excludes loans that are in maturity default and represents current effective maturity as of December 31, 2025 and 2024, exclusive of any extension available.

Real Estate Owned

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

As of December 31, 2025 and 2024, the real estate and related lease intangible assets and liabilities had a net carrying value of $47.4 million and $125.3 million, respectively, and the mortgage loans payable encumbering the real estate properties had an outstanding principal amount of $20.7 million and $74.4 million, respectively.

Equity Investments

Equity Interest in Unconsolidated Investments

As of both December 31, 2025 and 2024, we owned 14.9% of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.

1 unchanged sentence

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

As of December 31, 2024 and 2023, these equity investments had total carrying value of $106.8 million and $37.2 million, respectively.

Additionally, in December 2025, we entered into a subscription agreement with another affiliated limited partnership that invests in stressed, distressed, and special situations investments, including the origination of first mortgage loans, mezzanine loans, preferred equity, and structured equity investments, as well as the acquisition of performing and non-performing notes, and public market real estate debt and equity securities for a 1.5% interest in the partnership.

As of December 31, 2025 and 2024, these equity interests had total carrying value of $94.2 million and $106.8 million, respectively.

Book Value Per Share

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

Our book value per share of Class B Stock Common Stock as of December 31, 2024 and 2023 was $7.63 and $9.93, respectively.

Our book value per share of Class B Common Stock as of December 31, 2025 and 2024 was $6.02 and $7.63, respectively.

Portfolio Investment Activity

Net Loan Portfolio

For the years ended December 31, 2024 and 2023, we invested $95.8 million and $37.1 million in new and add-on investments and had $112.7 million and $29.8 million of repayments, resulting in net repayments of $16.9 million and net investments of $7.3 million, respectively.

For the years ended December 31, 2025 and 2024, we invested $4.1 million and $95.8 million in new and add-on investments and had $17.8 million and $112.7 million of repayments, resulting in net repayments of $13.7 million and $16.9 million, respectively.

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

Net Loan Portfolio Information

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

Percentages of total represented below are calculated as a percentage of the total carrying value.

December 31, 2025 December 31, 2024

3 unchanged sentences

First mortgages $ 86,456,898 $ 88,060,452 65.2 % $ 207,985,740 $ 209,496,879 81.6 %

Preferred equity investments 76,224,551 31,937,149 12.5 % 126,550,969 85,222,201 18.7 %

Mezzanine loans 24,703,471 24,763,765 18.3 % 15,044,732 15,038,010 5.9 %

Preferred equity investments 81,261,393 22,365,215 16.5 % 76,224,551 31,937,149 12.5 %

Total $ 192,421,762 $ 135,189,432 100.0 % $ 299,255,023 $ 256,472,038 100.0 %

6 unchanged sentences

Multifamily 37,855,514 37,390,000 27.7 % 60,969,051 60,662,514 23.7 %

Industrial 7,000,000 6,993,917 5.2 % 7,000,000 6,966,233 2.7 %

Mixed-use 4,272,174 4,314,231 3.2 % 30,438,507 29,890,548 11.7 %

Retail 973,467 973,467 0.7 % — — — %

Student housing — — — % 28,000,000 28,910,000 11.3 %

Industrial 7,000,000 6,966,233 2.7 % 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 $ 192,421,762 $ 135,189,432 100.0 % $ 299,255,023 $ 256,472,038 100.0 %

5 unchanged sentences

California $ 36,088,728 $ 36,445,271 27.0 % $ 53,006,023 $ 53,096,008 20.6 %

Georgia 31,734,254 31,878,019 23.6 % 30,562,858 30,586,450 11.9 %

New Jersey 22,906,090 24,051,394 17.8 % 22,900,000 24,045,000 9.4 %

Arizona 17,703,471 17,769,848 13.1 % 33,407,815 33,005,952 12.9 %

New York 76,015,752 17,077,516 12.6 % 75,657,255 31,536,808 12.3 %

Georgia 30,562,858 30,586,450 11.9 % 74,335,828 62,564,770 13.8 %

Utah 28,000,000 28,910,000 11.3 % 49,250,000 50,293,850 11.0 %

Massachusetts 7,000,000 6,993,917 5.2 % 7,000,000 6,966,233 2.7 %

Illinois 973,467 973,467 0.7 % — — — %

Washington — — — % 26,894,593 26,907,157 10.5 %

New Jersey 22,900,000 24,045,000 9.4 % 82,419,378 83,485,543 18.3 %

North Carolina — — — % 21,826,479 21,418,430 8.4 %

Massachusetts 7,000,000 6,966,233 2.7 % 7,000,000 6,930,932 1.5 %

Utah — — — % 28,000,000 28,910,000 11.3 %

Total $ 192,421,762 $ 135,189,432 100.0 % $ 299,255,023 $ 256,472,038 100.0 %

39 unchanged sentences

local real estate conditions;

changes or continued weakness in specific

industry segments;

changes or continued weakness in specific industry segments;

construction quality, age and design;

26 unchanged sentences

Professional fees 2,812,876 3,012,046 (199,170)

Impairment charge on real estate assets 3,399,684 — 3,399,684

Directors’ fees 303,022 356,886 (53,864)

Other 551,713 558,638 (6,925)

Impairment charge — 11,765,540 (11,765,540)

36,755,866 45,751,554 (8,995,688)

Operating income (loss) 3,937,940 (24,484,250) 28,422,190

Operating (loss) income (1,316,846) 3,937,940 (5,254,786)

Other income and expenses

2 unchanged sentences

Interest expense on obligations under participation agreements (3,648,329) (2,971,924) (676,405)

Unrealized gain (loss) on investments, net 100,149 (316,573) 416,722

Income (loss) from equity interest in unconsolidated investments 2,738,410 (2,383,938) 5,122,348

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

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

Income from equity interest in unconsolidated investments 3,283,274 2,738,410 544,864

Gain on extinguishment of debt 548,625 — 548,625

Loss on sale of real estate, net (2,880,545) — (2,880,545)

Unrealized gain on investments, net 39,290 100,149 (60,859)

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

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

(26,076,398) (41,097,895) 15,021,497

Net loss before income taxes (27,393,244) (37,159,955) 9,766,711

Provision for income tax (432,602) — $ (432,602)

Net loss $ (27,825,846) $ (37,159,955) $ 9,334,109

Net Loan Portfolio

In assessing the performance of our loans, we believe it is appropriate to evaluate the loans on an economic basis, that is, gross loans net of obligations under participation agreements, promissory notes payable, revolving credit facility, secured borrowing and repurchase agreements payable.

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

14 unchanged sentences

Gross loans $ 146,765,769 12.5 % $ 314,283,363 12.5 %

Obligations under participation agreements — — % (9,987,566) 17.4 %

Secured borrowing (23,267,808) 9.5 % (2,311,475) 9.9 %

15 unchanged sentences

Interest Income

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, interest income decreased by $17.9 million, primarily due to a decrease in contractual interest income as a result of a decrease in the weighted average principal balance of performing loans as well as an increase in suspended interest income accrual on non-performing loans of $3.0 million.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, interest income decreased by $10.0 million, primarily due to a decrease in contractual interest income as a result of a decrease in the weighted average principal balance of performing loans.

Real Estate Operating Revenue

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, real estate operating revenue decreased by $0.3 million, primarily due to a reduction in lease revenue resulting from the disposal of the office building in October 2023, partially offset by an increase in lease revenue contributed by the five industrial buildings acquired in May 2023.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, real estate operating revenue decreased by $3.9 million, primarily due to the sale of four industrial buildings in 2025, the expiration of a lease in December 2024, and the write off of an unamortized below-market rent intangible in January 2024 in connection with a lease termination.

Prepayment Fee Income

There was no prepayment fee income for the year ended December 31, 2025.

For the year ended December 31, 2024 prepayment fee income was $0.4 million, related to the early repayment of one of our loans.

There was no such prepayment fee income for the year ended December 31, 2023.

Other Operating Income

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, other operating income decreased by $0.5 million, primarily due to a decline in dividend income earned on our marketable securities.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, other operating income increased by $0.1 million, primarily due to an increase in dividend income earned on our money market account.

Operating Expenses Reimbursed to Manager

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

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

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, operating expenses reimbursed to our Manager decreased by $3.4 million, primarily due to a decrease in the allocation ratio as a result of a decrease in our total funds under management.

Asset Management Fee

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

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, asset management fees decreased by $1.6 million, primarily due to a decrease in total assets under management resulting from repayment of loans.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, asset management fees decreased by $1.4 million, primarily due to a decrease in total assets under management resulting from repayment of loans as well as the sale of four industrial buildings in 2025.

Asset Servicing Fee

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

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, asset servicing fees decreased by $0.4 million, primarily due to a decrease in total assets under management resulting from the repayment of loans.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, asset servicing fees decreased by $0.3 million, primarily due to a decrease in total assets under management resulting from the repayment of loans as well as the sale of four industrial buildings in 2025.

Provision for Credit Losses

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

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.

For the year ended December 31, 2024, provision for credit losses was $16.6 million, primarily related to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in senior funding.

For the year ended December 31, 2023, provision for credit losses was $45.5 million, primarily related to the decline in our estimated recoverable amount on three non-performing loans in the investment portfolio due to a decline in the macroeconomic outlook for commercial real estate.

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

For the year ended December 31, 2025, provision for credit losses was $12.8 million, primarily due to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in funding on the senior loan as well as a decrease in the estimated fair value of underlying collateral.

For the year ended December 31, 2024, provision for credit losses was $16.6 million, primarily due to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in funding on the senior loan.

Real Estate Operating Expenses

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, real estate operating expenses decreased by $1.9 million, primarily due to the disposal of the office building in October 2023 which resulted in a reduction in rent expense of $1.5 million.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, real estate operating expenses increased by $0.4 million, primarily due to an increase in real estate taxes as well as an increase in repairs and maintenance, partially offset by a reduction in operating expenses driven by the sale of four industrial buildings in 2025.

Depreciation and Amortization

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, depreciation and amortization increased by $0.4 million, primarily due to the five industrial buildings that we acquired in May 2023, partially offset by a reduction in depreciation and amortization related to the disposal of the office building in October 2023.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, depreciation and amortization decreased by $3.5 million, primarily due to the sale of four industrial buildings in 2025, as well as the write off of the unamortized in-place lease intangibles in January 2024 in connection with a lease termination.

Professional Fees

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, professional fees decreased by $0.7 million, primarily due to legal fees incurred in connection with a review of strategic alternatives for our company in 2023.

Impairment Charge

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

There was no impairment charge for the year ended December 31, 2024.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, professional fees decreased by $0.2 million, primarily due to a decrease in regulatory compliance costs incurred during the period.

Impairment Charge on Real Estate Assets

For the year ended December 31, 2025, in connection with the pending sale of two industrial buildings, we recorded an impairment charge of $3.4 million to reduce the carrying value of these industrial buildings to their estimated selling price less the costs to sell.

There was no such impairment charge for the year ended December 31, 2024.

Interest Expense on Secured Financing

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

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, interest expense on secured financing decreased by $3.1 million, as a result of a decrease in the weighted average principal amount outstanding as well as a decrease in the index rate on secured financing agreements.

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

The outstanding amounts under the two repurchase agreements, the revolving line of credit and the promissory notes were repaid in full and the facilities were terminated in February 2024, June 2025, July 2025 and November 2025 respectively.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, interest expense on secured financing decreased by $11.5 million as a result of a decrease in the weighted average principal amount outstanding.

Interest Expense on Unsecured Notes Payable

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

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, interest expense on unsecured notes payable increased by $0.2 million, primarily due to an increase in the amortization of financing costs using the effective interest rate method.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, interest expense on unsecured notes payable increased by $0.1 million, primarily due to an increase in the amortization of financing costs using the effective interest rate method, partially offset by a decrease in interest expense driven by the retirement of 189,465 units of the 6.00% Senior Notes Due 2026 in 2025.

Interest from Obligations under Participation Agreements

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, interest expense from obligations under participation agreements increased by $1.6 million, primarily as a result of an increase in the weighted average principal amount outstanding as well as an increase in the weighted average interest rate on the obligations under participation agreements.

Unrealized Gain (Loss) on Investments, Net

For the year ended December 31, 2024, we recognized an unrealized gain on investment of $0.1 million, compared to an unrealized loss on investment of $0.3 million for the year ended December 31, 2023, primarily due to an increase in the fair value of our marketable securities as of December 31, 2024.

Income (Loss) from Equity Interest in Unconsolidated Investments

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

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

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, interest expense from obligations under participation agreements increased by $0.7 million, primarily as a result of an increase in the weighted average principal amount outstanding.

Gain on Extinguishment of Debt

For the year ended December 31, 2025, we recorded a gain on extinguishment of debt of $0.5 million in connection with the repurchase and retirement of 189,465 units of the 6.00% Senior Notes Due 2026 for $4.2 million.

There was no such gain on extinguishment of debt for the year ended December 31, 2024.

Income from Equity Interest in Unconsolidated Investments

We owned a 14.9% equity interest in RESOF as of both December 31, 2025 and 2024, and a 1.5% equity interest in VS2 as of December 31, 2025.

Both RESOF and VS2 are affiliated limited partnerships that invest primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.

As of both December 31, 2025 and 2024, w e also beneficially owned equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, and a preferred equity investment with residual profit-sharing.

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

1 unchanged sentence

Income from equity interest in RESOF $ 8,661,998 $ 6,977,386

Income from equity interest in VS2 316,072 —

Loss from equity interest in the joint ventures (8,293,140) (5,483,997)

1 unchanged sentence

$ 3,283,274 $ 2,738,410

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, equity income from RESOF increased as a result of an increase in RESOF’s net income associated with increased investments.

For the year ended December 31, 2024 as compared to the year ended December 31, 2023, equity loss from the joint ventures increased primarily due to an increase in operating expenses, depreciation and amortization, and interest expense recognized by the joint ventures, partially offset by an increase in revenues and a gain on sale of real estate recognized by the joint ventures.

Other equity investment relates to a preferred equity agreement in which we also share residual profit from the sale of underlying property with the borrower.

There was no such investment during the year ended December 31, 2023.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, equity income from RESOF increased as a result of an increase in RESOF’s net income generated by an increase in the amount of invested capital.

For the year ended December 31, 2025, equity income from VS2 was recorded as a result of VS2’s net income generated by invested capital.

There was no such investment in VS2 or related income for the year ended December 31, 2024.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, equity loss from the joint ventures increased primarily due to a loss recognized in 2025 by a joint venture in connection with a loss incurred on a portfolio investment as well as a gain recognized by a joint venture in connection with the sale of property in 2024.

Other equity investment relates to a preferred equity agreement we acquired in June 2024 in which we also share residual profit from the sale of underlying property with the borrower.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, the increase in income from other equity investment is due to holding the investment for a longer period of time in the current period.

Loss on Sale of Real Estate, Net

For the year ended December 31, 2025, we sold four industrial buildings, and recognized a net loss on sale of $2.9 million.

There was no such gain or loss for the year ended December 31, 2024.

Loss on Repayment of Loan

1 unchanged sentence

There was no such loss for the year ended December 31, 2025.

Loss on Disposal of Real Estate

In October 2023, we conveyed our interest in an office building to the lender by deed in lieu of foreclosure and recognized a net loss on disposal of real estate of $4.2 million for the year ended December 31, 2023.

There was no such loss for the year ended December 31, 2024.

Gain on Extinguishment of Participation Liability

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

There was no such gain for the year ended December 31, 2024

Realized Loss On Investments, Net

For the year ended December 31, 2024, we sold a portion of our investments in marketable equity securities and recognized a net loss on sale of $0.4 million.

For the year ended December 31, 2023, we sold a portion of our investments in common stock and recognized a net loss on sale of $0.5 million.

There was no realized loss for the year ended December 31, 2025.

For the year ended December 31, 2024, we sold a portion of our investments in trading securities and recognized a net loss on sale of $0.4 million.

Provision for Income tax

On December 31, 2025, we elected the TRS status for a wholly own subsidiary that holds a non-real estate-related investment.

In connection with this election, we recorded a deferred income tax expense of $0.4 million for the year ended December 31, 2025.

There was no such TRS or related income tax expense for the year ended December 31, 2024.

For the year ended December 31, 2025 as compared to the year ended December 31, 2024, the resulting net loss decreased by $9.3 million.

Financial Condition, Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, funding and maintaining our assets and operations, making distributions to our stockholders and other general business needs.

business needs.

We use significant cash to purchase our target assets, repay principal and interest on our borrowings, make distributions to our investors and fund our operations.

Our primary sources of cash generally consist of payments of principal

and interest we receive on our portfolio of investments, cash generated from our operating results and unused borrowing capacity under our financing sources.

We deploy moderate amounts of leverage as part of our operating strategy and use a number of sources to finance our target assets, including our senior notes, term loan, repurchase agreement and revolving line of credit.

Our primary sources of cash generally consist of payments of principal and interest we receive on our portfolio of investments, cash generated from our operating results and unused borrowing capacity under our financing sources.

We deploy moderate amounts of leverage as part of our operating strategy and use a number of sources to finance our target assets, including our senior notes and term loan.

We may use other sources to finance our target assets, including bank financing and arranged financing facilities with domestic or international financing providers.

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These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for our business.

On February 13, 2026, we filed the Registration Statement with the SEC in connection with registered exchange offers to exchange any and all of the 6.00% Senior Notes Due 2026 and the 7.00% Senior Notes Due 2026 for newly issued Senior Secured Notes due 2029 by us.

In connection with the exchange offer relating to the 6.00% Senior Notes Due 2026, we are also soliciting consents to amend the indenture governing such notes to, among other things, eliminate substantially all of the restrictive covenants therein, eliminate certain events of default terms and conditions and eliminate provisions related to our reporting obligations thereunder.

The exchange offers and consent solicitation were scheduled to expire on March 16, 2026, unless extended.

On March 12, 2026, we amended the Registration Statement to reduce the interest rate on the newly issued senior secured notes offered in the exchange offers from 9.75% to 7.00% and to extend the expiration date of the exchange offers and consent solicitation to March 26, 2026.

For additional information regarding the exchange offers and consent solicitation, including the terms and conditions thereof, please refer to the Registration Statement, including the prospectus contained therein.

We expect to fund approximately $8.8 million of the unfunded commitments to borrowers during the next twelve months.

We expect to maintain sufficient liquidity to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on our credit facilities.

Obligation under participation agreement of $18.0 million will mature in the next twelve months.

We use the proceeds from the repayment of the corresponding investment to repay the participation obligation.

Our revolving line of credit with outstanding principal balance of $16.4 million and our Goldman Sachs Bank repurchase agreement with outstanding principal balance of $48.2 million was scheduled to mature on December 31, 2024 and February 18, 2025, respectively.

In January and February 2025, the maturity of the revolving line of credit and the Goldman Sachs Bank repurchase agreement was extended to June 30, 2025 and February 18, 2027, respectively.

We expect to use proceeds from repayment of the underlying loan to repay the outstanding principal or refinance with another lender.

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

We expect to use proceeds from the repayment of the underlying loans to repay the promissory notes payable.

Obligations under participation agreements of $18.0 million will mature in the next twelve months.

We will use the proceeds from the repayment of the corresponding investment to repay the participation obligations.

Additionally, secured borrowing with a total outstanding principal balance of $13.3 million that is collateralized by a senior loan with an aggregate principal balance of $31.8 million will mature within the next twelve months.

We expect to use proceeds from the repayment of the underlying loan to repay the secured borrowing.

Finally the 7.00% Senior Notes Due 2026 and the 6.00% Senior Notes Due 2026 with an outstanding principal balance of $38.4 million and $80.4 million, respectively, are scheduled to mature on March 31, 2026 and June 30, 2026, respectively.

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.

To the extent Terra LLC has available liquidity, it intends to repay any 7.00% Senior Notes Due 2026 that remain outstanding following the exchange offer, and we are also evaluating other potential alternatives in connection with the maturity of the 7.00% Senior Notes Due 2026.

As of December 31, 2025, Terra LLC had assets of approximately $105.8 million, of which approximately $0.4 million consisted of cash and cash equivalents and $48.1 million consisted of a revolving promissory note receivable with us, which matures on March 31, 2027 and is not payable on demand.

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 the 7.00% Senior Notes Due 2026.

Accordingly, no assurance can be given that the exchange offers will be successful or that Terra LLC or we will be able to obtain alternative or additional liquidity when needed or under acceptable terms, if at all.

As previously disclosed, we may repurchase certain of our 6.00% Senior Notes Due 2026 and the 7.00% Senior Notes Due 2026.

The repurchases may be made directly by us or made indirectly through an affiliated purchaser entity managed by our Manager and co-owned by us and other vehicles managed by our Manager or its affiliates.

Such affiliate purchaser entity may also purchase third-party marketable securities.

The timing and amount of any transactions will be determined by our Manager based on its evaluation of market conditions, prices, legal requirements and other factors, and may be made from time to time on the open market, in privately negotiated transactions or otherwise, in each case subject to compliance with all SEC rules and other legal requirements.

Summary of Financing

The table below summarizes our debt financing as of December 31, 2025:

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

Unsecured notes payable N/A $ 85,125,000 N/A 6.00% June 2026

Unsecured notes payable N/A 38,375,000 N/A 7.00% March 2026

Property mortgages N/A 40,250,000 N/A 6.25% June 2028

Term loan payable N/A 10,000,000 N/A Interest free until 6/30/2025, after that 9.00% December 2027

Type of Financing Outstanding Balance Interest Rate Maturity Date

Unsecured notes payable $ 80,388,375 6.00% June 2026

Unsecured notes payable 38,375,000 7.00% March 2026

Property mortgages 20,700,000 6.25% June 2028

Term loan payable 10,000,000 9.00% December 2027

$ 149,463,375

Variable Rate:

Property mortgages N/A $ 34,100,000 N/A Term SOFR +3.5% (Term SOFR Floor of 3.75%) April 2027

Promissory notes payable N/A 40,694,390 N/A Term SOFR plus a spread ranging from 4.75% to 5.98% with a combined floor rate ranging from 9.0% to 11.28% March 2025 - March 2026

Secured borrowing N/A 18,000,000 N/A Term SOFR + 5%, (combined floor rate of 9.85% November 2026

Revolving line of

16,361,111 16,361,111 — Term SOFR + 3.5% (combined floor rate of 7.0%) December 2024

Goldman Sachs Bank

repurchase agreement (2)

48,188,441 48,188,441 — Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 2.0% to 5.00%)

February 2025

$ 64,549,552 $ 157,343,942 $ —

_______________

(1) In January 2025, the maturity of the facility was extended to June 30, 2025.

(2) In February 2025, the maturity of the facility was extended to February 18, 2027.

Cash Flows (Used in) Provided by Operating Activities

For the year ended December 31, 2024, cash flows used in operating activities was $3.3 million, compared to cash flow from operating activities of $8.6 million for the year ended December 31, 2023.

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

Cash Flows Provided by (Used in) Investing Activities

Secured borrowing 31,250,000 Term SOFR + 5%, (combined floor rate ranging from 9.32% to 9.85%) Nov 2026 - Jun 2027

Cash Flows Provided by (Used in) Operating Activities

For the year ended December 31, 2025, cash flows provided by operating activities were $1.9 million compared to cash used in operating activities of $3.3 million for the year ended December 31, 2024.

The increase in operating cash flows was primarily due to a decrease in contractual interest expense, partially offset by a decrease in contractual interest income.

Cash Flows Provided by Investing Activities

For the year ended December 31, 2025, cash flows provided by investing activities were $180.6 million, primarily related to proceeds from repayment of loans of $136.4 million, proceeds from sale of real estate of $69.1 million and distributions received in excess of income of $5.5 million, partially offset by origination, purchase and funding of loans of $29.6 million.

For the year ended December 31, 2024, cash flows provided by investing activities were $101.6 million, primarily related to proceeds from repayment of loans of $215.1 million and promissory note receivable of $9.6 million, partially offset by origination and purchase of loans of $57.2 million, purchase of equity interests in unconsolidated investments of $65.6 million and funding for promissory note receivable of $5.0 million.

For the year ended December 31, 2023, cash flows used in investing activities were $10.0 million, primarily related to origination and purchase of loans of $78.9 million, purchase of real estate properties of $52.5 million, purchase of held-to-maturity securities of $20.0 million, purchase of marketable securities of $7.9 million, purchase of equity interests in unconsolidated investments of $7.3 million, and funding for promissory note receivable of $3.8 million, partially offset by proceeds from repayments of loans of $126.1 million, proceeds from redemption of held-to-maturity securities of $20.0 million, return of capital on unconsolidated investments of $11.3 million, and proceeds from sale of marketable equity securities of $2.4 million.

Cash Flows Used in Financing Activities

For the year ended December 31, 2025, cash flows used in financing activities were $163.6 million, primarily related to principal repayments on secured financing of $170.9 million, distributions paid of $11.6 million, repayments on unsecured notes payable of $4.2 million, repayments on obligations under participation agreements of $2.6 million and a decrease in interest reserve and other deposits held on investments of $1.7 million, partially offset by proceeds from secured financing of $24.8 million and proceeds from obligations under participation agreements of $2.6 million.

For the year ended December 31, 2024, cash flows used in financing activities were $99.0 million, primarily related to principal repayments on secured financing of $177.5 million, distributions paid of $18.6 million and payment for financing costs of $1.1 million, partially offset by proceeds from secured financing of $81.3 million and proceeds from obligations under participation agreements of $18.0 million.

For the year ended December 31, 2023, cash flows used in financing activities were $15.5 million, primarily related to principal repayments on secured financing of $205.3 million, distributions paid of $18.6 million and payment for financing costs of $3.3 million, partially offset by proceeds from secured financing of $211.0 million.

Distribution Reinvestment Plan

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Critical Accounting Policies and Use of Estimates

Our consolidated financial statements are prepared in conformity with United States generally accepted accounting principles, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Our consolidated financial statements are prepared in conformity with United States generally accepted accounting principles, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the

date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods.

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Allowance for Credit Losses

On January 1, 2023, we adopted the provisions of ASU 2016-13, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.

The CECL model requires the consideration of

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

We follow the provisions of ASC 326, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.

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

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

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Origination and Extension Fee .

An origination fee in the amount of 1.0% of the amount used to originate, acquire, fund or structure real estate-related investments, including any third-party expenses related to such loan.

In the event that the term of any real estate-related loan is extended, our Manager also receives an origination fee equal to the lesser of (i) 1.0% of the principal amount of the loan being extended or (ii) the amount of fee paid by the borrower in connection with such extension.

An origination fee in the amount of 1.0% of the amount used to originate, acquire, fund or structure investments, including any third-party expenses related to such investments.

In the event that the term of any loan is extended, our Manager also receives an origination fee equal to the lesser of (i) 1.0% of the principal amount of the loan being extended or (ii) the amount of the fee paid by the borrower in connection with such extension.

Asset Management Fee .

A monthly asset management fee at an annual rate equal to 1.0% of the aggregate funds under management, which includes the loan origination amount or aggregate gross acquisition cost, as applicable, for each real estate-related loan and cash held by us.

Asset Servicing Fee .

A monthly asset servicing fee at an annual rate equal to 0.25% of the aggregate gross origination price or aggregate gross acquisition price for each real estate related loan then held by us (inclusive of closing costs and expenses).

A monthly asset servicing fee at an annual rate equal to 0.25% of the aggregate gross origination price or aggregate gross acquisition price for each investment then held by us (inclusive of closing costs and expenses).

Disposition Fee .

A disposition fee in the amount of 1.0% of the gross sale price received by our company from the disposition of each loan, but not upon the maturity, prepayment, workout, modification or extension of a loan unless there is a corresponding fee paid by the borrower, in which case the disposition fee will be the lesser of (i) 1.0% of the principal amount of the loan and (ii) the amount of the fee paid by the borrower in connection with such transaction.

A disposition fee in the amount of 1.0% of the gross sale price received by our company from the disposition of an investment, but not upon the maturity, prepayment, workout, modification or extension of a loan unless there

is a corresponding fee paid by the borrower, in which case the disposition fee will be the lesser of (i) 1.0% of the principal amount of the loan and (ii) the amount of the fee paid by the borrower in connection with such transaction.

If we take ownership of a property as a result of a workout or foreclosure of a loan, we will pay a disposition fee upon the sale of such property equal to 1.0% of the sales price.

Transaction Breakup Fee .

In the event that we receive 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, our 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 our Manager with respect to its evaluation and pursuit of such transactions.

In the event that we receive 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 investment or disposition transaction, our 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 our Manager with respect to its evaluation and pursuit of such transactions.

In addition to the fees described above, we reimburse our Manager for operating expenses incurred in connection with services provided to the operations of our company, including our allocable share of our Manager’s overhead, such as rent, employee costs, utilities, and technology costs.

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

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

provided, however, that we will not have the right to terminate the Management Agreement on the basis of unfair compensation to our Manager if our 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 our Board determine to be fair pursuant to the procedures set forth in the Management Agreement.

We must deliver prior written notice of any such termination to our 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 us as discussed above, we will pay our 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 our 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.

We may also terminate the Management Agreement, effective upon 30 calendar days’ prior written notice from our Board to our Manager, without payment of any Termination Fees or other penalties, upon (i) the material breach of the Management Agreement by our Manager or its affiliates that continues for 30 days after written notice thereof to our Manager (or 45 days after delivery of written notice thereof if our 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 our 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) our Manager’s bankruptcy, insolvency or dissolution, or (iv) an Internalization Event (as defined in the Management Agreement).

Agreement by our Manager or its affiliates that continues for 30 days after written notice thereof to our Manager (or 45 days after delivery of written notice thereof if our 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 our 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) our 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 us.

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The promissory note matures on March 31, 2027.

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

As of December 31, 2025 and 2024, amount outstanding under the promissory note payable was $48.1 million and $45.1 million, respectively.

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

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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 5. Market for Registrant’s Common Equity