0001674356-21-000012.txt : 20210513 0001674356-21-000012.hdr.sgml : 20210513 20210513134828 ACCESSION NUMBER: 0001674356-21-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 108 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210513 DATE AS OF CHANGE: 20210513 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: 21918528 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-20210331.htm 10-Q tpt-20210331
0001674356--12-312021-03-312021Q1false0.010.0150,000,00050,000,00012.512.51251251251251251250.010.01450,000,000450,000,00019,487,46019,487,46019,487,46019,487,4600.20.532.53163,791,52944,174,0316,295,1006,295,10000LIBOR3.852.234.251.005.2500016743562021-01-012021-03-31xbrli:shares00016743562021-05-13iso4217:USD00016743562021-03-3100016743562020-12-310001674356tpt:LoansHeldforInvestmentMember2021-03-310001674356tpt:LoansHeldforInvestmentMember2020-12-310001674356tpt:LoansHeldForInvestmentAcquiredThroughParticipationMember2021-03-310001674356tpt:LoansHeldForInvestmentAcquiredThroughParticipationMember2020-12-310001674356us-gaap:CumulativePreferredStockMember2021-03-310001674356us-gaap:CumulativePreferredStockMember2020-12-31iso4217:USDxbrli:sharesxbrli:pure0001674356us-gaap:CumulativePreferredStockMember2021-01-012021-03-310001674356us-gaap:CumulativePreferredStockMember2020-01-012020-12-3100016743562020-01-012020-03-310001674356us-gaap:PreferredStockMember2020-12-310001674356us-gaap:CommonStockMember2020-12-310001674356us-gaap:AdditionalPaidInCapitalMember2020-12-310001674356us-gaap:RetainedEarningsMember2020-12-310001674356us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001674356us-gaap:RetainedEarningsMember2021-01-012021-03-310001674356us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001674356us-gaap:PreferredStockMember2021-03-310001674356us-gaap:CommonStockMember2021-03-310001674356us-gaap:AdditionalPaidInCapitalMember2021-03-310001674356us-gaap:RetainedEarningsMember2021-03-310001674356us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001674356us-gaap:PreferredStockMember2019-12-310001674356us-gaap:CumulativePreferredStockMember2019-12-310001674356us-gaap:CommonStockMember2019-12-310001674356us-gaap:AdditionalPaidInCapitalMember2019-12-310001674356us-gaap:RetainedEarningsMember2019-12-310001674356us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-3100016743562019-12-310001674356us-gaap:CommonStockMember2020-01-012020-03-310001674356us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001674356us-gaap:RetainedEarningsMember2020-01-012020-03-310001674356us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310001674356us-gaap:PreferredStockMember2020-03-310001674356us-gaap:CumulativePreferredStockMember2020-03-310001674356us-gaap:CommonStockMember2020-03-310001674356us-gaap:AdditionalPaidInCapitalMember2020-03-310001674356us-gaap:RetainedEarningsMember2020-03-310001674356us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-3100016743562020-03-310001674356tpt:TerraPropertyTrust2IncMember2021-01-012021-03-310001674356tpt:TerraPropertyTrust2IncMember2020-01-012020-03-310001674356tpt:TerraInternationalFund3REITLLCMember2021-01-012021-03-310001674356tpt:TerraInternationalFund3REITLLCMember2020-01-012020-03-310001674356tpt:TerraSecuredIncomeFundSevenLlcMember2020-03-012020-03-010001674356tpt:TerraPropertyTrust2IncMember2020-03-010001674356tpt:TerraPropertyTrust2IncMember2020-03-012020-03-010001674356tpt:TerraInternationalFund3REITLLCMember2020-03-022020-03-020001674356tpt:TerraInternationalFund3REITLLCMember2020-03-020001674356srt:MinimumMember2021-03-310001674356srt:MaximumMember2021-03-3100016743562020-03-020001674356srt:PartnershipInterestMember2021-03-310001674356tpt:TerraSecuredIncomeFundSevenLlcMember2020-03-010001674356tpt:TerraPropertyTrustMember2020-03-010001674356us-gaap:CommonStockMembertpt:TerraPropertyTrust2IncMember2020-03-010001674356tpt:TerraPropertyTrust2IncMember2021-01-012021-03-31tpt:numberOfAgreements0001674356tpt:TerraOffshoreFundsMember2020-03-022020-03-020001674356tpt:TerraOffshoreFundsMember2020-03-020001674356tpt:TerraOffshoreFundsMember2021-01-012021-03-310001674356tpt:TerraOffshoreFundsMember2020-04-292020-04-290001674356tpt:TerraOffshoreFundsMember2020-04-290001674356tpt:TerraSecuredIncomeFundFiveLlcMember2020-02-280001674356tpt:TerraJVMembertpt:TerraSecuredIncomeFundFiveLlcMember2020-03-020001674356tpt:TerraJVMember2021-03-310001674356tpt:TerraJVMembertpt:TerraSecuredIncomeFundFiveLlcMember2021-01-012021-03-310001674356tpt:TerraSecuredIncomeFundSevenLlcMembertpt:TerraJVMember2021-01-012021-03-31tpt:Loans0001674356tpt:FixedInterestRateMember2021-01-012021-03-310001674356tpt:FloatingInterestRateMember2021-01-012021-03-310001674356tpt:FixedInterestRateMember2020-01-012020-12-310001674356tpt:FloatingInterestRateMember2020-01-012020-12-3100016743562020-01-012020-12-310001674356tpt:FixedInterestRateMember2021-03-310001674356tpt:FloatingInterestRateMember2021-03-310001674356tpt:FixedInterestRateMember2020-12-310001674356tpt:FloatingInterestRateMember2020-12-310001674356us-gaap:LondonInterbankOfferedRateLIBORMembertpt:FloatingInterestRateMember2021-03-310001674356us-gaap:LondonInterbankOfferedRateLIBORMembertpt:FloatingInterestRateMember2020-12-310001674356tpt:TermLoanMember2021-03-310001674356tpt:TermLoanMember2020-12-310001674356us-gaap:LineOfCreditMembertpt:CollateralMember2021-03-310001674356us-gaap:LineOfCreditMember2021-03-310001674356us-gaap:LondonInterbankOfferedRateLIBORMembertpt:FloatingInterestRateMembertpt:TermLoanMember2021-03-310001674356us-gaap:LondonInterbankOfferedRateLIBORMembertpt:FloatingInterestRateMembertpt:TermLoanMemberus-gaap:InterestRateFloorMember2021-03-310001674356tpt:FloatingInterestRateMemberus-gaap:LineOfCreditMembersrt:MinimumMembertpt:CollateralMember2021-03-310001674356tpt:LoansHeldforInvestmentMemberus-gaap:RealEstateLoanMember2020-12-310001674356tpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:RealEstateLoanMember2020-12-310001674356us-gaap:RealEstateLoanMember2020-12-310001674356tpt:LoansHeldforInvestmentMemberus-gaap:RealEstateLoanMember2021-01-012021-03-310001674356tpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:RealEstateLoanMember2021-01-012021-03-310001674356us-gaap:RealEstateLoanMember2021-01-012021-03-310001674356tpt:LoansHeldforInvestmentMemberus-gaap:RealEstateLoanMember2021-03-310001674356tpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:RealEstateLoanMember2021-03-310001674356us-gaap:RealEstateLoanMember2021-03-310001674356tpt:LoansHeldforInvestmentMemberus-gaap:RealEstateLoanMember2019-12-310001674356tpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:RealEstateLoanMember2019-12-310001674356us-gaap:RealEstateLoanMember2019-12-310001674356tpt:LoansHeldforInvestmentMemberus-gaap:RealEstateLoanMember2020-01-012020-03-310001674356tpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:RealEstateLoanMember2020-01-012020-03-310001674356us-gaap:RealEstateLoanMember2020-01-012020-03-310001674356tpt:LoansHeldforInvestmentMemberus-gaap:RealEstateLoanMember2020-03-310001674356tpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:RealEstateLoanMember2020-03-310001674356us-gaap:RealEstateLoanMember2020-03-310001674356tpt:LoansHeldforInvestmentMembertpt:ObligationsUnderParticipationAgreementsMemberus-gaap:RealEstateLoanMember2021-01-012021-03-310001674356tpt:LoansHeldforInvestmentMembertpt:ObligationsUnderParticipationAgreementsMemberus-gaap:RealEstateLoanMember2020-01-012020-03-310001674356us-gaap:FirstMortgageMember2021-03-310001674356us-gaap:FirstMortgageMember2020-12-310001674356us-gaap:EquitySecuritiesInvestmentSummaryMember2021-03-310001674356us-gaap:EquitySecuritiesInvestmentSummaryMember2020-12-310001674356tpt:MezzanineLoansMember2021-03-310001674356tpt:MezzanineLoansMember2020-12-310001674356srt:OfficeBuildingMember2021-03-310001674356srt:OfficeBuildingMember2020-12-310001674356srt:MultifamilyMember2021-03-310001674356srt:MultifamilyMember2020-12-310001674356srt:HotelMember2021-03-310001674356srt:HotelMember2020-12-310001674356srt:OtherPropertyMember2021-03-310001674356srt:OtherPropertyMember2020-12-310001674356tpt:InfillLandMember2021-03-310001674356tpt:InfillLandMember2020-12-310001674356srt:IndustrialPropertyMember2021-03-310001674356srt:IndustrialPropertyMember2020-12-310001674356us-gaap:HotelOtherMember2021-03-310001674356us-gaap:HotelOtherMember2020-12-310001674356tpt:StudentHousingMember2021-03-310001674356tpt:StudentHousingMember2020-12-310001674356stpr:CA2021-03-310001674356stpr:CA2020-12-310001674356stpr:NY2021-03-310001674356stpr:NY2020-12-310001674356stpr:GA2021-03-310001674356stpr:GA2020-12-310001674356stpr:NC2021-03-310001674356stpr:NC2020-12-310001674356stpr:WA2021-03-310001674356stpr:WA2020-12-310001674356stpr:MA2021-03-310001674356stpr:MA2020-12-310001674356stpr:TX2021-03-310001674356stpr:TX2020-12-310001674356stpr:SC2021-03-310001674356stpr:SC2020-12-310001674356tpt:RatingOneMember2021-03-310001674356tpt:RatingOneMember2020-12-310001674356tpt:RatingTwoMember2021-03-310001674356tpt:RatingTwoMember2020-12-310001674356tpt:RatingThreeMember2021-03-310001674356tpt:RatingThreeMember2020-12-310001674356tpt:RatingFourMember2021-03-310001674356tpt:RatingFourMember2020-12-310001674356tpt:RatingFiveMember2021-03-310001674356tpt:RatingFiveMember2020-12-310001674356tpt:RatingOtherMember2021-03-310001674356tpt:RatingOtherMember2020-12-310001674356tpt:RatingFourMember2020-03-310001674356tpt:RatingFiveMember2020-03-310001674356tpt:RatingFourMember2020-01-012020-03-310001674356tpt:MavikRESOFMember2020-08-030001674356tpt:MavikRESOFMember2021-03-310001674356tpt:MavikRESOFMember2020-12-310001674356tpt:MavikRESOFMember2021-01-012021-03-310001674356tpt:MavikRESOFMember2020-01-012020-03-310001674356tpt:MavikRESOFMember2020-01-012020-12-310001674356us-gaap:ContractTerminationMember2020-09-040001674356us-gaap:ContractTerminationMember2021-01-012021-03-3100016743562020-09-012020-09-04utr:acre0001674356us-gaap:RealEstateInvestmentMember2021-03-310001674356us-gaap:LandMemberus-gaap:RealEstateInvestmentMember2021-03-310001674356us-gaap:LandMemberus-gaap:RealEstateInvestmentMember2020-12-310001674356us-gaap:BuildingAndBuildingImprovementsMemberus-gaap:RealEstateInvestmentMember2021-03-310001674356us-gaap:BuildingAndBuildingImprovementsMemberus-gaap:RealEstateInvestmentMember2020-12-310001674356tpt:TenantImprovementMemberus-gaap:RealEstateInvestmentMember2021-03-310001674356tpt:TenantImprovementMemberus-gaap:RealEstateInvestmentMember2020-12-310001674356us-gaap:FurnitureAndFixturesMemberus-gaap:RealEstateInvestmentMember2021-03-310001674356us-gaap:FurnitureAndFixturesMemberus-gaap:RealEstateInvestmentMember2020-12-310001674356us-gaap:RealEstateMemberus-gaap:RealEstateInvestmentMember2021-03-310001674356us-gaap:RealEstateMemberus-gaap:RealEstateInvestmentMember2020-12-310001674356us-gaap:LeasesAcquiredInPlaceMemberus-gaap:RealEstateInvestmentMember2021-03-310001674356us-gaap:LeasesAcquiredInPlaceMemberus-gaap:RealEstateInvestmentMember2020-12-310001674356us-gaap:AboveMarketLeasesMemberus-gaap:RealEstateInvestmentMember2021-03-310001674356us-gaap:AboveMarketLeasesMemberus-gaap:RealEstateInvestmentMember2020-12-310001674356us-gaap:RealEstateInvestmentMember2020-12-310001674356tpt:BelowMarketLeaseMemberus-gaap:RealEstateInvestmentMember2021-03-310001674356tpt:BelowMarketLeaseMemberus-gaap:RealEstateInvestmentMember2020-12-310001674356tpt:AboveMarketGroundLeaseMemberus-gaap:RealEstateInvestmentMember2021-03-310001674356tpt:AboveMarketGroundLeaseMemberus-gaap:RealEstateInvestmentMember2020-12-310001674356us-gaap:RealEstateInvestmentMember2021-01-012021-03-310001674356us-gaap:RealEstateInvestmentMember2020-01-012020-03-31tpt:lease00016743562018-07-300001674356tpt:MultiTenantOfficeBuildingMembersrt:MinimumMember2018-07-300001674356srt:MaximumMembertpt:MultiTenantOfficeBuildingMember2018-07-300001674356tpt:GroundLeaseMember2018-07-300001674356tpt:GroundLeaseMember2021-03-310001674356tpt:AboveBelowMarketRentMember2021-03-310001674356us-gaap:LeasesAcquiredInPlaceMember2021-03-310001674356tpt:GroundLeaseMember2021-03-310001674356tpt:GroundLeaseMember2020-12-310001674356tpt:GroundLeaseMember2021-01-012021-03-310001674356tpt:GroundLeaseMember2020-01-012020-03-310001674356us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-03-310001674356us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-03-310001674356us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356us-gaap:EquitySecuritiesMember2021-03-310001674356us-gaap:FairValueInputsLevel1Memberus-gaap:DebtSecuritiesMember2021-03-310001674356us-gaap:FairValueInputsLevel2Memberus-gaap:DebtSecuritiesMember2021-03-310001674356us-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2021-03-310001674356us-gaap:DebtSecuritiesMember2021-03-310001674356us-gaap:FairValueInputsLevel1Member2021-03-310001674356us-gaap:FairValueInputsLevel2Member2021-03-310001674356us-gaap:FairValueInputsLevel3Member2021-03-310001674356us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel1Member2020-12-310001674356us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-12-310001674356us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356us-gaap:EquitySecuritiesMember2020-12-310001674356us-gaap:FairValueInputsLevel1Memberus-gaap:DebtSecuritiesMember2020-12-310001674356us-gaap:FairValueInputsLevel2Memberus-gaap:DebtSecuritiesMember2020-12-310001674356us-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2020-12-310001674356us-gaap:DebtSecuritiesMember2020-12-310001674356us-gaap:FairValueInputsLevel1Member2020-12-310001674356us-gaap:FairValueInputsLevel2Member2020-12-310001674356us-gaap:FairValueInputsLevel3Member2020-12-310001674356tpt:LoansHeldforInvestmentMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356tpt:LoansHeldforInvestmentMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356tpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356tpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356us-gaap:LoansPayableMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356us-gaap:LoansPayableMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356tpt:ObligationsUnderParticipationAgreementsMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356tpt:ObligationsUnderParticipationAgreementsMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356tpt:MortgageAgreementPayableMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356tpt:MortgageAgreementPayableMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356tpt:RepurchaseAgreementPayableMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356tpt:RepurchaseAgreementPayableMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356us-gaap:LineOfCreditMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356us-gaap:LineOfCreditMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356tpt:LoansHeldforInvestmentMemberus-gaap:MeasurementInputDiscountRateMembersrt:MinimumMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356tpt:LoansHeldforInvestmentMembersrt:MaximumMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356tpt:LoansHeldforInvestmentMembersrt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356us-gaap:MeasurementInputDiscountRateMembersrt:MinimumMembertpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMembertpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMembertpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356us-gaap:MeasurementInputDiscountRateMembersrt:MinimumMemberus-gaap:LoansPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:LoansPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:LoansPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356us-gaap:MeasurementInputDiscountRateMembersrt:MinimumMembertpt:ObligationsUnderParticipationAgreementsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMembertpt:ObligationsUnderParticipationAgreementsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMembertpt:ObligationsUnderParticipationAgreementsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356tpt:MortgageAgreementPayableMemberus-gaap:MeasurementInputDiscountRateMembersrt:MinimumMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:MaximumMembertpt:MortgageAgreementPayableMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356tpt:MortgageAgreementPayableMembersrt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356us-gaap:MeasurementInputDiscountRateMembersrt:MinimumMembertpt:RepurchaseAgreementPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMembertpt:RepurchaseAgreementPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMembertpt:RepurchaseAgreementPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356us-gaap:LineOfCreditMemberus-gaap:MeasurementInputDiscountRateMembersrt:MinimumMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:MaximumMemberus-gaap:LineOfCreditMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356srt:WeightedAverageMemberus-gaap:LineOfCreditMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2021-03-310001674356tpt:LoansHeldforInvestmentMemberus-gaap:MeasurementInputDiscountRateMembersrt:MinimumMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356tpt:LoansHeldforInvestmentMembersrt:MaximumMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356tpt:LoansHeldforInvestmentMembersrt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356us-gaap:MeasurementInputDiscountRateMembersrt:MinimumMembertpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMembertpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356srt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMembertpt:LoansHeldForInvestmentAcquiredThroughParticipationMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356us-gaap:MeasurementInputDiscountRateMembersrt:MinimumMemberus-gaap:LoansPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:LoansPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356srt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:LoansPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356us-gaap:MeasurementInputDiscountRateMembersrt:MinimumMembertpt:ObligationsUnderParticipationAgreementsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMembertpt:ObligationsUnderParticipationAgreementsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356srt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMembertpt:ObligationsUnderParticipationAgreementsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356tpt:MortgageAgreementPayableMemberus-gaap:MeasurementInputDiscountRateMembersrt:MinimumMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356srt:MaximumMembertpt:MortgageAgreementPayableMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356tpt:MortgageAgreementPayableMembersrt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356us-gaap:MeasurementInputDiscountRateMembersrt:MinimumMembertpt:RepurchaseAgreementPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMembertpt:RepurchaseAgreementPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-310001674356srt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMembertpt:RepurchaseAgreementPayableMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueInputsLevel3Member2020-12-3100016743562020-08-012020-08-030001674356us-gaap:LimitedPartnerMember2021-03-310001674356us-gaap:LimitedPartnerMember2021-01-012021-03-310001674356tpt:TerraInternationalFund3REITLLCMember2020-03-022020-03-020001674356tpt:TerraSecuredIncomeFundFiveLlcMembertpt:TerraJVMember2021-03-310001674356tpt:TerraSecuredIncomeFundSevenLlcMembertpt:TerraJVMember2021-03-310001674356tpt:MavikRealEstateSpecialOpportunitiesFundLPMember2020-08-030001674356tpt:TerraOffshoreFundsMember2019-01-012019-09-300001674356tpt:TerraOffshoreFundsMember2019-09-300001674356tpt:LDMilpitasMezzLPMember2021-03-310001674356tpt:LDMilpitasMezzLPMember2020-12-310001674356tpt:TerraIncomeFundSixIncMember2018-06-270001674356us-gaap:BridgeLoanMembertpt:TerraIncomeFundSixIncMember2018-06-270001674356tpt:FourteenthAliceStreetOwnerLLCMembertpt:ParticipatingMortgageLoanMember2021-03-310001674356tpt:ParticipatingMortgageLoanMembertpt:ThreeSevenZeroLexPartDeuxLLCMember2021-03-310001674356tpt:ParticipatingMortgageLoanMembertpt:OrangeGrovePropertyInvestorsLLCMember2021-03-310001674356tpt:ParticipatingMortgageLoanMembertpt:RSJZDriggsLLCMember2021-03-310001674356tpt:ParticipatingMortgageLoanMembertpt:StonewallStationMezzLLCMember2021-03-310001674356tpt:ParticipatingMortgageLoanMembertpt:TheBristolAtSouthportLLCMember2021-03-310001674356tpt:ParticipatingMortgageLoanMember2021-03-310001674356tpt:FourteenthAliceStreetOwnerLLCMembertpt:ParticipatingMortgageLoanMember2020-12-310001674356tpt:ParticipatingMortgageLoanMembertpt:ThreeSevenZeroLexPartDeuxLLCMember2020-12-310001674356tpt:ParticipatingMortgageLoanMembertpt:CityGardensThreeThreeThreeLLCMember2020-12-310001674356tpt:ParticipatingMortgageLoanMembertpt:OrangeGrovePropertyInvestorsLLCMember2020-12-310001674356tpt:ParticipatingMortgageLoanMembertpt:RSJZDriggsLLCMember2020-12-310001674356tpt:ParticipatingMortgageLoanMembertpt:StonewallStationMezzLLCMember2020-12-310001674356tpt:ParticipatingMortgageLoanMembertpt:TheBristolAtSouthportLLCMember2020-12-310001674356tpt:ParticipatingMortgageLoanMember2020-12-310001674356us-gaap:SecuredDebtMembertpt:WindyHillPVFiveCMLLCMember2021-03-310001674356us-gaap:SecuredDebtMember2021-03-310001674356us-gaap:SecuredDebtMembertpt:WindyHillPVFiveCMLLCMember2020-12-310001674356us-gaap:SecuredDebtMember2020-12-310001674356us-gaap:LineOfCreditMember2021-03-120001674356us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMember2021-03-012021-03-120001674356us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMemberus-gaap:InterestRateFloorMember2021-03-012021-03-120001674356us-gaap:LineOfCreditMember2021-03-012021-03-120001674356us-gaap:LineOfCreditMember2021-01-012021-03-310001674356srt:MaximumMemberus-gaap:LineOfCreditMember2021-03-310001674356us-gaap:LineOfCreditMembertpt:A870SantaCruzLLCMember2021-03-310001674356tpt:TermLoanMembertpt:IndentureAndCreditAgreementMember2020-09-030001674356tpt:ClassBLoanMembertpt:IndentureAndCreditAgreementMember2020-09-030001674356tpt:TermLoanMember2021-01-012021-03-310001674356us-gaap:LondonInterbankOfferedRateLiborSwapRateMembertpt:TermLoanMemberus-gaap:InterestRateFloorMember2021-01-012021-03-310001674356us-gaap:LondonInterbankOfferedRateLIBORMembertpt:TermLoanMember2021-01-012021-03-310001674356tpt:TermLoanMembertpt:IndentureAndCreditAgreementMember2021-01-012021-03-310001674356tpt:IndentureAndCreditAgreementMember2021-01-012021-03-310001674356tpt:TermLoanMember2020-09-030001674356tpt:TermLoanMembersrt:MinimumMember2020-09-030001674356srt:MaximumMembertpt:TermLoanMember2020-09-012020-09-030001674356tpt:ThreeThreeZeroTryonDeLlcMembertpt:TermLoanMember2021-03-310001674356tpt:OneThreeEightNinePeachtreeStLpandOthersMembertpt:TermLoanMember2021-03-310001674356tpt:TermLoanMembertpt:AgreDcpPalmSpringsLlcMember2021-03-310001674356tpt:MscFieldsPeachtreeRetreatLlcMembertpt:TermLoanMember2021-03-310001674356tpt:TermLoanMembertpt:PatrickHenryRecoveryAcquisitionLlcMember2021-03-310001674356tpt:UniversityParkBerkeleyLLCMembertpt:TermLoanMember2021-03-310001674356tpt:ThreeThreeZeroTryonDeLlcMembertpt:TermLoanMember2020-12-310001674356tpt:OneThreeEightNinePeachtreeStLpandOthersMembertpt:TermLoanMember2020-12-310001674356tpt:TermLoanMembertpt:AgreDcpPalmSpringsLlcMember2020-12-310001674356tpt:MscFieldsPeachtreeRetreatLlcMembertpt:TermLoanMember2020-12-310001674356tpt:TermLoanMembertpt:PatrickHenryRecoveryAcquisitionLlcMember2020-12-310001674356tpt:UniversityParkBerkeleyLLCMembertpt:TermLoanMember2020-12-310001674356us-gaap:LondonInterbankOfferedRateLIBORMembertpt:FloatingInterestRateMembertpt:TermLoanMember2020-01-012020-12-310001674356tpt:MasterRepurchaseAgreementMembertpt:TerraMortgageCapitalLlcMember2018-12-120001674356tpt:MasterRepurchaseAgreementMember2020-01-012020-12-310001674356tpt:MasterRepurchaseAgreementMember2020-12-310001674356us-gaap:RevolvingCreditFacilityMember2019-06-200001674356us-gaap:RevolvingCreditFacilityMemberus-gaap:PrimeRateMember2021-01-012021-03-310001674356us-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-01-012021-03-310001674356us-gaap:RevolvingCreditFacilityMemberus-gaap:InterestRateFloorMember2021-01-012021-03-310001674356us-gaap:RevolvingCreditFacilityMember2020-10-020001674356us-gaap:RevolvingCreditFacilityMemberus-gaap:PrimeRateMember2020-10-012020-10-020001674356us-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-10-012020-10-020001674356us-gaap:RevolvingCreditFacilityMemberus-gaap:InterestRateFloorMember2020-10-012020-10-020001674356us-gaap:RevolvingCreditFacilityMember2020-10-012020-10-020001674356us-gaap:RevolvingCreditFacilityMember2020-12-310001674356tpt:CentennialBankMember2021-03-310001674356tpt:CentennialBankMember2021-01-012021-03-310001674356tpt:CentennialBankMember2020-12-310001674356srt:WeightedAverageMembertpt:ParticipatingMortgageLoanMember2021-03-310001674356srt:WeightedAverageMembertpt:ParticipatingMortgageLoanMember2020-12-310001674356us-gaap:LondonInterbankOfferedRateLiborSwapRateMembertpt:CentennialBankMember2021-01-012021-03-310001674356us-gaap:LondonInterbankOfferedRateLiborSwapRateMemberus-gaap:InterestRateFloorMembertpt:CentennialBankMember2021-01-012021-03-310001674356us-gaap:LondonInterbankOfferedRateLIBORMembertpt:TermLoanMember2020-01-012020-12-310001674356us-gaap:LondonInterbankOfferedRateLiborSwapRateMembertpt:TermLoanMemberus-gaap:InterestRateFloorMember2020-01-012020-12-310001674356us-gaap:SeriesAPreferredStockMember2016-11-300001674356us-gaap:SeriesAPreferredStockMember2016-11-302016-11-300001674356us-gaap:SeriesAPreferredStockMember2016-12-310001674356us-gaap:SeriesAPreferredStockMember2016-01-012016-12-310001674356tpt:TerraInternationalFund3REITLLCMember2020-03-022020-03-020001674356tpt:TerraInternationalFund3REITLLCMember2019-09-300001674356tpt:TerraInternationalFund3REITLLCMember2020-04-292020-04-29

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 March 31, 2021
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 May 13, 2021, 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
March 31, 2021December 31, 2020
(unaudited)
Assets
Cash and cash equivalents$18,464,161 $18,607,952 
Restricted cash7,096,549 12,145,616 
Cash held in escrow by lender2,039,349 2,166,755 
Marketable securities6,251,980 1,287,500 
Loans held for investment, net401,776,723 417,986,462 
Loans held for investment acquired through participation, net4,292,148 4,294,053 
Equity investment in a limited partnership, net50,505,511 36,259,959 
Real estate owned, net (Note 6)
Land, building and building improvements, net62,969,129 63,385,339 
Lease intangible assets, net9,273,696 9,793,600 
Operating lease right-of-use assets16,104,041 16,105,888 
Interest receivable2,510,061 2,509,589 
Other assets4,514,677 3,934,468 
Total assets$585,798,025 $588,477,181 
Liabilities and Equity
Liabilities:
Term loan payable, net of deferred financing fees$104,235,266 $105,245,801 
Obligations under participation agreements (Note 8 )
71,613,358 71,581,897 
Mortgage loan payable, net of deferred financing fees and other40,728,560 44,117,293 
Revolving line of credit payable, net of deferred financing fees7,407,536  
Secured borrowing21,983,096 18,187,663 
Interest reserve and other deposits held on investments7,096,549 12,145,616 
Operating lease liabilities16,104,041 16,105,888 
Lease intangible liabilities, net (Note 6)
10,128,244 10,249,776 
Due to Manager (Note 8)
1,746,682 1,257,098 
Interest payable 1,213,218 1,185,502 
Accounts payable and accrued expenses1,822,493 3,968,603 
Unearned income389,257 677,856 
Distributions payable3,906  
Other liabilities422,159 429,123 
Total liabilities284,894,365 285,152,116 
Commitments and contingencies (Note 10)
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 March 31, 2021 and December 31, 2020
125,000 125,000 
Common stock, $0.01 par value, 450,000,000 shares authorized and
  19,487,460 shares issued and outstanding at both March 31, 2021 and
   December 31, 2020, respectively
194,875 194,875 
Additional paid-in capital373,443,672 373,443,672 
Accumulated deficit(72,859,887)(70,438,482)
Total equity300,903,660 303,325,065 
Total liabilities and equity$585,798,025 $588,477,181 
See notes to unaudited consolidated financial statements.

2


Terra Property Trust, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31,
20212020
Revenues
Interest income$8,120,949 $9,651,865 
Real estate operating revenue2,011,641 2,313,051 
Other operating income156,662 112,655 
10,289,252 12,077,571 
Operating expenses
Operating expenses reimbursed to Manager1,342,758 1,367,189 
Asset management fee 1,156,543 1,029,533 
Asset servicing fee 273,207 234,208 
Provision for loan losses276,020 1,144,994 
Real estate operating expenses971,315 944,518 
Depreciation and amortization931,725 946,494 
Professional fees 520,419 294,761 
Directors fees36,250 83,750 
Other71,488 64,949 
5,579,725 6,110,396 
Operating income4,709,527 5,967,175 
Other income and expenses
Interest expense from obligations under participation agreements(1,880,081)(2,560,267)
Interest expense on repurchase agreement payable (1,551,270)
Interest expense on mortgage loan payable(686,150)(750,636)
Interest expense on revolving line of credit(17,846)(174,989)
Interest expense on term loan payable(1,672,768) 
Interest expense on secured borrowing(299,805)(40,491)
Net loss on extinguishment of obligations under participation agreements (319,453)
Net change in unrealized losses on marketable securities(14,608) 
Income from equity investment in a limited partnership1,337,827  
Realized gains on marketable securities 8,894 
(3,233,431)(5,388,212)
Net income$1,476,096 $578,963 
Series A preferred stock dividend declared(3,906)(3,906)
Net income allocable to common stock$1,472,190 $575,057 
Earnings per share basic and diluted
$0.08 $0.03 
Weighted-average shares basic and diluted
19,487,460 16,707,279 
Distributions declared per common share$0.20 $0.53 

See notes to unaudited consolidated financial statements.

3


Terra Property Trust, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended March 31,
20212020
Comprehensive income, net of tax
Net income$1,476,096 $578,963 
Other comprehensive income
Net unrealized gains on marketable securities 192,919 
Reclassification of net realized gains on marketable securities into earnings (8,894)
 184,025 
Total comprehensive income$1,476,096 $762,988 
Series A preferred stock dividend declared(3,906)(3,906)
Comprehensive income attributable to common shares$1,472,190 $759,082 

See notes to unaudited consolidated financial statements.


4


Terra Property Trust, Inc.
Consolidated Statements of Changes in Equity
(Unaudited)

Preferred Stock12.5% Series A Cumulative Non-Voting Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated DeficitAccumulated Other Comprehensive Income
$0.01 Par Value
SharesAmountSharesAmountTotal equity
Balance at January 1, 2021$ 125$125,000 19,487,460$194,875 $373,443,672 $(70,438,482)$ $303,325,065 
Distributions declared on common shares ($0.20 per share)— — — — (3,893,595)— (3,893,595)
Distributions declared on preferred shares— — — — (3,906)— (3,906)
Comprehensive income:
Net income— — — — 1,476,096 — 1,476,096 
Net unrealized gains on marketable securities— — — — —   
Reclassification of net realized gains on marketable securities
   into earnings
— — — — —   
Balance at March 31, 2021$ 125$125,000 19,487,460 $194,875 $373,443,672 $(72,859,887)$ $300,903,660 
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)
— — 4,574,47045,745 75,334,248 — — 75,379,993 
Distributions declared on common shares ($0.53 per share)— — — — (8,832,071)— (8,832,071)
Distributions declared on preferred shares— — — — (3,906)— (3,906)
Comprehensive income:
Net income— — — — 578,963 — 578,963 
Net unrealized gains on marketable securities— — — — — 192,919 192,919 
Reclassification of net realized gains on marketable securities
   into earnings
— — — — — (8,894)(8,894)
Balance at March 31, 2020$ 125$125,000 19,700,151 $197,002 $377,061,545 $(62,716,835)$184,025 $314,850,737 

See notes to unaudited consolidated financial statements.


5


Terra Property Trust, Inc.
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
20212020
Cash flows from operating activities:
Net income$1,476,096 $578,963 
Adjustments to reconcile net income to net cash (used in) provided by operating
   activities:
Paid-in-kind interest income, net(224,197)(80,116)
Depreciation and amortization931,725 946,494 
Provision for loan losses276,020 1,144,994 
Amortization of net purchase premiums on loans15,348 11,112 
Straight-line rent adjustments(12,008)(334,452)
Amortization of deferred financing costs172,692 551,226 
Net loss on extinguishment of obligations under participation agreements 319,453 
Amortization of above- and below-market rent intangibles(84,555)(111,748)
Amortization and accretion of investment-related fees, net (4,140)
Amortization of above-market rent ground lease(32,588)(32,587)
Unrealized gains on marketable securities14,608  
Income from equity investment in a limited partnership(1,337,827) 
Changes in operating assets and liabilities:
Interest receivable(472)(376,919)
Other assets(528,133)(9,093)
Due to Manager93,228 22,520 
Unearned income(391,727)(167,104)
Interest payable27,716 (143,220)
Accounts payable and accrued expenses(2,146,110)839,938 
Other liabilities(6,964)222,194 
Net cash (used in) provided by operating activities(1,757,148)3,377,515 
Cash flows from investing activities:
Origination and purchase of loans(14,410,706)(38,376,448)
Proceeds from repayments of loans31,531,804 13,371,565 
Purchase of partnership interest in a limited partnership(12,907,725) 
Purchase of marketable securities(4,979,088)(3,354,442)
Proceeds from sale of marketable securities 48,073 
Net cash used in investing activities(765,715)(28,311,252)
Cash flows from financing activities:
Proceeds from borrowings under the term loan1,469,656  
Proceeds from borrowings under revolving line of credit8,030,611 35,000,000 
Repayments of obligations under participation agreements(3,962,509) 
Distributions paid(3,893,595)(8,832,071)
Proceeds from secured borrowing3,751,680 8,257,583 
Proceeds from obligations under participation agreements3,520,514 6,034,316 
Repayment of mortgage principal(3,423,245)(132,625)
Change in interest reserve and other deposits held on investments(5,049,067)(2,286,740)
Repayment of borrowings under the term loan(2,600,000) 
Payment of financing costs(641,446)(84,175)
Repayment of borrowings under repurchase agreement (3,395,740)
Proceeds from borrowings under repurchase agreement 14,807,834 
Proceeds from issuance of common stock in the Merger 16,897,074 
Proceeds from issuance of common stock to Terra Offshore REIT 8,600,000 
Net cash (used in) provided by financing activities(2,797,401)74,865,456 
Net (decrease) increase in cash, cash equivalents and restricted cash(5,320,264)49,931,719 
Cash, cash equivalents and restricted cash at beginning of period32,920,323 50,549,700 
Cash, cash equivalents and restricted cash at end of period (Note 2)
$27,600,059 $100,481,419 

6


Terra Property Trust, Inc.
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
Three Months Ended March 31,
20212020
Supplemental Disclosure of Cash Flows Information:
Cash paid for interest$4,094,327 $4,459,761 

Supplemental Non-Cash Financing Activities:

Merger

    On February 28, 2020, Terra Property Trust, Inc. (the “Company”) entered into certain Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Terra Property Trust 2, Inc. (“TPT2”) and Terra Secured Income Fund 7, LLC (“Terra Fund 7”), the sole stockholder of TPT2, pursuant to which, effective March 1, 2020, TPT2 was merged with and into the Company, with the Company continuing as the surviving corporation (the “Merger”). In connection with the Merger, the Company issued 2,116,785.76 shares of common stock, par value $0.01 per share, were issued to Terra Fund 7 (Note 3). The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Merger:
Total Consideration
Equity issued in the Merger$34,630,615 
Proceeds from equity issued in the Merger16,897,074 
$17,733,541 
Net assets exchanged
Settlement of obligations under participation agreements$17,688,741 
Interest receivable134,543 
Other assets18,384 
Accounts payable and accrued expenses(57,433)
Due to Manager(50,694)
$17,733,541 
Non-cash Proceeds from Issuance of Common Stock to Terra Offshore REIT

    In addition, on March 2, 2020, the Company entered into two separate contribution agreements, one by and among the Company, Terra Offshore Funds REIT, LLC (the “Terra Offshore REIT”) and Terra Income Fund International, and another by and among the Company, Terra Offshore REIT and Terra Secured Income Fund 5 International, pursuant to which the Company issued an aggregate of 2,457,684.59 shares of common stock in exchange for the settlement of $32.1 million of participation interests in loans held by the Company, $8.6 million in cash, and other net working capital (“Issuance of Common Stock to Terra Offshore REIT”) (Note 3). The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Issuance of Common Stock to Terra Offshore REIT:
Total Consideration
Equity issued to Terra Offshore REIT$40,749,378 
Proceeds from equity issued to Terra Offshore REIT8,600,000 
$32,149,378 
Net Assets exchanged
Settlement of obligations under participation agreements$32,112,257 
Interest receivable270,947 
Due to Manager(233,826)
Net assets acquired excluding cash and cash equivalents$32,149,378 

        

See notes to unaudited consolidated financial statements.

7


Terra Property Trust, Inc.
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2021

Note 1. Business

    Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) was incorporated under the general corporation laws of the State of Maryland on December 31, 2015. Terra Property Trust is a real estate credit focused company that originates, structures, funds and manages commercial real estate investments, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments. The Company’s loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. The Company focuses on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties in primary and secondary markets. The Company believes these loans are subject to less competition and offer higher risk adjusted returns than larger loans with similar risk/return metrics.
    On January 1, 2016, Terra Secured Income Fund 5, LLC (“Terra Fund 5”), the Company’s then parent, contributed its consolidated portfolio of net assets to the Company pursuant to a contribution agreement in exchange for shares of the Company’s common stock. Upon receipt of the contribution of the consolidated portfolio of net assets from Terra Fund 5, the Company commenced its operations on January 1, 2016. On March 2, 2020, the Company engaged in a series of transactions pursuant to which the Company issued an aggregate of 4,574,470.35 shares of its common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by the Company, cash of $25.5 million and other working capital. As of March 31, 2021, Terra JV, LLC (“Terra JV”) held 87.4% of the issued and outstanding shares of the Company's common stock with the remainder held by Terra Offshore REIT (Note 3).

    The Company has elected to be taxed, and to qualify annually thereafter, as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with the taxable year ended December 31, 2016. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. The Company also operates its business in a manner that permits it to maintain its exclusion from registration under the Investment Company Act of 1940, as amended.

    The Company’s investment activities are externally managed by Terra REIT Advisors, LLC (“Terra REIT Advisors” or the “Manager”), a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC (“Terra Capital Partners”), pursuant to a management agreement (the “Management Agreement”), under the oversight of the Company’s board of directors (Note 8). The Company does not currently have any employees and does not expect to have any employees. Services necessary for the Company’s business are provided by individuals who are employees of the Manager or by individuals who were contracted by the Company or by the Manager to work on behalf of the Company pursuant to the terms of the Management Agreement. On April 1, 2021, Mavik Capital Management, LP (“Mavik”), an entity controlled by Vikram S. Uppal, the Chief Executive Officer of the Company, completed a series of related transactions that resulted in all of the outstanding interests in Terra Capital Partners, LLC, being acquired by Mavik for a combination of cash and interests in Mavik (the “Recapitalization”). No amendments or other modifications were made to the Management Agreement in connection with the Recapitalization and the Manager and its personnel continue to serve as the external manager of the Company pursuant to the terms of the Management Agreement.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

    The consolidated financial statements include all of the Company’s accounts and those of its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation.

The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or voting interest model. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Company consolidates an entity when it holds a majority voting interest in an entity.

8



Notes to Unaudited Consolidated Financial Statements

The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting (see Note 5).

VIE Model

An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights.

Under the VIE model, limited partnerships are considered VIE unless the limited partners hold substantive kick-out or participating rights over the general partner. The Company consolidates entities that are VIEs when the Company determines it is the primary beneficiary. Generally, the primary beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

Loans Held for Investment

    The Company originates, acquires, and structures real estate-related loans generally to be held to maturity. Loans held for investment are carried at the principal amount outstanding, adjusted for the accretion of discounts on investments and exit fees, and the amortization of premiums on investments and origination fees. The Company’s preferred equity investments, which are economically similar to mezzanine loans and subordinate to any loans but senior to common equity, are accounted for as loans held for investment. Loans are carried at cost less allowance for loan losses.

Allowance for Loan Losses
    
    The Company’s loans are typically collateralized by either the sponsors’ equity interest in the real estate properties or the underlying real estate properties. As a result, the Company regularly evaluates the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan-by-loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations and/or reserve balances are sufficient to cover the debt service requirements currently and into the future; (ii) the ability of the borrower to refinance the loan; and/or (iii) the property’s liquidation value. The Company also evaluates the financial wherewithal of the sponsor as well as its competency in managing and operating the real estate property. In addition, the Company considers the overall economic environment, real estate sector, and geographic sub-market in which the borrower operates. Such analyses are completed and reviewed by asset management and finance personnel, who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, the capitalization and discount rates; (ii) site inspections; and (iii) current credit spreads and discussions with market participants.

    The Manager performs a quarterly evaluation for possible impairment of the Company’s portfolio of loans. A loan is impaired if it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan. Impairment is measured based on the present value of expected future cash flows or the fair value of the collateral, if the loan is collateral dependent. Upon measurement of impairment, the Company records an allowance to reduce the carrying value of the loan with a corresponding charge to net income.

    In conjunction with the quarterly evaluation of loans not considered impaired, the Manager assesses the risk factors of each loan and assigns each loan a risk rating between 1 and 5, which is an average of the numerical ratings in the following categories: (i) sponsor capability and financial condition; (ii) loan and collateral performance relative to underwriting; (iii) quality and stability of collateral cash flows and/or reserve balances; and (iv) loan to value. Based on a 5-point scale, the Company’s loans are rated “1” through “5”, from less risk to greater risk, as follows:

9


Notes to Unaudited Consolidated Financial Statements

Risk RatingDescription
1Very low risk
2Low risk
3Moderate/average risk
4Higher risk
5Highest risk

    The Company records an allowance for loan losses equal to (i) 1.5% of the aggregate carrying amount of loans rated as a “4”, plus (ii) 5% of the aggregate carrying amount of loans rated as a “5”, plus (iii) impaired loan reserves, if any.

    There may be circumstances where the Company modifies a loan by granting the borrower a concession that it might not otherwise consider when a borrower is experiencing financial difficulty or is expected to experience financial difficulty in the foreseeable future. Such concessionary modifications are classified as troubled debt restructurings (“TDR”s) unless the modification solely results in a delay in a payment that is insignificant. Loans classified as TDRs are considered impaired loans for reporting and measurement purposes.

Equity Investment in a Limited Partnership

The Company accounts for its equity interest in a limited partnership under the equity method of accounting, i.e., at cost, increased or decreased by its share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting.

Marketable Securities

    The Company from time to time invests in short term debt and equity securities. These securities are classified as available-for-sale and are carried at fair value. Changes in the fair value of equity securities are recognized in earnings. Changes in the fair value of debt securities are reported in other comprehensive income until a gain or loss on the securities is realized.
    
Real Estate Owned, Net

    Real estate acquired is recorded at its estimated fair value at acquisition and is shown net of accumulated depreciation and impairment charges.

    Acquisition of properties generally are accounted for as asset acquisitions. Under asset acquisition accounting, the costs to acquire real estate, including transaction costs, are accumulated and then allocated to individual assets and liabilities acquired based upon their relative fair value. The Company allocates the purchase price of its real estate acquisitions to land, building, tenant improvements, acquired in-place leases, intangibles for the value of any above or below market leases at fair value and to any other identified intangible assets or liabilities. The Company amortizes the value allocated to in-place leases over the remaining lease term, which is reported in depreciation and amortization expense on its consolidated statements of operations. The value allocated to above or below market leases are amortized over the remaining lease term as an adjustment to rental income.

    Real estate assets are depreciated using the straight-line method over their estimated useful lives: buildings and improvements - not to exceed 40 years, and tenant improvements - shorter of the lease term or life of the asset. Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful life.

    Management reviews the Company’s real estate for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate assets. If impaired, the real estate asset will be written down to its estimated fair value.

Leases

    The Company determines if an arrangement is a lease at inception. Operating leases in which the Company is the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. 

10


Notes to Unaudited Consolidated Financial Statements


    ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s lease typically does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made in advance and excludes lease incentives if there were any. The Company’s lease term may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Revenue Recognition

    Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

    Interest Income: Interest income is accrued based upon the outstanding principal amount and contractual terms of the loans and preferred equity investments that the Company expects to collect and it is accrued and recorded on a daily basis. Discounts and premiums on investments purchased are accreted or amortized over the expected life of the respective loan using the effective yield method, and are included in interest income in the consolidated statements of operations. Loan origination fees and exit fees, net of portions attributable to obligations under participation agreements, are capitalized and amortized or accreted to interest income over the life of the investment using the effective yield method. Income accrual is generally suspended for loans at the earlier of the date at which payments become 90 days past due or when, in the opinion of the Manager, recovery of income and principal becomes doubtful. Outstanding interest receivable is assessed for recoverability. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability.

    The Company holds loans in its portfolio that contain paid-in-kind (“PIK”) interest provisions. The PIK interest, which represents contractually deferred interest that is added to the principal balance that is due at maturity, is recorded on the accrual basis.

    Real Estate Operating Revenues: Real estate operating revenue is derived from leasing of space to various types of tenants. The leases are for fixed terms of varying length and generally provide for annual rent increases and expense reimbursements to be paid in monthly installments. Lease revenue, or rental income from leases, is recognized on a straight-line basis over the term of the respective leases. Additionally, the Company recorded above- and below-market lease intangibles, which are included in real estate owned, net, in connection with the acquisition of the real estate properties. These intangible assets and liabilities are amortized to lease revenue over the remaining contractual lease term.
    
    Other Revenues: Prepayment fee income is recognized as prepayments occur. All other income is recognized when earned.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments, with original maturities of ninety days or less when purchased, as cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains all of its cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation.
    Restricted cash represents cash held as additional collateral by the Company on behalf of the borrowers related to the investments in loans or preferred equity instruments for the purpose of such borrowers making interest and property-related operating payments. Restricted cash is not available for general corporate purposes. The related liability is recorded in “Interest reserve and other deposits held on investments” on the consolidated balance sheets.

    Cash held in escrow by lender represents amounts funded to an escrow account for debt services and tenant improvements.

    The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s consolidated balance sheets to the total amount shown in its consolidated statements of cash flows:

11


Notes to Unaudited Consolidated Financial Statements

March 31, 2021March 31, 2020
Cash and cash equivalents$18,464,161 $82,163,055 
Restricted cash7,096,549 16,255,423 
Cash held in escrow by lender2,039,349 2,062,941 
Total cash, cash equivalents and restricted cash shown in the consolidated
   statements of cash flows
$27,600,059 $100,481,419 

 Participation Interests

Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. For the investments for which participation has been granted, the interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations. Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes doubtful. See “Obligations under Participation Agreements” in Note 9 for additional information.

Term Loan

    The Company finances certain of its senior loans through borrowings under an indenture and credit agreement. The Company accounts for the borrowings as a term loan, which is carried at the contractual amount (cost), net of unamortized deferred financing fees.

Fair Value Measurements

    United States generally accepted accounting principles (“U.S. GAAP”) establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment, where applicable. Marketable securities are financial instruments that are reported at fair value.

Deferred Financing Costs

    Deferred financing costs represent fees and expenses incurred in connection with obtaining financing for investments. These costs are presented in the consolidated balance sheets as a direct deduction of the debt liability to which the costs pertain. These costs are amortized using the effective interest method and are included in interest expense on the applicable borrowings in the consolidated statements of operations over the life of the borrowings.

Income Taxes

    The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ended December 31, 2016. In order to qualify as a REIT, the Company is required, among other things, to distribute at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax for taxable years before 2018) beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. Any gains from the sale of foreclosed properties within two years are subject to U.S. federal and state income taxes at regular corporate rates.

     As of March 31, 2021, the Company has satisfied all the requirements for a REIT. No provision for federal income taxes has been included in the consolidated financial statements for the three months ended March 31, 2021 and 2020.

    The Company did not have any uncertain tax positions that met the recognition or measurement criteria of Accounting Standards Codification (“ASC”) 740-10-25, Income Taxes, nor did the Company have any unrecognized tax benefits as of the

12


Notes to Unaudited Consolidated Financial Statements

periods presented herein. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its consolidated statements of operations. For the three months ended March 31, 2021 and 2020, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s 2017-2019 federal tax returns remain subject to examination by the Internal Revenue Service.

Earnings Per Share

    The Company has a simple equity capital structure with only common stock and preferred stock outstanding. As a result, earnings per share, as presented, represent both basic and dilutive per-share amounts for the periods presented in the consolidated financial statements. Income per basic share of common stock is calculated by dividing net income allocable to common stock by the weighted-average number of shares of common stock issued and outstanding during such period.

Use of Estimates

    The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

As of March 31, 2021, the outbreak of the coronavirus (“COVID-19”) pandemic around the globe continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The COVID-19 pandemic and preventative measures taken by local, state and federal authorities to alleviate the public health crisis have had a continued and prolonged adverse impact on economic and market conditions and have caused a global economic slowdown which has had and could further have a material adverse effect on the Company’s results and financial condition. The pandemic continues to evolve, and the full impact of COVID-19 on the real estate industry, the commercial real estate market, and the credit markets generally, and consequently on the Company’s financial condition and results of operations is uncertain and cannot be predicted at the current time as it depends on several factors beyond the control of the Company including, but not limited to, (i) the uncertainty around the severity and duration of the outbreak, (ii) the effectiveness of the United States public health response, including the administration of vaccines throughout the United States (iii) the pandemic’s impact on the U.S. and global economies, (iv) the timing, scope and effectiveness of governmental responses to the pandemic, including the PPP and other programs under the CARES Act, (v) the timing and speed of economic recovery, (vi) the availability of a treatment or vaccination for COVID-19, and (vii) the negative impact on our borrowers, real estate values and cost of capital. The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2021, however uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of March 31, 2021 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates.

Segment Information

    The Company’s primary business is originating, acquiring and structuring real estate-related loans related to high quality commercial real estate. From time to time, the Company may acquire real estate encumbering the senior loans through foreclosure. However, management treats the operations of the real estate acquired through foreclosure as the continuation of the original senior loans. The Company operates in a single segment focused on mezzanine loans, other loans and preferred equity investments, and to a lesser extent, owning and managing real estate.
    
Recent Accounting Pronouncements

    In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. In April 2019, the FASB issued additional amendments to clarify the scope of ASU 2016-13 and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. In May 2019, the FASB issued ASU 2019-05 — Targeted Transition Relief, which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In October 2019, the FASB decided that for smaller reporting companies, ASU 2016-13 and related amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company meets the definition of a smaller reporting company under the regulation of the Securities and Exchange Commission. As such, the Company will adopt this

13


Notes to Unaudited Consolidated Financial Statements

ASU and related amendments on January 1, 2023. Management is currently evaluating the impact this change will have on the Company’s consolidated financial statements and disclosures.

        London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. At the end of 2021, banks will no longer be required to report certain information that is used to determine LIBOR. As a result, LIBOR could be discontinued. Other interest rates used globally could also be discontinued for similar reasons. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition (“ASU 2021-01”). ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. In the event LIBOR is unavailable, the Company’s investment documents provide for a substitute index, on a basis generally consistent with market practice, intended to put the Company in substantially the same economic position as LIBOR. As a result, the Company does not expect the reference rate reform and the adoption of ASU 2020-04 and ASU 2021-01 to have a material impact on its consolidated financial statements and disclosures.

Note 3. Merger and Issuance of Common Stock to Terra Offshore REIT

Merger

    On February 28, 2020, the Company entered into the Merger Agreement pursuant to which TPT2 was merged with and into the Company, with the Company continuing as the surviving corporation, effective March 1, 2020. In connection with the Merger, each share of common stock, par value $0.01 per share, of TPT2 issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive from the Company a number of shares of common stock, par value $0.01 per share, of the Company equal to an exchange ratio, which was 1.2031. The exchange ratio was based on the relative net asset values of the Company and TPT2 as of December 31, 2019 as adjusted to reflect changes in the net working capital of each of the Company and TPT2 during the period from January 1, 2020 through March 1, 2020, the effective time for the Merger. For purposes of determining the respective fair values of the Company and TPT2, the value of the loans (or participation interests therein) held by each of the Company and TPT2 was the value of such loans (or participation interests) as set forth in the audited financial statements of the Company as of and for the year ended December 31, 2019. As a result, Terra Fund 7, the sole stockholder of TPT2, received 2,116,785.76 shares of common stock of the Company as consideration in the Merger. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder.
    The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Merger:
Total Consideration
Equity issued in the Merger$34,630,615 
$34,630,615 
Net Assets of TPT2 Received in the Merger
Loans held for investment acquired through participation$17,688,741 
Cash and cash equivalents16,897,074 
Interest receivable134,543 
Other assets18,384 
Accounts payable and accrued expenses(57,433)
Due to Manager(50,694)
Total identifiable net assets$34,630,615 

14


Notes to Unaudited Consolidated Financial Statements

    The fair value of the 2,116,785.76 shares of the Company’s stock issued in the Merger as consideration paid for TPT2 was derived from the fair value per share of the Company as of December 31, 2019 as adjusted to reflect the change in the net working capital of the Company during the period from January 1, 2020 through March 1, 2020, the effective time of the Merger.
    In connection with the Merger, the size of the board of directors of the Company was reduced from eight directors to four directors, with Andrew M. Axelrod, Vikram S. Uppal, Roger H. Beless and Michael L. Evans continuing as directors of the Company.
Issuance of Common Stock to Terra Offshore REIT
    In addition, on March 2, 2020, the Company entered into two separate contribution agreements, one by and among the Company, Terra Offshore REIT and Terra Income Fund International, and another by and among the Company, Terra Offshore REIT and Terra Secured Income Fund 5 International, pursuant to which the Company issued 2,457,684.59 shares of common stock of the Company to Terra Offshore REIT in exchange for the settlement of $32.1 million of participation interests in loans also held by the Company, $8.6 million in cash and other net working capital. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder.
    The fair value of the 2,457,684.59 shares of the Company’s stock issued in the transaction as consideration paid for Terra Offshore REIT was derived from the fair value per share of the Company as of December 31, 2019, which was the most recently determined fair value per share of the Company.
    The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Issuance of Common Stock to Terra Offshore REIT:
Total Consideration
Equity issued to Terra Offshore REIT$40,749,378 
$40,749,378 
Net Assets of Terra Offshore REIT Received
Investments through participation interest, at fair value$32,112,257 
Cash and cash equivalents8,600,000 
Interest receivable270,947 
Due to Manager(233,826)
Total identifiable net assets$40,749,378 
On April 29, 2020, the Company repurchased 212,691 shares of common stock at a price of $17.02 per share that the Company had previously sold to Terra Offshore REIT on September 30, 2019 (Note 8).

Terra JV, LLC

    Prior to the completion of the Merger and the Issuance of Common Stock to Terra Offshore REIT transactions described above, Terra Fund 5 owned approximately 98.6% of the issued and outstanding shares of the Company’s common stock indirectly through its wholly owned subsidiary, Terra JV, of which Terra Fund 5 was the sole managing member, and the remaining issued and outstanding shares of the Company’s common stock were owned by Terra Offshore REIT.

    As described above, the Company acquired TPT2 in the Merger and, in connection with such transaction, Terra Fund 7 contributed the shares of the Company’s common stock received as consideration in the Merger to Terra JV and became a co-managing member of Terra JV pursuant to the amended and restated operating agreement of Terra JV, dated March 2, 2020 (the “JV Agreement”). The JV Agreement and related stockholders agreement between Terra JV and the Company, dated March 2, 2020, provide for the joint approval of Terra Fund 5 and Terra Fund 7 with respect to certain major decisions that are taken by Terra JV and the Company.

    On March 2, 2020, the Company, Terra Fund 5, Terra JV and Terra REIT Advisors also entered into the Amended and Restated Voting Agreement (the “Voting Agreement”), pursuant to which Terra Fund 5 assigned its rights and obligations under the Voting Agreement to Terra JV. Consistent with the original voting agreement dated February 8, 2018, for the period that Terra REIT Advisors remains the external manager of the Company, Terra REIT Advisors will have the right to nominate

15


Notes to Unaudited Consolidated Financial Statements

two individuals to serve as directors of the Company and, until Terra JV no longer holds at least 10% of the outstanding shares of the Company’s common stock, Terra JV will have the right to nominate one individual to serve as a director of the Company.

    As of March 31, 2021, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.

Net Loss on Extinguishment of Obligations Under Participation Agreements

    As discussed in Note 7, in the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties. The obligations under participation agreements were released as a result of the Merger and the Issuance of Common Stock to Terra Offshore REIT. In connection with these transactions, the Company recognized a net loss of $0.3 million for the three months ended March 31, 2020, which was primarily related to transaction costs incurred in connection with both transactions.

Note 4. Loans Held for Investment

Portfolio Summary

The following table provides a summary of the Company’s loan portfolio as of March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
Fixed Rate
Floating
Rate
(1)(2)(3)
TotalFixed Rate
Floating
Rate
(1)(2)(3)
Total
Number of loans6 13 19 6 14 20 
Principal balance$57,040,923 $350,689,385 $407,730,308 $56,335,792 $367,838,966 $424,174,758 
Carrying value$57,157,301 $348,911,570 $406,068,871 $56,464,310 $365,816,205 $422,280,515 
Fair value$57,099,978 $346,367,302 $403,467,280 $56,284,334 $363,122,860 $419,407,194 
Weighted-average coupon rate12.07 %7.66 %8.28 %12.17 %7.95 %8.51 %
Weighted-average remaining
 term (years)
1.571.411.431.781.441.48
_______________
(1)These loans pay a coupon rate of LIBOR plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.11% and 0.14% as of March 31, 2021 and December 31, 2020, respectively.
(2)As of March 31, 2021 and December 31, 2020, amounts included $183.7 million and $184.2 million of senior mortgages used as collateral for $106.5 million and $107.6 million of borrowings under a term loan, respectively (Note 9). As of March 31, 2021, amounts also included $11.9 million of senior mortgages used as collateral for $8.0 million of borrowings under a revolving line of credit. Borrowings under the term loan bear interest at an annual rate of LIBOR plus 4.25% with a LIBOR floor of 1.00%. Borrowings under the revolving line of credit bear interest at a minimum rate of 4.0%.
(3)As of March 31, 2021 and December 31, 2020, eleven and twelve of these loans, respectively, are subject to a LIBOR floor.


16


Notes to Unaudited Consolidated Financial Statements

Lending Activities

The following table presents the activities of the Company’s loan portfolio for the three months ended March 31, 2021 and 2020:
Loans Held for InvestmentLoans Held for Investment through Participation InterestsTotal
Balance, January 1, 2021$417,986,462 $4,294,053 $422,280,515 
New loans made14,410,706  14,410,706 
Principal repayments received(31,531,804) (31,531,804)
PIK interest (1)
676,646  676,646 
Net amortization of premiums on loans(15,348) (15,348)
Accrual, payment and accretion of investment-related fees and other,
   net
526,081 (1,905)524,176 
Provision for loan losses(276,020) (276,020)
Balance, March 31, 2021$401,776,723 $4,292,148 $406,068,871 

Loans Held for InvestmentLoans Held for Investment through Participation InterestsTotal
Balance, January 1, 2020$375,462,222 $3,150,546 $378,612,768 
New loans made37,504,601 871,847 38,376,448 
Principal repayments received(13,371,565) (13,371,565)
PIK interest (1)
294,237  294,237 
Net amortization of premiums on loans(15,348) (15,348)
Accrual, payment and accretion of investment-related fees, net 202,793 15,174 217,967 
Provision for loan losses(1,144,994) (1,144,994)
Balance, March 31, 2020$398,931,946 $4,037,567 $402,969,513 
_______________
(1)Certain loans in the Company’s portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted to $0.5 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

Portfolio Information

    The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
Loan StructurePrincipal BalanceCarrying Value% of Total Principal BalanceCarrying Value% of Total
First mortgages$263,999,390 $265,573,062 65.4 %$254,042,847 $255,093,989 60.5 %
Preferred equity investments114,921,610 115,331,442 28.4 %141,590,632 142,002,144 33.6 %
Mezzanine loans28,809,308 29,179,145 7.2 %28,541,279 28,923,140 6.8 %
Allowance for loan losses— (4,014,778)(1.0)%— (3,738,758)(0.9)%
Total$407,730,308 $406,068,871 100.0 %$424,174,758 $422,280,515 100.0 %


17


Notes to Unaudited Consolidated Financial Statements

March 31, 2021December 31, 2020
Property TypePrincipal BalanceCarrying Value% of Total Principal BalanceCarrying Value% of Total
Office$191,527,932 $192,017,466 47.3 %$182,698,225 $183,053,751 43.3 %
Multifamily127,657,844 128,599,015 31.6 %150,873,173 151,768,347 35.9 %
Hotel - full/select service47,112,522 47,704,223 11.7 %