Terra Property Trust, Inc. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information There is no established trading market for our Class B Common Stock. As of March 19, 2026, we had 24,340,069 shares of Class B Common Stock outstanding held by 5,413 investors. As of March 19, 2026, there were no outstanding options, warrants to purchase our common stock or securities convertible into our shares of common stock. Sales of Unregistered Equity Securities There were no sales of unregistered equity securities during the year ended December 31, 2025. Issuer Purchases of Equity Securities There were no issuer purchases of equity securities during the year ended December 31, 2025. Item 6. [Reserved]. Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations. The information contained in this section should be read in conjunction with our audited consolidated financial statements and related notes thereto and other financial information included elsewhere in this annual report on Form 10-K. Overview We are a real estate investment trust that originates, invests in and manages a diverse portfolio of real estate and real estate-related assets. We focus primarily on commercial real estate credit investments, including first mortgage loans, subordinated loans (including B-notes, mezzanine and preferred equity) and credit facilities throughout the United States, which we collectively refer to as our targeted assets. Our loans finance the acquisition, development or recapitalization of high-quality commercial real estate in the United States. We focus on middle market loans in the approximately $10 million to $50 million range, which we believe are subject to less competition, offer higher risk-adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. Our investment objective is to provide attractive risk-adjusted returns to our stockholders, primarily by earning high current income that allows for regular distributions, and, in certain instances, benefiting from potential capital appreciation. There can be no assurances that we will be successful in meeting our investment objective. 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, 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, 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 38 properties to pre-development and construction. Our loans are structured across mezzanine debt, first mortgages, preferred equity investments and credit facilities. We were incorporated under the Maryland General Corporation Law on December 31, 2015. 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. 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 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. As previously disclosed, we continue to explore alternative liquidity transactions on an opportunistic basis to maximize stockholder value. Examples of the alternative liquidity transactions that, depending on market conditions, may be available to us include a listing of our shares of common stock on a national securities exchange, adoption of a share repurchase plan, a liquidation of our assets, a sale of our company or a strategic business combination, in each case, which may include the further in-kind distribution of our shares of common stock indirectly owned by certain of our affiliate funds to the ultimate investors in such affiliate funds. 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 our 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 our common stock redeemed for cash. We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2016. So long as we qualify as a REIT, we generally are not subject to U.S. federal income tax on our net taxable income to the extent that we annually distribute all of our net taxable income to our stockholders. Portfolio Summary Net Loan Portfolio 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 Fixed Rate Floating Rate (1)(2)(3) Total Gross Loans Obligations under Participation Agreements Total Net Loans Number of loans 3 6 9 1 9 Principal balance $ 14,012,427 $ 196,429,911 $ 210,442,338 $ 18,020,576 $ 192,421,762 Carrying value 13,226,342 140,161,071 153,387,413 18,197,981 135,189,432 Fair value 13,133,944 139,806,938 152,940,882 18,197,981 134,742,901 Weighted average coupon rate (4) 9.42 % 14.46 % 14.16 % 18.79 % 13.44 % Weighted-average remaining term (years) (5) 1.48 0.59 0.71 — 0.71 39 December 31, 2024 Fixed Rate Floating Rate (1)(2)(3) Total Gross Loans Obligations under Participation Agreements Total Net Loans Number of loans 2 11 13 1 13 Principal balance $ 12,680,463 $ 304,574,560 $ 317,255,023 $ 18,000,000 $ 299,255,023 Carrying value 12,106,695 262,542,450 274,649,145 18,177,107 256,472,038 Fair value 11,740,671 264,796,547 276,537,218 18,254,853 258,282,365 Weighted average coupon rate (4) 8.50 % 13.18 % 13.04 % 19.53 % 12.52 % Weighted-average remaining term (years) (5) 2.68 0.84 0.91 0.10 0.99 _______________ (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 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. We also beneficially own equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, as well as a preferred equity investment with residual profit sharing from sale of the underlying property. These investments are accounted for using the equity method of accounting. 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 Common Stock as of December 31, 2025 and 2024 was $6.02 and $7.63, respectively. 40 Portfolio Investment Activity Net Loan Portfolio 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. Percentages of total represented below are calculated as a percentage of the total carrying value. December 31, 2025 December 31, 2024 Loan Structure Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total First mortgages $ 86,456,898 $ 88,060,452 65.2 % $ 207,985,740 $ 209,496,879 81.6 % 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 % December 31, 2025 December 31, 2024 Property Type Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total Office $ 101,711,046 $ 43,696,575 32.3 % $ 116,539,650 $ 72,991,791 28.4 % Infill land 40,609,561 41,821,242 30.9 % 56,307,815 57,050,952 22.2 % 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 % Total $ 192,421,762 $ 135,189,432 100.0 % $ 299,255,023 $ 256,472,038 100.0 % December 31, 2025 December 31, 2024 Geographic Location Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total United States 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 % 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 % North Carolina — — — % 21,826,479 21,418,430 8.4 % 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 % 41 Factors Impacting Operating Results Our results of operations are affected by a number of factors and primarily depend on, among other things, the level of the interest income from targeted assets, the market value of our assets and the supply of, and demand for, real estate-related loans, including mezzanine loans, first mortgage loans, subordinated mortgage loans, preferred equity investments and other loans related to high quality commercial real estate in the United States, and the financing and other costs associated with our business. Interest income and borrowing costs may vary as a result of changes in interest rates, which could impact the net interest we receive on our assets. Our operating results may also be impacted by conditions in the financial markets and unanticipated credit events experienced by borrowers under our loan assets. Credit Risk Our loans and investments are subject to credit risk. The performance and value of our loans and investments depend upon the owners’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, our asset management team reviews our investment portfolios and is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary. In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control. We seek to manage these risks through our Manager's underwriting and asset management processes. We maintain all of our cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation. Concentration Risk We hold real estate and real estate-related loans. Thus, our investment portfolio may be subject to a more rapid change in value than would be the case if it were required to maintain a wide diversification among industries, companies and types of loans. The result of such concentration in real estate assets is that a loss in such investments could materially reduce our capital. Interest Rate Risk Interest rate risk represents the effect from a change in interest rates, which could result in an adverse change in the fair value of our interest-bearing financial instruments. With respect to our business operations, increases in interest rates, in general, may over time cause: (i) the interest expense associated with variable rate borrowings to increase; (ii) the value of real estate and real estate-related loans to decline; (iii) coupons on variable rate loans to reset, although on a delayed basis, to higher interest rates; (iv) to the extent applicable under the terms of our investments, prepayments on real estate-related loans to slow; and (v) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase. Conversely, decreases in interest rates, in general, may over time cause: (i) the interest expense associated with variable rate borrowings to decrease; (ii) the value of real estate and real estate-related loans to increase; (iii) coupons on variable rate real estate-related loans to reset, although on a delayed basis, to lower interest rates; (iv) to the extent applicable under the terms of our investments, prepayments on real estate-related loans to increase; and (v) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease. Prepayment Risk Prepayments can either positively or adversely affect the yields on our loans. Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we do not collect a prepayment fee in connection with a prepayment or are unable to invest the proceeds of such prepayments received, the yield on the portfolio will decline. In addition, we may acquire assets at a discount or premium and if the asset does not repay when expected, the anticipated yield may be impacted. Under certain interest rate and prepayment scenarios we may fail to recoup fully our cost of acquisition of certain loans. 42 Extension Risk Extension risk is the risk that our assets will be repaid at a slower rate than anticipated and generally increases when interest rates rise. In which case, to the extent we have financed the acquisition of an asset, we may have to finance our asset at potentially higher costs without the ability to reinvest principal into higher yielding securities because borrowers prepay their mortgages at a slower pace than originally expected, adversely impacting our net interest spread, and thus our net interest income. Real Estate Risk The market values of commercial and residential mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; pandemics; natural disasters; and other Acts of God. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses. Use of Leverage We deploy moderate amounts of leverage as part of our operating strategy, which may consist of borrowings under first mortgage financings, warehouse facilities, term loans, repurchase agreements and other credit facilities. While borrowing and leverage present opportunities for increasing total return, they may have the effect of potentially creating or increasing losses. Market Risk Our loans are highly illiquid, and there is no assurance that we will achieve our investment objectives, including targeted returns. Due to the illiquidity of the loans, valuation of our loans may be difficult, as there generally will be no established markets for these loans. 43 Results of Operations The following table presents the comparative results of our operations: Years Ended December 31, 2025 2024 Change Revenues Interest income $ 28,296,872 $ 38,250,784 $ (9,953,912) Real estate operating revenue 6,802,853 10,740,170 (3,937,317) Prepayment fee income — 435,677 (435,677) Other operating income 339,295 262,863 76,432 35,439,020 49,689,494 (14,250,474) Operating expenses Operating expenses reimbursed to Manager 4,035,222 7,468,132 (3,432,910) Asset management fee 4,786,640 6,207,231 (1,420,591) Asset servicing fee 1,143,783 1,489,674 (345,891) Provision for credit losses 12,767,592 16,627,739 (3,860,147) Real estate operating expenses 3,113,673 2,673,913 439,760 Depreciation and amortization 3,841,661 7,357,295 (3,515,634) 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) 36,755,866 45,751,554 (8,995,688) Operating (loss) income (1,316,846) 3,937,940 (5,254,786) Other income and expenses Interest expense on secured financing (13,505,701) (25,052,058) 11,546,357 Interest expense on unsecured notes payable (9,913,012) (9,836,953) (76,059) Interest expense on obligations under participation agreements (3,648,329) (2,971,924) (676,405) 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 and secured financing agreements. 44 The following table presents a reconciliation of our loan portfolio on a weighted average basis from gross to net : Year Ended December 31, 2025 Year Ended December 31, 2024 Weighted Average Principal Amount (1) Weighted Average Coupon Rate (2) Weighted Average Principal Amount (1) Weighted Average Coupon Rate (2) Total portfolio Gross loans $ 262,261,404 13.0 % $ 414,141,672 12.6 % Obligations under participation agreements (18,910,392) 18.5 % (14,450,820) 18.6 % Secured borrowing (23,267,808) 9.5 % (2,311,475) 9.9 % Promissory notes payable (25,342,054) 9.3 % (66,170,732) 9.8 % Repurchase agreements payable (17,191,448) 9.0 % (69,518,266) 8.1 % Revolving line of credit payable (6,534,307) 7.0 % (35,411,716) 7.7 % Net loans (3) $ 171,015,395 14.0 % $ 226,278,663 15.2 % Senior loans Gross loans $ 146,765,769 12.5 % $ 314,283,363 12.5 % Secured borrowing (23,267,808) 9.5 % (2,311,475) 9.9 % Promissory notes payable (25,342,054) 9.3 % (66,170,732) 9.8 % Repurchase agreements payable (17,191,448) 9.0 % (69,518,266) 8.1 % Revolving line of credit payable (6,534,307) 7.0 % (35,411,716) 7.7 % Net loans (3) $ 74,430,152 15.8 % $ 140,871,174 17.2 % Subordinated loans (4) Gross loans $ 115,495,635 13.5 % $ 99,858,309 12.8 % Obligations under participation agreements (18,910,392) 18.5 % (14,450,820) 18.6 % Net loans (3) $ 96,585,243 12.5 % $ 85,407,489 11.8 % _______________ (1) Amount is calculated based on the number of days each loan is outstanding. (2) Amount is calculated based on the underlying principal amount of each loan. (3) The weighted average coupon rate represents net interest income over the period calculated using the weighted average coupon rate and weighted average principal amount shown on the table (interest income on the loans less interest expense) divided by the weighted average principal amount of the net loans during the period. (4) Subordinated loans include mezzanine loans, preferred equity investments and credit facilities. Interest Income 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, 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. Other Operating Income 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. 45 Operating Expenses Reimbursed to Manager 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 investment and cash held by us. 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 investment held by us. 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 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, 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, 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, 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. 46 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 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 In June 2021, we issued $85.1 million in aggregate principal amount of 6.00% notes due 2026. 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, 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, 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. 47 Our income (loss) from equity interest in unconsolidated investments are as follows: Years Ended December 31, 2025 2024 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) Income from other equity investment 2,598,344 1,245,021 $ 3,283,274 $ 2,738,410 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 In August 2024, a $65.0 million senior loan was repaid, resulting in a loss on repayment of $5.6 million for the year ended December 31, 2024, which included the write-off of interest receivable of $4.8 million. There was no such loss for the year ended December 31, 2025. Realized Loss On Investments, Net 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. Net Loss 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 48 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 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. 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. We may also issue additional equity, equity-related and debt securities to fund our investment strategies. We may issue these securities to unaffiliated third parties or to vehicles advised by affiliates of Terra Capital Partners or third parties. As part of our capital raising transactions, we may grant to one or more of these vehicles certain control rights over our activities including rights to approve major decisions we take as part of our business. In order to qualify as a REIT, we must distribute to our stockholders, each calendar year, dividends equal to at least 90% of our REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. 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. 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. 49 Summary of Financing The table below summarizes our debt financing as of December 31, 2025: Type of Financing Outstanding Balance Interest Rate Maturity Date Fixed Rate: 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: Secured borrowing 31,250,000 Term SOFR + 5%, (combined floor rate ranging from 9.32% to 9.85%) Nov 2026 - Jun 2027 $ 31,250,000 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. 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. Distribution Reinvestment Plan On January 20, 2023, our Board adopted a distribution reinvestment plan (the “Plan”), pursuant to which our stockholders may elect to reinvest cash distributions payable by us in additional shares of Class A Common Stock and Class B Common Stock, at the price per share determined pursuant to the Plan. Critical Accounting Policies and Use of Estimates 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 50 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. In preparing the consolidated financial statements, management has made 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. In preparing the consolidated financial statements, management has utilized available information, including industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As we execute our expected operating plans, we will describe additional critical accounting policies in the notes to our future consolidated financial statements in addition to those discussed below. Allowance for Credit Losses 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. We utilize information obtained from internal and external sources relating to past events, current economic conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for our loan portfolio. We utilize a commercial mortgage-based, third-party loan loss model and because we do not have a meaningful history of realized credit losses on our loan portfolio, we subscribe to a database service to provide historical proxy loan loss information. We employ logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. We have chosen to incorporate a weighted average macroeconomic forecast that encompasses baseline, upside and downside scenarios, into our allowance for credit losses on performing loans estimate during the reasonable and supportable forecast period which is currently eight quarters. We select certain economics variables from a group of independent variables such as Commercial Real Estate Price Index, unemployment and interest rate which are included in the model as part of macroeconomic forecast and updated regularly based on current economic trends. The specific loan level information input into the model includes loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. Based on the inputs, the loan loss model determines a loan loss rate through the generation of a probability of default (PD) and loss given default (LGD) for each loan. The allowance for credit losses on performing loans is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect the expected credit losses. Management Agreement with our Manager We currently pay the following fees to our Manager pursuant to the Management Agreement: Origination and Extension Fee . 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 investment 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 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 an investment, but not upon the maturity, prepayment, workout, modification or extension of a loan unless there 51 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 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. The following table presents a summary of fees paid and costs reimbursed to our Manager in connection with providing services to us: Years Ended December 31, 2025 2024 Origination and extension fee expense (1) $ 1,189,878 $ 1,334,709 Asset management fee 4,786,640 6,207,231 Asset servicing fee 1,143,783 1,489,674 Operating expenses reimbursed to Manager 4,035,222 7,468,132 Disposition fee (2) 1,698,415 907,224 Total $ 12,853,938 $ 17,406,970 _______________ (1) Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan. (2) Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations. 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 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 month 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 52 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. Our Manager may terminate the Management Agreement, effective upon 60 days’ prior written from our Manager to us, if we breach the Management Agreement and such breach continues for 30 days after written notice thereof. We will pay our Manager the Termination Fee upon such termination by our Manager. Promissory Note Payable with Terra LLC On January 24, 2024, we, as borrower, entered into a revolving promissory note payable with Terra LLC. The promissory note payable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days. The promissory note matures on March 31, 2027. As of December 31, 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. Cost Sharing and Reimbursement Agreement with Terra LLC 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 based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on our consolidated financial statements. Participation Agreements We have further diversified our exposure to loans and borrowers by entering into participation agreements whereby we transferred a portion of certain of our loans on a pari passu basis to related parties, primarily other affiliated funds managed by our Manager or its affiliates, and to a lesser extent, unrelated parties. As of December 31, 2025, the principal balance of our participation obligation was $18.0 million, which was a participation obligation to a related-party managed by the Manager. The loans that are subject to participation agreements are held in our name, but each of the participant’s rights and obligations, including with respect to interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon their respective pro rata participation interest in such participated investments, as specified in the respective participation agreements. We do not have direct liability to a participant with respect to the underlying loan and the participants’ share of the investments is repayable only from the proceeds received from the related borrower/issuer of the investments and, therefore, the participants also are subject to credit risk (i.e., risk of default by the underlying borrower/issuer). Pursuant to the participation agreement with these entities, we receive and allocate the interest income and other related investment income to the participants based on their respective pro rata participation interest. The affiliated fund participant pays related expenses also based on their respective pro rata participation interest (i.e., asset management and asset servicing fees, disposition fees) directly to our Manager, as per the terms of each respective affiliate’s management agreement. Other than for U.S. federal income tax purposes, our loan participations do not qualify for sale treatment. As such, the investments remain on our combined consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. Similarly, interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations. For the years ended December 31, 2025 and 2024, the weighted average outstanding principal balance on obligations under participation agreements was approximately $18.9 million and $14.5 million, respectively, and the weighted average interest rate was approximately 18.5% and 18.6%, respectively. 53