0001674356-20-000012.txt : 20200810 0001674356-20-000012.hdr.sgml : 20200810 20200810171228 ACCESSION NUMBER: 0001674356-20-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 104 CONFORMED PERIOD OF REPORT: 20200630 FILED AS OF DATE: 20200810 DATE AS OF CHANGE: 20200810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Terra Property Trust, Inc. CENTRAL INDEX KEY: 0001674356 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-56117 FILM NUMBER: 201090274 BUSINESS ADDRESS: STREET 1: 805 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 212-754-5100 MAIL ADDRESS: STREET 1: 805 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 10-Q 1 tpt-20200630.htm 10-Q tpt-20200630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-56117
Terra Property Trust, Inc.
(Exact name of registrant as specified in its charter)
Maryland81-0963486
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
550 Fifth Avenue, 6th Floor
New York, New York 10036
(Address of principal executive offices)
(212) 753-5100
(Registrant’s telephone number, including area code)
Securities registered pursuant to section 12(b) of the Securities Exchange Act of 1934:
None
Securities registered pursuant to section 12(g) of the Securities Exchange Act of 1934:
Common Stock $0.01 par value per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨Accelerated filer ¨
Non-accelerated filer þSmaller reporting company
Emerging growth company
        If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☑
As of August 10, 2020, the registrant had 19,487,460 shares of common stock, $0.01 par value, outstanding. No market value has been computed based upon the fact that no active trading market had been established as of the date of this document.



TABLE OF CONTENTS
Page
PART I
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

1


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Terra Property Trust, Inc.
Consolidated Balance Sheets
June 30, 2020December 31, 2019
(unaudited)
Assets
Cash and cash equivalents$82,553,933  $29,609,484  
Restricted cash18,459,391  18,542,163  
Cash held in escrow by lender1,931,976  2,398,053  
Marketable securities236,085    
Loans held for investment, net410,150,293  375,462,222  
Loans held for investment acquired through participation, net4,297,989  3,150,546  
Real estate owned, net (Note 5)
Land, building and building improvements, net63,966,026  64,751,247  
Lease intangible assets, net11,728,682  12,845,228  
Operating lease right-of-use assets16,109,476  16,112,925  
Interest receivable2,566,443  1,876,799  
Other assets2,231,969  2,594,411  
Total assets$614,232,263  $527,343,078  
Liabilities and Equity
Liabilities:
Obligations under participation agreements (Note 7)
$78,246,519  $103,186,327  
Repurchase agreement payable, net of deferred financing fees94,571,367  79,608,437  
Mortgage loan payable, net of deferred financing fees and other44,753,239  44,753,633  
Revolving credit facility payable35,000,000    
Interest reserve and other deposits held on investments18,459,391  18,542,163  
Operating lease liabilities16,109,476  16,112,925  
Lease intangible liabilities, net (Note 5)
11,127,360  11,424,809  
Due to Manager (Note 7)
1,895,105  1,037,168  
Interest payable 1,154,023  1,076,231  
Accounts payable and accrued expenses2,273,686  1,749,525  
Unearned income334,290  624,021  
Other liabilities1,078,934  1,684,106  
Total liabilities305,003,390  279,799,345  
Commitments and contingencies (Note 9)
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized and
none issued
    
12.5% Series A Cumulative Non-Voting Preferred Stock at liquidation
preference, 125 shares authorized and 125 shares issued and outstanding at
both June 30, 2020 and December 31, 2019
125,000  125,000  
Common stock, $0.01 par value, 450,000,000 shares authorized and
19,487,460 and 15,125,681 shares issued and outstanding at
June 30, 2020 and December 31, 2019, respectively
194,875  151,257  
Additional paid-in capital373,443,672  301,727,297  
Accumulated deficit(64,534,674) (54,459,821) 
Total equity309,228,873  247,543,733  
Total liabilities and equity$614,232,263  $527,343,078  
See notes to unaudited consolidated financial statements.
2


Terra Property Trust, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenues
Interest income$9,585,175  $10,805,438  $19,237,040  $21,014,402  
Real estate operating revenue2,251,095  2,527,256  4,564,146  4,848,494  
Prepayment fee income      98,775  
Other operating income228,359    341,014  108,957  
12,064,629  13,332,694  24,142,200  26,070,628  
Operating expenses
Operating expenses reimbursed to Manager1,694,875  1,213,314  3,062,064  2,328,518  
Asset management fee 1,140,426  956,985  2,169,959  1,837,340  
Asset servicing fee 253,316  226,764  487,524  431,241  
Provision for loan losses169,300    1,314,294    
Real estate operating expenses871,207  764,108  1,815,725  1,519,963  
Depreciation and amortization946,494  946,494  1,892,988  1,892,988  
Impairment charge  1,550,000    1,550,000  
Professional fees 373,098  2,545,321  667,859  2,718,107  
Directors fees33,750  83,750  117,500  167,500  
Other267,702  75,694  332,651  93,278  
5,750,168  8,362,430  11,860,564  12,538,935  
Operating income6,314,461  4,970,264  12,281,636  13,531,693  
Other income and expenses
Interest expense from obligations under
participation agreements
(1,992,743) (2,974,837) (4,593,501) (5,899,147) 
Interest expense on repurchase agreement payable(1,469,669) (1,366,562) (3,020,939) (2,300,535) 
Interest expense on mortgage loan payable(749,753) (782,350) (1,500,389) (1,562,621) 
Interest expense on revolving credit facility(599,989)   (774,978)   
Net loss on extinguishment of obligations under
participation agreements
    (319,453)   
Realized gains on marketable securities1,076,213    1,085,107    
Unrealized gains on marketable securities67,522    67,522    
(3,668,419) (5,123,749) (9,056,631) (9,762,303) 
Net income (loss)$2,646,042  $(153,485) $3,225,005  $3,769,390  
Preferred stock dividend declared(3,906) (3,906) (7,812) (7,812) 
Net income (loss) allocable to common stock$2,642,136  $(157,391) $3,217,193  $3,761,578  
Earnings (loss) per share basic and diluted
$0.14  $(0.01) $0.18  $0.25  
Weighted-average shares basic and diluted
19,555,241  14,912,990  18,131,260  14,912,990  
Distributions declared per common share$0.23  $0.51  $0.76  $1.02  

See notes to unaudited consolidated financial statements.

3


Terra Property Trust, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Comprehensive income, net of tax
Net income (loss)$2,646,042  $(153,485) $3,225,005  $3,769,390  
Other comprehensive income (loss)
Net unrealized gains on marketable securities192,919    
Reclassification of net realized gains on marketable
securities into earnings
(184,025)(192,919)   
(184,025)       
Total comprehensive income (loss)$2,462,017  $(153,485) $3,225,005  $3,769,390  
Preferred stock dividend declared(3,906)(3,906)(7,812) (7,812) 
Comprehensive income (loss) attributable to
common shares
$2,458,111  $(157,391) $3,217,193  $3,761,578  

See notes to unaudited consolidated financial statements.

4


Terra Property Trust, Inc.
Consolidated Statements of Changes in Equity
Three Months Ended June 30, 2020 and 2019
(Unaudited)

Preferred Stock12.5% Series A Cumulative Non-Voting Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitAccumulated Other Comprehensive Income
$0.01 Par Value
SharesAmountSharesAmountTotal equity
Balance at April 1, 2020$  125$125,000  19,700,151197,002377,061,545(62,716,835)$184,025  $314,850,737  
Issuance of common stock (Note 3)
—  —  —  —    
Repurchase of common stock—  —  —  (212,691)(2,127)(3,617,873)—  (3,620,000) 
Distributions declared on common
share ($0.23 per share)
—  —  —  (4,459,975)—  (4,459,975) 
Distributions declared on preferred
shares
—  —  —  (3,906)—  (3,906) 
Comprehensive income:
Net income—  —  —  2,646,042—  2,646,042  
Net unrealized gains on marketable
securities
—  —  —  —  —  —  —      
Reclassification of net realized
gains on marketable securities
into earnings
—  —  —  (184,025) (184,025) 
Balance at June 30, 2020$  125  $125,000  19,487,460  $194,875  $373,443,672  $(64,534,674) $  $309,228,873  


See notes to unaudited consolidated financial statements.








5



Terra Property Trust, Inc.
Consolidated Statements of Changes in Equity
Three Months Ended June 30, 2020 and 2019 (Continued)
(Unaudited)

Preferred Stock12.5% Series A Cumulative Non-Voting Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitAccumulated Other Comprehensive Income
$0.01 Par Value
SharesAmountSharesAmountTotal equity
Balance at April 1, 2019$  125  $125,000  14,912,990  $149,130  $298,109,424  $(36,728,639) $  $261,654,915  
Distributions declared on common
share ($0.51 per share)
—  —  —  —  —  —  (7,626,503) —  (7,626,503) 
Distributions declared on preferred
shares
—  —  —  —  —  —  (3,906) —  (3,906) 
Comprehensive income:
Net loss—  —  —  —  —  —  (153,485) —  (153,485) 
Net unrealized gains on marketable
securities
—  —  —  —  —  —  —      
Reclassification of net realized
gains on marketable securities
into earnings
—  —  —  —  —  —  —      
Balance at June 30, 2019$  125  $125,000  14,912,990  $149,130  $298,109,424  $(44,512,533) $  $253,871,021  

See notes to unaudited consolidated financial statements.




6


Terra Property Trust, Inc.
Consolidated Statements of Changes in Equity
Six Months Ended June 30, 2020 and 2019
(Unaudited)

Preferred Stock12.5% Series A Cumulative Non-Voting Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitAccumulated Other Comprehensive Income
$0.01 Par Value
SharesAmountSharesAmountTotal equity
Balance at January 1, 2020$  125  $125,000  15,125,681  $151,257  $301,727,297  $(54,459,821) $  $247,543,733  
Issuance of common stock (Note 3)
—  —  —  4,574,470  45,745  75,334,248  —  —  75,379,993  
Repurchase of common stock—  —  —  (212,691) (2,127) (3,617,873) —  —  (3,620,000) 
Distributions declared on common
share ($0.76 per share)
—  —  —  —  —  —  (13,292,046) —  (13,292,046) 
Distributions declared on preferred
shares
—  —  —  —  —  —  (7,812) —  (7,812) 
Comprehensive income:
Net income—  —  —  —  —  —  3,225,005—  3,225,005  
Net unrealized gains on marketable
securities
—  —  —  —  —  —  —  192,919  192,919  
Reclassification of net realized
gains on marketable securities
into earnings
—  —  —  —  —  —  —  (192,919) (192,919) 
Balance at June 30, 2020$  125  $125,000  19,487,460  $194,875  $373,443,672  $(64,534,674) $  $309,228,873  



See notes to unaudited consolidated financial statements.






7





Terra Property Trust, Inc.
Consolidated Statements of Changes in Equity
Six Months Ended June 30, 2020 and 2019 (Continued)
(Unaudited)

Preferred Stock12.5% Series A Cumulative Non-Voting Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitAccumulated Other Comprehensive Income
$0.01 Par Value
SharesAmountSharesAmountTotal equity
Balance at January 1, 2019$  125  $125,000  14,912,990  $149,130  $298,109,424  $(33,091,195) $  $265,292,359  
Distributions declared on common
share ($1.02 per share)
—  —  —  —  —  —  (15,182,916) —  (15,182,916) 
Distributions declared on preferred
shares
—  —  —  —  —  —  (7,812) —  (7,812) 
Comprehensive income:
Net income—  —  —  —  —  —