10-Q

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, 2023

☐ 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: 001-40496

Terra Property Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	81-0963486
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

205 West 28th Street, 12th Floor

New York, New York 10001

(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:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
6.00% Notes due 2026	TPTA	New York Stock Exchange

Securities registered pursuant to section 12(g) of the Securities Exchange Act of 1934:

Class B 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	þ	Smaller 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 12, 2023, the registrant had 24,335,429 shares of Class B 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	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements:
	Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	2
	Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Changes in Equity for the three months ended March 31, 2023 and 2022 (unaudited)	4
	Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	61
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults upon Senior Securities	61
Item 4.	Mine Safety Disclosures	61
Item 5.	Other Information	61
Item 6.	Exhibits	62
Signatures		64

1

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Terra Property Trust, Inc.

Consolidated Balance Sheets

	March 31, 2023		December 31, 2022
	(unaudited)
Assets
Cash and cash equivalents	$	28,869,594	$	28,567,825
Restricted cash	4,611,794		4,633,204
Cash held in escrow by lender	3,571,083		3,268,563
Loans held for investment, net of allowance for credit losses of $28,504,829    and $25,471,890	571,176,710		584,417,939
Loans held for investment acquired through participation, net of allowance for     credit losses of $146,748 and none	38,772,079		42,072,828
Equity investment in unconsolidated investments	53,566,840		62,498,340
Held-to-maturity debt securities	20,025,024		—
Real estate owned, net (Note 6)
Land, building and building improvements, net	94,828,089		46,660,226
Lease intangible assets, net	6,605,936		2,568,461
Operating lease right-of-use asset	27,374,554		27,378,786
Deal deposit	—		4,241,892
Interest receivable	5,227,742		4,100,501
Other assets	3,851,770		2,928,327
Total assets	$	858,481,215	$	813,336,892
Liabilities and Equity
Liabilities:
Term loan payable	$	25,000,000	$	25,000,000
Unsecured notes payable, net of debt issuance cost	116,976,542		116,530,673
Repurchase agreements payable, net of deferred financing fees	151,772,313		169,304,710
Obligations under participation agreements (Note 8 )	13,209,982		12,680,594
Mortgage loans payable, net of deferred financing fees and other	60,768,698		29,488,326
Revolving line of credit payable, net of deferred financing fees	124,741,957		89,807,448
Interest reserve and other deposits held on investments	4,611,794		4,633,204
Operating lease liability	27,374,554		27,378,786
Lease intangible liabilities, net (Note 6)	12,668,367		8,646,840
Due to Manager (Note 8)	3,871,022		3,935,997
Interest payable	1,482,773		1,058,001
Accounts payable and accrued expenses	1,854,679		1,452,236
Unearned income	378,018		378,018
Other liabilities	739,507		1,159,885
Total liabilities	545,450,206		491,454,718
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 no shares and 125 shares issued and outstanding at    March 31, 2023 and December 31, 2022, respectively	—		125,000
Class A Common Stock, $0.01 par value, 450,000,000 shares authorized and no    shares issued, at both March 31, 2023 and December 31, 2022	—		—
Class B Common Stock, $0.01 par value, 450,000,000 shares authorized and    24,335,404 and 24,335,370 shares issued and outstanding at March 31, 2023 and     December 31, 2022, respectively	243,354		243,354
Additional paid-in capital	444,450,291		444,449,813
Accumulated deficit	(131,662,636)		(122,935,993)
Total equity	313,031,009		321,882,174
Total liabilities and equity	$	858,481,215	$	813,336,892

See notes to consolidated financial statements.

2

Terra Property Trust, Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Revenues
Interest income	$	15,615,807	$	8,882,151
Real estate operating revenue	1,332,969		2,979,454
Other operating income	53,395		250,665
	17,002,171		12,112,270
Operating expenses
Operating expenses reimbursed to Manager	2,177,004		1,928,563
Asset management fee	1,997,427		1,488,095
Asset servicing fee	470,525		349,329
(Reversal of) provision for credit losses	(850,051)		50,296
Real estate operating expenses	1,209,912		1,217,963
Depreciation and amortization	681,813		1,718,372
Impairment charge	—		1,604,989
Professional fees	979,895		742,518
Directors fees	96,464		36,252
Other	215,244		83,421
	6,978,233		9,219,798
Operating income	10,023,938		2,892,472
Other income and expenses
Interest expense from obligations under participation agreements	(532,146)		(1,075,109)
Interest expense on repurchase agreements payable	(3,056,506)		(755,826)
Interest expense on mortgage loans payable	(746,128)		(518,617)
Interest expense on revolving line of credit	(1,965,534)		(524,294)
Interest expense on term loan payable	(351,563)		(164,969)
Interest expense on unsecured notes payable	(2,394,306)		(1,430,183)
Interest expense on secured borrowing	—		(552,785)
Net unrealized gains (losses) on marketable securities	6,584		(99,044)
(Loss) income from equity investment in unconsolidated investments	(436,860)		1,419,335
Realized gains on marketable securities	—		51,133
	(9,476,459)		(3,650,359)
Net income (loss)	$	547,479	$	(757,887)
Series A preferred stock dividend declared	$	(3,907)	$	(3,906)
Net income (loss) allocable to common stock	$	543,572	$	(761,793)
Income (loss) per share — basic and diluted	$	0.02	$	(0.04)
Weighted-average shares — basic and diluted	24,335,373		19,487,460
Distributions declared per common share	$	0.19	$	0.20

See notes to consolidated financial statements.

3

Terra Property Trust, Inc.

Consolidated Statements of Changes in Equity

(Unaudited)

	Preferred Stock		12.5% Series A Cumulative Non-Voting Preferred Stock			Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit
						$0.01 Par Value			$0.01 Par Value
			Shares	Amount		Shares	Amount		Shares	Amount						Total equity
Balance at January 1, 2023	$	—	125	$	125,000	—	$	—	24,335,370	$	243,354	$	444,449,813	$	(122,935,993)	$	321,882,174
Cumulative effect of credit loss     accounting standard effective     January 1, 2023 (Note 2)	—		—	—		—	—		—	—		—		(4,619,723)		(4,619,723)
Shares issued from reinvestment of      shareholder distributions	—		—	—		—	—		34	—		478		—		478
Redemption of Series A Preferred    Stock	—		(125)	(125,000)		—	—		—	—		—		—		(125,000)
Distributions declared on common    shares ($0.19 per share)	—		—	—		—	—		—	—		—		(4,650,492)		(4,650,492)
Distributions declared on preferred    shares	—		—	—		—	—		—	—		—		(3,907)		(3,907)
Net income	—		—	—		—	—		—	—		—		547,479		547,479
Balance at March 31, 2023	$	—	—	$	—	—	$	—	24,335,404	$	243,354	$	444,450,291	$	(131,662,636)	$	313,031,009

	Preferred Stock		12.5% Series A Cumulative Non-Voting Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit
						$0.01 Par Value
			Shares	Amount		Shares	Amount						Total equity
Balance at January 1, 2022	$	—	125	$	125,000	19,487,460	$	194,875	$	373,443,672	$	(99,919,969)	$	273,843,578
Distributions declared on common shares ($0.20 per share)	—		—	—		—	—		—		(3,893,595)		(3,893,595)
Distributions declared on preferred shares	—		—	—		—	—		—		(3,906)		(3,906)
Net loss	—		—	—		—	—		—		(757,887)		(757,887)
Balance at March 31, 2022	$	—	125	$	125,000	19,487,460	$	194,875	$	373,443,672	$	(104,575,357)	$	269,188,190

See notes to consolidated financial statements.

4

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	547,479	$	(757,887)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	681,813		1,718,516
(Reversal of) provision for credit losses	(850,051)		50,296
Impairment charge	—		1,604,989
Amortization of net purchase premiums on loans	346,780		15,348
Straight-line rent adjustments	27,813		359,056
Amortization of deferred financing costs	535,276		520,991
Amortization of discount on unsecured notes payable	402,571		113,147
Amortization of above- and below-market rent intangibles	(34,764)		(246,375)
Amortization and accretion of investment-related fees, net	(4,745)		(195,932)
Amortization of above-market rent ground lease	(32,587)		(32,588)
Realized gain on marketable securities	—		(51,133)
Unrealized losses (gains) on marketable securities	(6,584)		99,044
Distributions received in excess of equity income (equity income in excess of    distributions received)	5,061,178		(1,119,913)
Changes in operating assets and liabilities:
Deal deposits	4,241,892		—
Interest receivable	(1,127,241)		(556,972)
Due from related party	(138,508)		2,605,639
Other assets	(806,166)		(705,897)
Due to Manager	—		336,805
Unearned income	—		261,193
Interest payable	424,772		(428,783)
Accounts payable and accrued expenses	402,443		317,529
Other liabilities	(1,010,363)		(797,996)
Net cash provided by operating activities	8,661,008		3,109,077
Cash flows from investing activities:
Origination and purchase of loans	(46,214,722)		(88,119,821)
Proceeds from repayments of loans	59,177,506		750,000
Purchase of real estate properties	(48,798,273)		—
Purchase of held-to-maturity debt securities	(20,025,024)		—
Return of capital on equity interests in unconsolidated investments	3,870,322		—
Purchase of equity interests in unconsolidated investments	—		(21,164,384)
Proceeds from sale of marketable securities	—		628,715
Distributions in excess equity income	—		336,000
Net cash used in investing activities	(51,990,191)		(107,569,490)

5

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Cash flows from financing activities:
Proceeds from borrowings under repurchase agreements	1,300,858		131,949,549
Proceeds from borrowings under revolving line of credit	34,864,135		26,377,654
Proceeds from mortgage loan payable	32,100,000		—
Proceeds from obligations under participation agreements	521,886		15,863,187
Repayments of borrowings under repurchase agreements	(19,230,071)		—
Distributions paid	(4,653,921)		(3,893,595)
Change in interest reserve and other deposits held on investments	(21,410)		646,956
Payment of financing costs	(844,415)		(895,247)
Redemption of Series A Preferred Stock	(125,000)		—
Repayment of borrowings under the term loan	—		(93,763,471)
Proceeds from secured borrowing	—		2,850,520
Repayment of mortgage principal	—		(204,967)
Net cash provided by financing activities	43,912,062		78,930,586
Net increase (decrease) in cash, cash equivalents and restricted cash	582,879		(25,529,827)
Cash, cash equivalents and restricted cash at beginning of period	36,469,592		51,098,647
Cash, cash equivalents and restricted cash at end of period (Note 2)	$	37,052,471	$	25,568,820

	Three Months Ended March 31,
	2023		2022
Supplemental Disclosure of Cash Flows Information:
Cash paid for interest	$	7,683,565	$	4,920,363
Supplemental non-cash information:
Reinvestment of stockholder distributions	$	478	$	—

See notes to consolidated financial statements.

6

Terra Property Trust, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2023

Note 1. Business

    Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) was incorporated under the Maryland General Corporation Law 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.

    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.

    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 exemption from registration as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”).

    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 (the “Board”) (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 October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Merger Agreement”), Terra Income Fund 6, Inc. (“Terra BDC”), merged with and into Terra Income Fund 6, LLC (“Terra LLC”), a wholly owned subsidiary of the Company, with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as a wholly owned subsidiary of the Company (Note 3).

As of March 31, 2023, Terra JV, LLC (“Terra JV”), former shareholders of Terra BDC and Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”) held 70.0%, 19.9% and 10.1% of the issued and outstanding shares of the Company’s common stock, respectively.

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

7

Notes to Unaudited Consolidated Financial Statements

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.

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 VIEs unless a limited partner holds substantive kick-out or participating rights over a 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, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”). 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 amortized cost less allowance for credit losses.

Current Expected Credit Losses Reserve

Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses, became effective for the Company on January 1, 2023. ASC 326 mandates the use of a current expected credit loss (“CECL”) model for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” credit model previously required under United States generally accepted accounting principles (“U.S. GAAP”). The CECL model requires the consideration of possible credit losses over the life of an instrument as opposed to only estimating credit losses upon the occurrence of a discrete loss event under the previous “incurred loss” methodology. The CECL model applies to the Company’s loan portfolio and the held-to-maturity debt securities which are carried at amortized cost, including future funding commitments for which the Company does not have the unconditional right to cancel. Amortized cost is defined as the principal amount outstanding, adjusted for the accretion of purchase discounts and disposition fees, and amortization of purchase premiums and origination fees, and includes accrued interest receivable related to these loans and securities. As permitted by ASC 326, the Company elected not to measure an allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheet), but rather write off in a timely manner by reversing interest income that would likely be uncollectible. The Company’s adoption of the CECL model resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to accumulated deficit as of January 1, 2023. Subsequent to the adoption of the CECL model, any increase or decrease to the CECL reserve is recorded in earnings on the consolidated statements of operations.

The Company utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio. The Company does not have a meaningful history of realized credit losses on its loan portfolio so it has subscribed to a third-party database service to provide the Company with industry losses for its loans. The Company utilizes a loan loss model that is widely used among banks and commercial mortgage REITs and is marketed by a leading commercial mortgage-based security data analytics provider. It employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. The Company provides specific loan-level inputs which include loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding

8

Notes to Unaudited Consolidated Financial Statements

commitments. The Company selects from a group of independent five-year macroeconomic forecasts included in the model that are updated regularly based on current economic trends. Because the Company’s loan portfolio is comprised of a small number of loans, the Company measures the CECL reserve based on an evaluation of each loan as its own segregated asset. Based on the inputs, the loan loss model determines a loan loss rate through the generation of probability of defaults (PD) and loss given defaults (LGD) for each loan. The CECL reserve is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect the expected credit losses.

The calculation of the estimate of expected credit loss considers historical experience and current conditions for each loan and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy, current portfolio composition, level of historical loss forecast estimates, material changes in growth and credit strategy and other factors that may affect its loss experience. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed.

Beyond the Company’s reasonable and supportable forecast period, the Company generally reverts to historical loss information, pooled by asset type and investment structure, over the remaining loan period, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. The Company generally expects to use an average historical loss for reversion, utilizing an immediate or straight-line method for the remaining life of the loans.

The Company also performs a qualitative assessment beyond model estimates and applies qualitative adjustments as necessary. The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the Company to determine the amount of the expected loss more accurately and reasonably for these investments. The Company also evaluates the contractual life of its loans to determine if changes are needed for contractual extension options, renewals, modifications, and prepayments.

During the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, the Company considers that loan non-performing. For all non-performing loans, such as those in default, collateral-dependent or modified loans, including historical troubled debt restructurings, the Company removes these loans from the industry loss rate approach described above and analyzes them separately. The credit loss reserve for these loans is calculated as any excess of the amortized cost of the loan over (i) the present value of expected future cash flows discounted at the appropriate discount rate or (ii) the fair value of collateral, if repayment is expected solely from the collateral.

Some of the Company’s loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL model because the Company does not have an unconditional right to cancel such commitments. The CECL reserve related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets. This CECL reserve is estimated using the same method outlined above for the Company’s outstanding loan balances, and increases or decreases in the CECL reserve relating to unfunded commitments are also recorded in earnings on the consolidated statements of operations.

    As discussed below in Recent Accounting Pronouncements, the Company adopted the provisions of Accounting Standards Update (“ASU”) 2022-02 Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) concurrently with the adoption of CECL on January 1, 2023, prospectively.

Equity Investment in Unconsolidated Investments

The Company accounts for its equity interests in unconsolidated investments 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.

9

Notes to Unaudited Consolidated Financial Statements

The Company evaluates its equity investment unconsolidated investments on a periodic basis to determine if there are any indicators that the value of its equity investments may be impaired and whether or not that impairment is other-than-temporary. To the extent an impairment has occurred and is determined to be other-than-temporary, the Company measures the charge as the excess of the carrying value of its investment over its estimated fair value, which is determined by calculating its share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint venture agreements.

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.

Held-to-Maturity Debt Securities

The Company classifies debt securities for which it has both the positive intent and ability to hold until maturity of the security as held-to-maturity debt securities. These securities are recorded at amortized cost with changes in amortized cost recognized in earnings until realized. Held-to-maturity debt securities are subject to the CECL reserve described above.

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. 

    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 is recognized on a straight-line basis over the lease term.

10

Notes to Unaudited Consolidated Financial Statements

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. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of income and principal becomes doubtful. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. 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 as of:

	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	28,869,594	$	9,858,153
Restricted cash	4,611,794		8,058,767
Cash held in escrow by lender	3,571,083		7,651,900
Total cash, cash equivalents and restricted cash shown in the consolidated    statements of cash flows	$	37,052,471	$	25,568,820

11

Notes to Unaudited Consolidated Financial Statements

 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 previously financed certain of its senior loans through borrowings under an indenture and credit agreement. The Company accounted for the borrowings as a term loan, which was carried at the contractual amount (cost), net of unamortized deferred financing fees. On February 18, 2022, the Company refinanced the Term Loan (as defined below) with a new repurchase agreement. See “Goldman Master Purchase Agreement” in Note 9 for additional information. In connection with the BDC Merger, the Company assumed a $25.0 million term loan. The Company classified this term loan as term loan payable on the consolidated balance sheets.

Repurchase Agreements

The Company finances certain of its senior loans held for investment through repurchase transactions under master repurchase agreements. The Company accounts for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. See “Repurchase Agreements” in Note 9 for additional information.

Fair Value Measurements

    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, unsecured notes, mortgage loan payable, term loan payable, repurchase agreement payment 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 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 dividends equal to 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) 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, 2023, the Company has satisfied all the requirements for a REIT.

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, 2023 and 2022, 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 2019-2022 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 outstanding as of March 31, 2023 and common stock and preferred stock outstanding as of December 31, 2022. 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. Actual results may ultimately differ from those estimates, and those differences could be material.

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, may invest in real estate related joint ventures and may directly acquire real estate properties. 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 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. The Company adopted this ASU and related amendments on January 1, 2023. The adoption of ASU 2016-13 resulted in an incremental reserve of approximately $4.6 million, which included reserve on future loan funding commitments. The Company recorded the cumulative effect of initially applying this guidance as an adjustment to Accumulated deficit using the modified retrospective method of adoption.

    London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. In July 2017, the U.K. Financial Conduct Authority, which regulates the LIBOR administrator, ICE Benchmark Administration Limited (“IBA”), announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021, which has subsequently been delayed to June 30, 2023. 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”). In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) — Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”). ASU 2022-06 deferred the sunset date of ASU 2020-04 to December 31, 2024. 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

13

Notes to Unaudited Consolidated Financial Statements

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.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates troubled debt restructuring guidance for organizations that adopted the amendments in ASU 2016-13 while providing for additional disclosures for loan modifications. ASU 2022-02 also amends the vintage disclosure guidance for public business entities. The Company adopted the provisions of ASU 2022-02 concurrently with the adoption of ASU 2016-03. The adoption of ASU 2022-02 did not have any material impact on the Company’s financial condition and results of operations.

Note 3. BDC Merger

BDC Merger

On October 1, 2022 (the “Closing Date”), pursuant to the Merger Agreement, Terra BDC merged with and into Terra LLC, with Terra LLC surviving as a wholly owned subsidiary of the Company. The Certificate of Merger and Articles of Merger with respect to the BDC Merger were filed with the Secretary of State of the State of Delaware and State Department of Assessments and Taxation of Maryland (the “SDAT”), respectively, with an effective time and date of 12:02 a.m., Eastern Time, on the Closing Date (the “Effective Time”).

At the Effective Time, except for any shares of common stock, par value $0.001 per share, of Terra BDC (“Terra BDC Common Stock”) held by the Company or any wholly owned subsidiary of the Company or Terra BDC, which shares were automatically retired and ceased to exist with no consideration paid therefor, each issued and outstanding share of Terra BDC Common Stock was automatically cancelled and retired and converted into the right to receive (i) 0.595 shares of the newly designated Class B Common Stock, par value $0.01 per share (“Class B Common Stock”) and (ii) cash, without interest, in lieu of any fractional shares of Class B Common Stock otherwise issuable in an amount, rounded to the nearest whole cent, determined by multiplying (x) the fraction of a share of Class B Common Stock to which such holder would otherwise be entitled by (y) $14.38.

Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of the Closing Date. Following the consummation of the BDC Merger, former Terra BDC stockholders owned approximately 19.9% of the common equity of the Company.

The Company and Terra BDC prepared their respective financial statements in accordance with generally accepted accounting principles in the United States. The BDC Merger is accounted for using the acquisition method of accounting, with the Company being treated as the accounting acquirer. In identifying the Company as the acquiring entity for accounting purposes, the Company and Terra BDC took into account a number of factors, including the relative size of the merging companies, which entity issues additional shares in conjunction with the BDC Merger, the relative voting interests of the respective stockholders after consummation of the BDC Merger, and the composition of the Board and senior management of the combined company after consummation of the BDC Merger.

The Company, as the acquirer, accounted for the BDC Merger as an asset acquisition and all direct acquisition-related costs are capitalized to the total cost of the assets acquired and liabilities assumed. Pursuant to Accounting Standard Codification Topic 805, Business Combination, total cost is allocated to the assets acquired and liabilities assumed on a relative fair value basis.

14

Notes to Unaudited Consolidated Financial Statements

The following table summarizes the total consideration and the fair values of assets acquired and liabilities assumed in the BDC Merger:

Total Consideration
Fair value of Terra Property Trust shares of common stock issued	$	71,054,620
Cash paid for fractional shares	12,920
Transaction costs	2,283,785
	$	73,351,325
Assets Acquired and Liabilities Assumed at Fair Value
Cash and cash equivalents	$	24,321,951
Restricted cash	260,614
Loans held for investment	77,562,528
Loans held for investment acquired through participation	36,793,313
Interest receivable	1,367,044
Other assets	55,465
Term loan payable	(25,000,000)
Unsecured notes payable	(33,770,000)
Obligations under participation agreements	(6,114,979)
Interest reserve and other deposits held on investments	(260,614)
Due to manager	(682,541)
Interest payable	(53,186)
Accounts payable and accrued expenses	(740,824)
Other liabilities	(387,446)
Net assets acquired	$	73,351,325

The fair value of the 4,847,910 shares of the Class B Common Stock was determined based on the Company’s net asset value per share of $14.66 as of October 1, 2022.

Net Gain on Extinguishment of Obligations Under Participation Agreements

As discussed in Note 8, 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. As a result of the BDC Merger, the obligations under participation agreements with Terra BDC totaling $37.0 million were effectively extinguished and the Company recognized a net gain of $3.4 million, representing the difference between the carrying value of the Company’s obligations under participation agreements and the fair value of Terra BDC’s investments acquired through participation agreements.

Appointment of Directors

As of the Effective Time and in accordance with the Merger Agreement, the size of the Board was increased by three members and each of Spencer Goldenberg, Adrienne Everett and Gaurav Misra (each a “Terra BDC Designee”, and collectively, the “Terra BDC Designees”) were elected to the Board to fill the vacancies created by such increase, with each Terra BDC Designee to serve until the Company’s next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Each of the other members of the Board immediately prior to the Effective Time continued as members following the Effective Time.

Voting Support Agreement

On the Closing Date, the Company, Terra JV and Terra Offshore REIT entered into a Voting Support Agreement (the “2022 Voting Agreement”). Pursuant to the 2022 Voting Agreement, effective as of the Closing Date, Terra JV and Terra Offshore REIT have agreed to, at any meeting of the Company’s stockholders called for the purpose of electing directors (or by

15

Notes to Unaudited Consolidated Financial Statements

any consent in writing or by electronic transmission in lieu of any such meeting), cast all votes entitled to be cast by each of them in favor of the election of the Terra BDC Designees until the earlier of (i) the first anniversary of the Closing Date, (ii) the TPT Class B Common Stock Distributions (as defined in the 2022 Voting Agreement) or (iii) an amendment and restatement of the amended and restated management agreement between the Company and Terra REIT Advisors approved by the Company’s Board, including the Terra BDC Designees.

Indemnification Agreements

The Company has entered into customary indemnification agreements with each member of the Board (including each Terra BDC Designee). These agreements, among other things, require the Company to indemnify each director to the maximum extent permitted by Maryland law, including indemnification of expenses such as attorney’s fees, judgments, fines and settlement amounts incurred in any action or proceeding, including any action or proceeding by or in right of the Company, arising out of his or her service as a director.

Note 4. Loans Held for Investment

The Company elected the practical expedient under ASC 326 to exclude accrued interest from amortized cost. As of March 31, 2023 and December 31, 2022, accrued interest receivable of $4.8 million and $4.1 million, respectively, is included in interest receivable on the consolidated balance sheets, and is excluded from the amortized cost of loans held for investment.

Portfolio Summary

The following table provides a summary of the Company’s loan portfolio as of:

	March 31, 2023									December 31, 2022
	Fixed Rate			Floating Rate (1)(2)(3)			Total			Fixed Rate			Floating Rate (1)(2)(3)			Total
Number of loans	6			24			30			8			23			31
Principal balance	$	59,726,205		$	573,106,467		$	632,832,672		$	90,990,183		$	554,805,276		$	645,795,459
Carrying value	$	60,121,950		$	549,826,839		$	609,948,789		$	92,274,998		$	534,215,769		$	626,490,767
Fair value	$	59,314,040		$	553,011,148		$	612,325,188		$	90,729,098		$	532,416,656		$	623,145,754
Weighted-average coupon rate	13.17		%	11.78		%	11.92		%	13.82		%	11.23		%	11.59		%
Weighted-average remaining  term (years)	1.71			1.03			1.09			1.35			1.10			1.14

_______________

(1)These loans pay a coupon rate of LIBOR or Secured Overnight Financing Rate (“SOFR”), as applicable, plus a fixed spread. Coupon rate shown was determined using LIBOR of 4.86%, average SOFR of 4.63% and forward-looking term rate based on SOFR (“Term SOFR”) of 4.80% as of March 31, 2023 and LIBOR of 4.39%, average SOFR of 4.06% and Term SOFR of 4.36% as of December 31, 2022.

(2)As of March 31, 2023 and December 31, 2022, amount included $427.3 million and $413.1 million of senior mortgages used as collateral for $277.9 million and $261.0 million of borrowings under credit facilities, respectively (Note 9).

(3)As of March 31, 2023 and December 31, 2022, twenty-two and twenty-one of these loans, respectively, are subject to a LIBOR or SOFR floor, as applicable.

16

Notes to Unaudited Consolidated Financial Statements

Lending Activities

The following tables present the activities of the Company’s loan portfolio:

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2023	$	584,417,939	$	42,072,828	$	626,490,767
Cumulative effect of credit loss accounting standard effective    January 1, 2023 (Note 2)	(4,250,052)		—		(4,250,052)
New loans made	46,214,722		—		46,214,722
Principal repayments received	(55,895,298)		(3,282,208)		(59,177,506)
Net amortization of premiums on loans	(346,780)		—		(346,780)
Accrual, payment and accretion of investment-related fees and other,    net	(34,186)		(18,541)		(52,727)
Reversal of provision for credit losses	1,070,365		—		1,070,365
Balance, March 31, 2023	$	571,176,710	$	38,772,079	$	609,948,789

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2022	$	457,329,582	$	12,343,732	$	469,673,314
New loans made	87,538,133		581,688		88,119,821
Principal repayments received	(750,000)		—		(750,000)
Net amortization of premiums on loans	(15,348)		—		(15,348)
Accrual, payment and accretion of investment-related fees and other,    net	1,029,625		11,884		1,041,509
Provision for credit losses	(50,296)		—		(50,296)
Balance, March 31, 2022	$	545,081,696	$	12,937,304	$	558,019,000

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, 2023						December 31, 2022
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	473,858,731	$	478,713,612	78.4	%	$	456,408,889	$	461,299,182	73.7	%
Preferred equity investments	122,131,455		122,948,116		20.2	%	121,231,434		122,132,177		19.5	%
Mezzanine loans	36,842,486		36,938,638		6.1	%	39,352,303		39,451,115		6.3	%
Credit facility	—		—		—	%	28,802,833		29,080,183		4.6	%
Allowance for credit losses	—		(28,651,577)		(4.7)	%	—		(25,471,890)		(4.1)	%
Total	$	632,832,672	$	609,948,789	100.0	%	$	645,795,459	$	626,490,767	100.0	%

17

Notes to Unaudited Consolidated Financial Statements

	March 31, 2023						December 31, 2022
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	162,206,536	$	162,659,401	26.6	%	$	184,196,708	$	184,722,657	29.4	%
Industrial	127,399,590		128,361,229		21.0	%	147,796,164		148,891,742		23.8	%
Multifamily	112,973,073		113,781,434		18.7	%	104,589,464		105,570,432		16.9	%
Mixed-use	85,128,218		86,026,507		14.1	%	64,880,450		65,838,965		10.5	%
Infill land	49,652,873		50,535,097		8.3	%	48,860,291		49,565,437		7.9	%
Hotel - full/select service	43,222,382		43,793,356		7.2	%	43,222,382		43,758,804		7.0	%
Student housing	31,000,000		31,744,890		5.2	%	31,000,000		31,774,261		5.1	%
Infrastructure	21,250,000		21,698,452		3.6	%	21,250,000		21,840,359		3.5	%
Allowance for credit losses	—		(28,651,577)		(4.7)	%	—		(25,471,890)		(4.1)	%
Total	$	632,832,672	$	609,948,789	100.0	%	$	645,795,459	$	626,490,767	100.0	%

	March 31, 2023						December 31, 2022
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	137,890,644	$	139,389,069	22.9	%	$	164,253,345	$	165,839,561	26.5	%
New York	88,108,375		88,108,375		14.4	%	91,845,479		91,877,084		14.7	%
Georgia	72,983,863		73,647,905		12.1	%	72,401,718		73,101,964		11.7	%
New Jersey	70,891,499		71,920,880		11.8	%	62,228,622		62,958,482		10.0	%
Texas	68,160,964		68,687,384		11.3	%	67,625,000		68,142,046		10.9	%
Washington	63,376,281		63,434,458		10.4	%	56,671,267		57,027,639		9.1	%
Utah	49,250,000		50,522,239		8.3	%	49,250,000		50,698,251		8.1	%
North Carolina	44,171,046		44,601,994		7.3	%	43,520,028		44,041,162		7.0	%
Arizona	31,000,000		31,288,062		5.1	%	31,000,000		31,276,468		5.0	%
Massachusetts	7,000,000		7,000,000		1.1	%	7,000,000		7,000,000		1.1	%
Allowance for credit losses	—		(28,651,577)		(4.7)	%	—		(25,471,890)		(4.1)	%
Total	$	632,832,672	$	609,948,789	100.0	%	$	645,795,459	$	626,490,767	100.0	%

Current Expected Credit Losses Reserve

As described in Note 2, on January 1, 2023, the Company adopted the provisions of ASU 2016-13, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses. The adoption of ASU 2016-13 resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to accumulated deficits as of January 1, 2023.

The following table presents the activity in allowance for credit loss for funded loans:

	Three Months Ended March 31,
	2023		2022
Allowance for credit losses, beginning of period	$	25,471,890	$	13,658,481
Cumulative effect of credit loss accounting standard effective    January 1, 2023 (Note 2)	4,250,052		—
(Reversal of) provision for credit losses (1)	(1,070,365)		50,296
Charge-offs	—		—
Recoveries	—		—
Allowance for credit losses, end of period	$	28,651,577	$	13,708,777

18

Notes to Unaudited Consolidated Financial Statements

_______________

(1)Prior to the adoption of the CECL model on January 1, 2023, the Company recorded an allowance for credit 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) non-performing loan reserves, if any.

Certain of the Company’s loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These unfunded commitments amounted to approximately $71.0 million and $47.3 million as of March 31, 2023 and December 31, 2022, respectively. The following table presents the activity in the liability for credit losses on unfunded commitments:

	Three Months Ended March 31, 2023
Liability for credit losses on unfunded commitments, beginning of period	$	—
Cumulative effect of credit loss accounting standard effective January 1, 2023 (Note 2)	369,671
Provision for credit losses	220,314
Liability for credit losses on unfunded commitments, end of period	$	589,985

The liability for credit losses on unfunded commitments is included in other liabilities on the consolidated balance sheets.

Accrued Interest Receivable

The Company elected not to measure a CECL reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely matter. If the Company determines it has uncollectible accrued interest receivable, it generally would reverse the accrued and unpaid interest against interest income and no longer accrues for interest. For the three months ended March 31, 2023 and 2022, the Company did not reverse any interest income accrual because all accrued interest income were deemed collectible. As of March 31, 2023 and 2022, the Company had three and two loans that were in default, and suspended interest income accrual of $3.4 million and $1.1 million for the three months ended March 31, 2023 and 2022, respectively, because recovery of such income was doubtful. As of March 31, 2023 and December 31, 2022, there was no outstanding interest receivable on these loans.

Non-Performing Loans

As discussed in Note 2, for loans that are considered non-performing, the Company removes them from the industry loss rate approach and analyzes them separately. As of March 31, 2023 and December 31, 2022, the Company had four non-performing loans with total carrying value of $89.5 million and $89.9 million, respectively. The allowance for credit losses for these non-performing loans were $25.5 million as of both March 31, 2023 and December 31, 2022.

Loan Risk Rating

The Company 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:

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

19

Notes to Unaudited Consolidated Financial Statements

    The following table presents the amortized cost of the Company’s loan portfolio by year of origination and loan risk rating as of March 31, 2023:

 

	March 31, 2023
Loan Risk Rating	Number of Loans		Amortized Cost		% of Total		Amortized Cost by Year Originated
							2023		2022		2021		2020		2019		Prior
1	—		$	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—
2	2		25,042,414		3.9	%	—		—		—		—		18,042,414		7,000,000
3	24		524,084,633		82.1	%	2,218,577		250,427,639		116,762,096		27,561,203		124,194,015		2,921,103
4	—		—		—	%	—		—		—		—		—		—
5	—		—		—	%	—		—		—		—		—		—
Non-performing	4		89,473,319		14.0	%	—		—		—		—		1,364,944		88,108,375
	30	30	638,600,366		100.0	%	$	2,218,577	$	250,427,639	$	116,762,096	$	27,561,203	$	143,601,373	$	98,029,478
Allowance for credit losses			(28,651,577)
Total, net of allowance for credit losses			$	609,948,789

The following table presents the principal balance and the amortized cost of the Company’s loans based on the loan risk rating as of December 31, 2022:

	December 31, 2022
Loan Risk Rating	Number of Loans	Principal Balance		Amortized Cost		% of Total
1	—	$	—	$	—	—	%
2	2	25,000,000		25,041,782		3.8	%
3	25	530,867,244		536,992,660		82.4	%
4	—	—		—		—	%
5	—	—		—		—	%
Non-performing (1)	4	89,928,215		89,928,215		13.8	%
	31	$	645,795,459	651,962,657		100.0	%
Allowance for credit losses				(25,471,890)
Total, net of allowance for credit losses				$	626,490,767

_______________

(1)Because these loans have an event of default, they were removed from the pool of loans on which a general allowance was calculated and were evaluated for collectability individually. As of December 31, 2022, the specific allowance for credit losses on these loans were $25.5 million, as a result of a decline in the fair value of the respective collateral.

Troubled Debt Restructuring

As of December 31, 2022, there was one investment that qualified as troubled debt restructuring.

In December 2022, the borrower of a $40.1 million senior loan experienced financial difficulty and offered to repay the loan for $38.7 million. The remaining $1.4 million was converted to subordinated equity that accrues dividends at 8.0% and the Company is entitled to receive waterfall profit upon a sale. The Company does not anticipate a full recovery of the equity position and does not expect to receive any additional income. As a result, the remaining $1.4 million is reflected as a loan receivable and it is fully reserved for as of March 31, 2023 and December 31, 2022. The Company classified this loan modification as a TDR as it met all the conditions to be considered a TDR pursuant to ASC 310-40.

20

Notes to Unaudited Consolidated Financial Statements

The following table summarizes the recorded investment of TDR as of the date of restructuring:

Number of loans modified	1
Pre-modified recorded carrying value	$	40,072,138
Post-modified recorded carrying value (1)	$	1,364,944

_______________

(1) As of March 31, 2023 and December 31, 2022 the principal balance of this loan was the same as the carrying value. The Company recorded an allowance for credit losses of $1.4 million to fully reserve for the unpaid principal balance. There was no income from this investment from the date of modification on December 28, 2022 through March 31, 2023.

Note 5. Equity Investment in Unconsolidated Investments

The Company owns interests in a limited partnership and three joint ventures. The Company accounts for its interests in these investments under the equity method of accounting (Note 2). The Company classifies distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.

Equity Investment in a Limited Partnership

On August 3, 2020, the Company entered into a subscription agreement with Mavik Real Estate Special Opportunities Fund, LP (“RESOF”) whereby the Company committed to fund up to $50.0 million to purchase a limited partnership interest in RESOF. RESOF’s primary investment objective is to generate attractive risk-adjusted returns by purchasing performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). The general partner of RESOF is Mavik Real Estate Special Opportunities Fund GP, LLC, which is a subsidiary of the Company’s sponsor, Terra Capital Partners. As of March 31, 2023 and December 31, 2022, the unfunded commitment was $30.3 million and $22.4 million, respectively.

The Company evaluated its equity interest in RESOF and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in RESOF is accounted for as an equity method investment. As of March 31, 2023 and December 31, 2022, the Company owned 23.4% and 27.9% of the equity interest in RESOF, respectively. As of March 31, 2023 and December 31, 2022, the carrying value of the Company’s investment in RESOF was $28.6 million and $36.8 million, respectively. For the three months ended March 31, 2023, the Company recorded equity income from RESOF of $0.3 million, and received distributions from RESOF of $3.8 million. For the three months ended March 31, 2022, the Company recorded equity income from RESOF of $1.3 million and received no distributions from RESOF.

In connection with the equity investment in RESOF, the Company paid origination fees to the Manager totaling $0.5 million, to be amortized to equity income on a straight-line basis over the life of RESOF.

21

Notes to Unaudited Consolidated Financial Statements

The following tables present summarized financial information of the Company’s equity investment in RESOF. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share:

	As of
	March 31, 2023		December 31, 2022
Investments at fair value (cost of $164,364,984 and $176,035,290, respectively)	$	166,309,340	$	178,283,703
Other assets	36,931,099		23,918,841
Total assets	203,240,439		202,202,544
Revolving line of credit, net of financing costs	27,607,079		14,795,985
Obligations under participation agreement (proceeds of $38,444,357 and     $41,726,565, respectively)	38,753,105		41,962,861
Other liabilities	19,189,912		17,120,804
Total liabilities	85,550,096		73,879,650
Partners’ capital	$	117,690,343	$	128,322,894

	Three Months Ended March 31,
	2023		2022
Total investment income	$	8,111,779	$	4,844,664
Total expenses	3,166,795		1,293,316
Net investment income	4,944,984		3,551,348
Unrealized (depreciation) appreciation on investments	(595,911)		69,051
Net increase in partners’ capital resulting from operations	$	4,349,073	$	3,620,399

Equity Investment in Joint Ventures

As of March 31, 2023 and December 31, 2022, the Company beneficially owned equity interests in three joint ventures that invest in real estate properties. The Company evaluated its equity interests in the joint ventures and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interests in the joint ventures are accounted for as equity method investments. In September 2022, the Company sold a 53% effective interest in two joint ventures and 59% effective interest in another joint venture for a total of $33.7 million and recognized a gain on sale of $0.8 million.

In December 2022, the Company originated a $10.0 million mezzanine loan to a borrower to finance the acquisition of a real estate portfolio. In connection with this mezzanine loan, the Company entered into a residual profit sharing agreement with the borrower where the borrower will pay the Company an additional amount of 35.0% of remaining net cash flow from the sale of the real estate portfolio. The Company accounts for this arrangement using the equity method of accounting.

The following table presents a summary of the Company’s equity investment in unconsolidated investments as of:

		March 31, 2023			December 31, 2022
Entity	Co-owner (1)	Beneficial Ownership Interest	Carrying Value		Beneficial Ownership Interest	Carrying Value
LEL Arlington JV LLC (1)	Affiliate/Third party	27.2%	$	6,885,336	27.2%	$	7,271,603
LEL NW 49th JV LLC (1)	Affiliate/Third party	27.2%	1,607,801		27.2%	1,521,556
TCG Corinthian FL Portfolio     JV LLV (1)(2)	Affiliate/Third Party	30.6%	6,370,863		30.6%	6,896,816
SF-Dallas Industrial, LLC (3)	N/A	N/A	10,065,935		N/A	10,013,691
			$	24,929,935		$	25,703,666

_______________

22

Notes to Unaudited Consolidated Financial Statements

(1)The Company sold a portion of the interest in this investment to an affiliate in September 2022.

(2)This investment was purchased from a third party in March 2022.

(3)This investment that meets the definition of an equity investment was entered into in December 2022.

The following tables present estimated combined summarized financial information of the Company’s equity investment in the joint ventures. Amounts provided are the total amounts attributable to the joint ventures and do not represent the Company’s proportionate share:

	As of
	March 31, 2023		December 31, 2022
Net investments in real estate	$	192,052,300	$	192,616,298
Other assets	10,956,841		12,817,388
Total assets	203,009,141		205,433,686
Mortgage loan payable	147,924,249		147,740,645
Other liabilities	3,221,660		3,104,624
Total liabilities	151,145,909		150,845,269
Members’ capital	$	51,863,232	$	54,588,417

	Three Months Ended March 31,
	2023		2022
Revenues	$	3,924,579	$	2,450,438
Operating expenses	(2,143,267)		(816,681)
Depreciation and amortization expense	(1,965,037)		(690,831)
Interest expense	(2,559,954)		(1,085,561)
Unrealized (losses) gains	(826,501)		235,511
Net (loss) income	$	(3,570,180)	$	92,876

For the three months ended March 31, 2023, the Company recorded net equity loss from the joint ventures and the mezzanine loan of $0.7 million, and received distributions from the joint ventures of $0.3 million. For the three months ended March 31, 2022, the Company recorded equity income from the joint ventures of $0.1 million and received distributions from the joint venture of $0.3. In connection with these investments, the Company paid origination fee to the Manager totaling $0.5 million, to be amortized to equity income over the life of the respective joint venture.

Note 6. Real Estate Owned, Net

Real Estate Activities

2023 — In March 2023, the Company purchased three industrial properties located in Texas for total costs of $48.8 million, including capitalized transaction costs. This acquisition was deemed to be real estate asset acquisition, and therefore transaction costs were capitalized to the cost basis of the assets.

The following table presents an allocation of the total capitalized costs:

	Total Capitalized Costs
Land	$	9,327,855
Buildings and Improvements	39,248,352
Intangible asset and liability:
In-please lease (weighted-average expected life of 2.63 years)	4,315,333
Below-market rent (weighted-average expected life of 2.69 years)	(4,093,267)
	$	48,798,273

23

Notes to Unaudited Consolidated Financial Statements

2022 — In June 2022, the Company sold the 4.9 acres of land it owned in Pennsylvania for net proceeds of $8.6 million, and recognized a net loss on sale of $0.1 million excluding impairment charges of $1.6 million and $3.4 million recognized in March 2022 and December 2021, respectively.

Real Estate Owned, Net

    Real estate owned is comprised of three single-tenant industrial buildings located in Texas and a multi-tenant office building located in California, with lease intangible assets and liabilities. The following table presents the components of real estate owned, net as of:

	March 31, 2023						December 31, 2022
	Cost		Accumulated Depreciation/Amortization		Net		Cost		Accumulated Depreciation/Amortization		Net
Real estate:
Land	$	9,327,855	$	—	$	9,327,855	$	—	$	—	$	—
Building and building    improvements	90,974,321		(6,034,760)		84,939,561		51,725,969		(5,711,468)		46,014,501
Tenant improvements	1,854,640		(1,293,967)		560,673		1,854,640		(1,224,648)		629,992
Furniture and fixtures	236,000		(236,000)		—		236,000		(220,267)		15,733
Total real estate	102,392,816		(7,564,727)		94,828,089		53,816,609		(7,156,383)		46,660,226
Lease intangible assets:
In-place lease	19,297,871		(12,766,548)		6,531,323		14,982,538		(12,493,079)		2,489,459
Above-market rent	156,542		(81,929)		74,613		156,542		(77,540)		79,002
Total intangible assets	19,454,413		(12,848,477)		6,605,936		15,139,080		(12,570,619)		2,568,461
Lease intangible liabilities:
Below-market rent	(6,848,189)		2,467,800		(4,380,389)		(2,754,922)		2,428,647		(326,275)
Above-market ground lease	(8,896,270)		608,292		(8,287,978)		(8,896,270)		575,705		(8,320,565)
Total intangible liabilities	(15,744,459)		3,076,092		(12,668,367)		(11,651,192)		3,004,352		(8,646,840)
Total real estate	$	106,102,770	$	(17,337,112)	$	88,765,658	$	57,304,497	$	(16,722,650)	$	40,581,847

Real Estate Operating Revenues and Expenses

    The following table presents the components of real estate operating revenues and expenses that are included in the consolidated statements of operations:

	Three Months Ended March 31,
	2023		2022
Real estate operating revenues:
Lease revenue	$	1,085,459	$	1,754,561
Other operating income	247,510		1,224,893
Total	$	1,332,969	$	2,979,454
Real estate operating expenses:
Utilities	$	36,414	$	45,334
Real estate taxes	354,680		346,432
Repairs and maintenances	207,365		157,416
Management fees	39,418		67,868
Lease expense, including amortization of above-market ground lease	487,163		487,163
Other operating expenses	84,872		113,750
Total	$	1,209,912	$	1,217,963

24

Notes to Unaudited Consolidated Financial Statements

Leases

    As of March 31, 2023, the Company owned three industrial buildings that were leased to three tenants and a multi-tenant office building also leased to three tenants. As of December 31, 2022, the Company owned a multi-tenant office building that was leased to three tenants. In addition, the office building is subject to a ground lease whereby the Company is the lessee (or a tenant) to the ground lease. The ground lease had a remaining lease term of 63.6 years as of March 31, 2023, and provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9% of the fair market value of the land. The next rent reset on the ground lease is scheduled for November 1, 2025. The Company is currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v. Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No. 20STCV34217. The Company believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. The Company’s position has prevailed in all three of the prior arbitrations to reset the ground rent. Since future rent reset determinations under the ground lease cannot be known at this time, the Company did not include any potential future rent increases in calculating the present value of future rent payments. The Company intends vigorously to pursue the litigation. While the Company believes its arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty. If the landlord prevails, the future rent reset determinations could result in significantly higher ground rent, which would likely result in a significant diminution in the value of the Company’s interest in the ground lease and the office building.

Scheduled Future Minimum Rent Income 

    Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at March 31, 2023 are as follows: 

Years Ending December 31,	Total
2023 (April 1 through December 31)	$	4,265,856
2024	5,845,112
2025	1,810,128
2026	1,443,553
2027	848,014
Thereafter	1,815,497
Total	$	16,028,160

Scheduled Annual Net Amortization of Intangibles 

    Based on the intangible assets and liabilities recorded at March 31, 2023, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows:

Years Ending December 31,	Net Decrease in Real Estate Operating Revenue (1)		Increase in Depreciation and Amortization (1)		Decrease in Rent Expense (1)		Total
2023 (April 1 through December 31)	$	(1,403,903)	$	2,220,354	$	(97,761)	$	718,690
2024	(1,884,920)		3,044,369		(130,348)		1,029,101
2025	(646,536)		737,423		(130,348)		(39,461)
2026	(272,505)		378,019		(130,348)		(24,834)
2027	(97,912)		151,158		(130,348)		(77,102)
Thereafter	—		—		(7,668,825)		(7,668,825)
Total	$	(4,305,776)	$	6,531,323	$	(8,287,978)	$	(6,062,431)

_______________

(1)Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to lease revenues; amortization of in-place lease intangibles is included in depreciation and amortization; and amortization of above-market ground lease is recorded as a reduction to rent expense.

25

Notes to Unaudited Consolidated Financial Statements

Supplemental Ground Lease Disclosures

    Supplemental balance sheet information related to the ground lease was as follows as of:    

	March 31, 2023			December 31, 2022
Operating lease
Operating lease right-of-use asset	$	27,374,554		$	27,378,786
Operating lease liability	$	27,374,554		$	27,378,786
Weighted average remaining lease term — operating lease (years)	63.6			63.8
Weighted average discount rate — operating lease	7.6		%	7.6		%

    The component of lease expense for the ground lease was as follows:

	Three Months Ended March 31,
	2023		2022
Operating lease cost	$	519,750	$	519,750

Supplemental non-cash information related to the ground lease was as follows:

	Three Months Ended March 31,
	2023		2022
Amounts included in the measurement of lease liability:
Operating cash flows from an operating lease	$	519,750	$	519,750
Right-of-use asset obtained in exchange for lease obligations:
Operating lease	$	519,750	$	519,750

    Maturities of operating lease liability as of December 31, 2022 was as follows:

Years Ending December 31,	Operating Lease
2023 (April 1 through December 31)	$	1,559,250
2024	2,079,000
2025	2,079,000
2026	2,079,000
2027	2,079,000
Thereafter	122,227,875
Total lease payments	132,103,125
Less: Imputed interest	(104,728,571)
Total	$	27,374,554

Note 7. Fair Value Measurements

    The Company follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets

26

Notes to Unaudited Consolidated Financial Statements

for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:

Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access.

Level 2 — Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

      Level 3 — Significant unobservable inputs are based on the best information available in the circumstances, to the extent observable inputs are not available, including the Company’s own assumptions used in determining the fair value of investments. Fair value for these investments are determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment.

     In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

As of March 31, 2023 and December 31, 2022, 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, held-to-maturity debt securities, obligations under participation agreements, term loan payable, repurchase agreement payable, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities and derivatives are financial instruments that are reported at fair value.

Financial Instruments Carried at Fair Value on a Recurring Basis

    From time to time, the Company may invest in short-term debt and equity securities which are classified as available-for-sale securities, which are presented at fair value and included in Other assets in the consolidated balance sheet. 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 the securities are realized.

As discussed in Note 9, in March 2023, the Company entered into a loan agreement with a lender to provide financing for the acquisition of real estate properties (Note 6). In connection with the financing, the Company purchased an interest rate cap for $258,500 to effectively cap the related index rate at 5.0%. The interest rate cap meets all the criteria of a derivative under ASC 815, but it does not met the criteria under ASC 815-20-25 to qualify for hedging accounting. As such, the interest rate cap is reported at fair value and is included in other assets in the consolidated balance sheet, and the change in the fair value of the interest rate cap is reported in income.

The following tables present fair value measurements of marketable securities and derivatives, by major class according to the fair value hierarchy as of:

	March 31, 2023
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Debt securities	$	154,544	$	—	$	—	$	154,544
Derivatives:
Interest rate cap	—		—		258,500		258,500
Total	$	154,544	$	—	$	258,500	$	413,044

27

Notes to Unaudited Consolidated Financial Statements

	December 31, 2022
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Debt securities	$	147,960	$	—	$	—	$	147,960
Total	$	147,960	$	—	$	—	$	147,960

    

The following table presents the activities of the marketable securities and derivatives:

	Three Months Ended March 31,
	2023				2022
	Marketable Securities		Derivatives		Marketable Securities
Beginning balance	$	147,960	$	—	$	1,310,000
Purchases	—		258,500		—
Proceeds from sale	—		—		(628,715)
Unsettled sale	—		—		(123,223)
Reclassification of net realized gains on marketable securities    into earnings	—		—		51,133
Unrealized (losses) gains on marketable securities	6,584		—		(99,044)
Ending balance	$	154,544	$	258,500	$	510,151

Financial Instruments Not Carried at Fair Value

In the first quarter of 2023, the Company purchased $20.0 million of corporate bonds with a coupon rate of 6.125% that mature on May 15, 2023. The Company classified these bonds as held-to-maturity debt securities, as it has the intent and ability to hold these securities until maturity.

The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of:

		March 31, 2023						December 31, 2022
	Level	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Loans:
Loans held for investment	3	$	594,388,315	$	599,828,287	$	573,572,071	$	604,068,894	$	609,889,829	$	581,182,892
Loans held for investment    acquired through    participation	3	38,444,357		38,772,079		38,753,117		41,726,565		42,072,828		41,962,862
Allowance for loan losses		—		(28,651,577)		—		—		(25,471,890)		—
Total loans		$	632,832,672	$	609,948,789	$	612,325,188	$	645,795,459	$	626,490,767	$	623,145,754
Other investment:
Held-to-maturity debt    securities	1	$	20,000,000	$	20,025,024	$	19,800,000	$	—	$	—	$	—
Liabilities:
Term loan payable	3	$	25,000,000	$	25,000,000	$	25,000,000	$	25,000,000	$	25,000,000	$	25,000,000
Unsecured notes payable	1	123,500,000		116,976,542		107,970,447		123,500,000		116,530,673		103,481,748
Repurchase agreement payable	3	152,947,394		151,772,313		152,947,394		170,876,606		169,304,710		170,876,606
Obligations under participation    agreements	3	13,106,844		13,209,982		13,209,983		12,584,958		12,680,594		12,680,595
Mortgage loan payable	3	61,352,308		60,768,698		61,606,608		29,252,308		29,488,326		29,394,870
Revolving line of credit    payable	3	125,000,000		124,741,957		125,000,000		90,135,865		89,807,448		90,135,865
Total liabilities		$	500,906,546	$	492,469,492	$	485,734,432	$	451,349,737	$	442,811,751	$	431,569,684

28

Notes to Unaudited Consolidated Financial Statements

    The Company estimated that its other financial assets and liabilities, not included in the tables above, had fair values that approximated their carrying values at both March 31, 2023 and December 31, 2022 due to their short-term nature.

Valuation Process for Fair Value Measurement

    The fair value of the Company’s investment in equity securities, held-to-maturity debt securities and its unsecured notes payable is determined based on quoted prices in an active market and is classified as Level 1 of the fair value hierarchy.

    Market quotations are not readily available for the Company’s real estate-related loan investments, all of which are included in Level 3 of the fair value hierarchy, and therefore these investments are valued utilizing a yield approach, i.e. a discounted cash flow methodology to arrive at an estimate of the fair value of each respective investment in the portfolio using an estimated market yield. In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, which may include available current market data on applicable yields of comparable debt/preferred equity instruments; market credit spreads and yield curves; the investment’s yield; covenants of the investment, including prepayment provisions; the portfolio company’s ability to make payments, net operating income and debt-service coverage ratio; construction progress reports and construction budget analysis; the nature, quality and realizable value of any collateral (and loan-to-value ratio); the forces that influence the local markets in which the asset (the collateral) is purchased and sold, such as capitalization rates, occupancy rates, rental rates and replacement costs; and the anticipated duration of each real estate-related loan investment.

The Manager designates a valuation committee to oversee the entire valuation process of the Company’s Level 3 loans. The valuation committee is comprised of members of the Manager’s senior management, deal and portfolio management teams, who meet on a quarterly basis, or more frequently as needed, to review the Company investments being valued as well as the inputs used in the proprietary valuation model. Valuations determined by the valuation committee are supported by pertinent data and, in addition to a proprietary valuation model, are based on market data, industry accepted third-party valuation models and discount rates or other methods the valuation committee deems to be appropriate. Because there is no readily available market for these investments, the fair values of these investments are approved in good faith by the Company’s board of directors (which is made up exclusively of independent directors).

    The fair values of the Company’s mortgage loan payable, secured borrowing, term loan payable and revolving line of credit are determined by discounting the contractual cash flows at the interest rate the Company estimates such arrangements would bear if executed in the current market.

The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of March 31, 2023 and December 31, 2022. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.

	Fair Value at March 31, 2023		Primary Valuation Technique	Unobservable Inputs	March 31, 2023
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	573,572,071	Discounted cash flow	Discount rate	9.00	%	16.80	%	11.29	%
Loans held for investment acquired through    participation, net	38,753,117		Discounted cash flow	Discount rate	15.30	%	17.50	%	17.08	%
Total Level 3 Assets	$	612,325,188
Liabilities:
Repurchase agreement payable	$	152,947,394	Discounted cash flow	Discount rate	5.56	%	7.27	%	6.67	%
Obligations under participation agreements	13,209,983		Discounted cash flow	Discount rate	16.80	%	16.80	%	16.80	%
Mortgage loan payable	61,606,608		Discounted cash flow	Discount rate	8.30	%	8.65	%	8.47	%
Term loan payable	25,000,000		Discounted cash flow	Discount rate	5.63	%	5.63	%	5.63	%
Revolving line of credit	125,000,000		Discounted cash flow	Discount rate	8.15	%	8.15	%	8.15	%
Total Level 3 Liabilities	$	377,763,985

29

Notes to Unaudited Consolidated Financial Statements

	Fair Value at December 31, 2022		Primary Valuation Technique	Unobservable Inputs	December 31, 2022
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	581,182,892	Discounted cash flow	Discount rate	8.71	%	19.36	%	11.46	%
Loans held for investment acquired through    participation, net	41,962,862		Discounted cash flow	Discount rate	15.25	%	17.06	%	16.67	%
Total Level 3 Assets	$	623,145,754
Liabilities:
Repurchase agreement payable	$	170,876,606	Discounted cash flow	Discount rate	5.22	%	6.17	%	6.82	%
Obligations under participation agreements	12,680,595		Discounted cash flow	Discount rate	16.36	%	16.36	%	16.36	%
Mortgage loan payable	29,394,870		Discounted cash flow	Discount rate	8.24	%	8.24	%	8.24	%
Term loan payable	25,000,000		Discounted cash flow	Discount rate	5.63	%	5.63	%	5.63	%
Revolving line of credit	90,135,865		Discounted cash flow	Discount rate	7.64	%	7.64	%	7.64	%
Total Level 3 Liabilities	$	328,087,936

Note 8. Related Party Transactions

Management Agreement

The Company entered into the Management Agreement with the Manager whereby the Manager is responsible for its day-to-day operations. The Management Agreement runs co-terminus with the amended and restated operating agreement for Terra Fund 5, which is scheduled to terminate on December 31, 2023 unless Terra Fund 5 is dissolved earlier. The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations:

	Three Months Ended March 31,
	2023		2022
Origination and extension fee expense (1)(2)	$	471,448	$	686,365
Asset management fee	1,997,427		1,488,095
Asset servicing fee	470,525		349,329
Operating expenses reimbursed to Manager	2,177,004		1,928,563
Disposition fee (3)	290,813		—
Total	$	5,407,217	$	4,452,352

_______________

(1)Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan.

(2)Amount for the three months ended March 31, 2023 excluded $0.5 million of origination fee paid to the Manager in connection with the acquisition of the three industrial buildings in 2023. Amount for the three months ended March 31, 2022 excluded $0.2 million of origination fee paid to the Manager in connection with the Company’s equity investment in an unconsolidated investment. This origination fee was capitalized to the carrying value of the unconsolidated investment as a transaction cost.

(3)Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations.

Origination and Extension Fee Expense

Pursuant to the Management Agreement, the Manager or its affiliates receives an origination fee in the amount of 1% of the amount used to originate, fund, acquire or structure real estate-related investments, including any third-party expenses related to such loans. In the event that the term of any real estate-related loan held by the Company is extended, the Manager also receives an extension fee equal to the lesser of (i) 1% of the principal amount of the loan being extended or (ii) the amount of fee paid to the Company by the borrower in connection with such extension.

30

Notes to Unaudited Consolidated Financial Statements

Asset Management Fee

Under the terms of the Management Agreement, the Manager or its affiliates provides the Company with certain investment management services in return for a management fee. The Company pays a monthly asset management fee at an annual rate of 1% of the aggregate funds under management, which includes the loan origination price or aggregate gross acquisition price, as defined in the Management Agreement, for each real estate related loan and cash held by the Company.

Asset Servicing Fee

The Manager or its affiliates receives from the Company a monthly servicing fee at an annual rate of 0.25% of the aggregate gross origination price or acquisition price, as defined in the Management Agreement, for each real estate-related loan held by the Company.

Transaction Breakup Fee

    In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of March 31, 2023 and December 31, 2022, the Company has not received any breakup fees.

Operating Expenses

The Company reimburses the Manager for operating expenses incurred in connection with services provided to the operations of the Company, including the Company’s allocable share of the Manager’s overhead, such as rent, employee costs, utilities, and technology costs.

Disposition Fee

Pursuant to the Management Agreement, the Manager or its affiliates receives a disposition fee in the amount of 1% of the gross sale price received by the Company from the disposition of any real estate-related loan, or any portion of, or interest in, any real estate-related loan. The disposition fee is paid concurrently with the closing of any such disposition of all or any portion of any real estate-related loan or any interest therein, which is the lesser of (i) 1% of the principal amount of the loan or debt-related loan prior to such transaction or (ii) the amount of the fee paid by the borrower in connection with such transaction. If the Company takes ownership of a property as a result of a workout or foreclosure of a loan, the Company will pay a disposition fee upon the sale of such property equal to 1% of the sales price.

Cost Sharing and Reimbursement Agreement

The Company and Terra LLC have entered into a cost sharing and reimbursement agreement effective October 1, 2022, pursuant to which Terra LLC is responsible for its allocable share of the Company’s expenses, including fees paid by the Company to the Manager based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on the Company’s consolidated financial statements.

Distributions Paid

For the three months ended March 31, 2023 and 2022, the Company made distributions to investors totaling $4.7 million and $3.9 million, respectively, of which $4.2 million and $2.9 million were returns of capital, respectively (Note 11).

Due to Manager

    As of both March 31, 2023 and December 31, 2022, approximately $3.9 million was due to the Manager, as reflected on the consolidated balance sheets, primarily related to the present value of the disposition fees on individual loans due to the Manager.

31

Notes to Unaudited Consolidated Financial Statements

Mavik Real Estate Special Opportunities Fund, LP

On August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. For more information on this investment, please see Note 5.

Participation Agreements

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 “Participants”). The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity.

ASC 860, Transfers and Servicing (“ASC 860”), establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (See “Participation interests” in Note 2 and “Obligations under Participation Agreements and Secured Borrowing” in (Note 9).

Participation Interests Purchased by the Company

From time to time, the Company may purchase investments from affiliates pursuant to participation agreements. In accordance with the terms of each participation agreement, each Participant’s rights and obligations, as well as the proceeds received from the related borrower/issuer of the loan, are based upon their respective pro rata participation interest in the loan.

The table below lists the participation interests purchased by the Company pursuant to participation agreements as of:

	March 31, 2023
	Participating Interests	Principal Balance		Carrying Value
Mesa AZ Industrial Owner, LLC (1)	38.27%	$	31,000,000	$	31,288,062
UNJ Sole Member, LLC (1)	40.80%	7,444,357		7,484,017
		$	38,444,357	$	38,772,079

	December 31, 2022
	Participating Interests	Principal Balance		Carrying Value
Havemeyer TSM LLC (1)(2)	23.00%	$	3,282,208	$	3,313,813
Mesa AZ Industrial Owner, LLC (1)	38.27%	31,000,000		31,276,468
UNJ Sole Member, LLC (1)	40.80%	7,444,357		7,482,547
		$	41,726,565	$	42,072,828

________________

(1)The loan is held in the name of Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager.

(2)This loan was repaid in February 2023.

32

Notes to Unaudited Consolidated Financial Statements

Transfers of Participation Interest by the Company

    The following tables summarize the loans that were subject to participation agreements with affiliated entities and third-parties as of:

					Transfers Treated as Obligations Under Participation Agreements as of March 31, 2023
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
610 Walnut Investors LLC (1)	$	19,398,129	$	19,533,518	67.57	%	$	13,106,844	$	13,209,982
	$	19,398,129	$	19,533,518			$	13,106,844	$	13,209,982

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2022
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
610 Walnut Investors LLC (1)	$	18,625,738	$	18,738,386	67.57	%	$	12,584,958	$	12,680,594
	$	18,625,738	$	18,738,386			$	12,584,958	$	12,680,594

________________

(1)Participant was a third party.

These investments are held in the name of the Company, but each of the Participant’s rights and obligations, including interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon their respective pro rata participation interest in such participated investments, as specified in the respective participation agreement. The Participants’ share of the investments is repayable only from the proceeds received from the related borrower/issuer of the investments and, therefore, the Participants also are subject to credit risk (i.e., risk of default by the underlying borrower/issuer). Pursuant to the participation agreements with these entities, the Company receives and allocates the interest income and other related investment income to the Participants based on their respective pro rata participation interest. The Participants pay any expenses, including any fees to the Manager, only on their respective pro rata participation interest, subject to the terms of the respective governing fee arrangements.

Note 9. Debt

Unsecured Notes Payable

The 6.00% Senior Notes Due 2026

On June 10, 2021, the Company issued $78.5 million in aggregate principal amount of its 6.00% notes due 2026 (the “initial note”), for net proceeds of $76.0 million after deducting underwriting commissions of $2.5 million, but before offering expenses payable by the Company. On June 25, 2021, the underwriters partially exercised their option to purchase an additional $6.6 million of the notes for net proceeds of $6.4 million (the “additional notes” and, together with the initial notes, the “6.00% Senior Notes Due 2026”), after deducting underwriting commissions of $0.2 million, but before offering expenses payable by us, which closed on June 29, 2021. Interest on the 6.00% Senior Notes Due 2026 is paid quarterly in arrears every March 30, June 30, September 30 and December 30, at a fixed rate of 6.00% per year, beginning September 30, 2021. The 6.00% Senior Notes Due 2026 mature on June 30, 2026, unless redeemed earlier by the Company, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after June 10, 2023.

In connection with the issuance of the 6.00% Senior Notes Due 2026, the Company entered into (i) an Indenture, dated June 10, 2021 (the “Base Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”), and (ii) the First Supplemental Indenture thereto, dated June 10, 2021 (the “Supplemental Indenture” and, collectively with the Base Indenture, the “Indenture”), by and between the Company and the Trustee. The Indenture contains certain covenants that, among other things, limit the ability of the Company, subject to exceptions, to make distributions in excess of 90% of the Company’s taxable income, incur indebtedness (as defined in the Indenture) or purchase shares of the Company’s capital stock unless the Company has an asset coverage ratio (as defined in the Indenture) of at least 150% after giving effect to such transaction. The Indenture also provides for customary events of default which, if any of them occurs,

33

Notes to Unaudited Consolidated Financial Statements

would permit or require the principal of and accrued interest on the notes to become or to be declared due and payable. As of March 31, 2023 and December 31, 2022, the Company was in compliance with the covenants included in the Indenture.

The 7.00% Senior Notes Due 2026

As previously reported by Terra BDC, on February 10, 2021, Terra BDC issued $34.8 million in aggregate principal amount of 7.00% fixed-rate notes due 2026, for net proceeds of $33.7 million after deducting underwriting commissions of $1.1 million and on February 26, 2021, the underwriters exercised the option to purchase an additional $3.6 million of the notes for net proceeds of $3.5 million, after deducting underwriting commissions of $0.1 million (collectively the “7.00% Senior Notes Due 2026”).

Pursuant to the Merger Agreement, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the 7.00% Senior Notes Due 2026 outstanding as of the Effective Time and the performance of every covenant of the Indenture, dated February 10, 2021 (the “TIF6 Indenture”), between Terra BDC and the Trustee, as supplemented by the First Supplemental Indenture, dated February 10, 2021, by and between Terra BDC and the Trustee (the “First Supplemental Indenture”), to be performed or observed by Terra BDC, including, without limitation, the execution and delivery to the Trustee of a supplement to the TIF6 Indenture in form satisfactory to the Trustee.

On the Closing Date, Terra BDC, Terra LLC and the Trustee entered into a Second Supplemental Indenture pursuant to which Terra LLC assumed the payment of the 7.00% Senior Notes Due 2026 and the performance of every covenant of the TIF6 Indenture, as supplemented by the First Supplemental Indenture, to be performed or observed by Terra BDC.

The 7.00% Senior Notes Due 2026 will mature on March 31, 2026, unless earlier repurchased or redeemed. The 7.00% Senior Notes Due 2026 bear interest at a rate of 7.00% per annum, payable on March 30, June 30, September 30 and December 30 of each year. The 7.00% Senior Notes Due 2026 are Terra LLC’s direct unsecured obligations and rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by Terra LLC; effectively subordinated in right of payment to any of Terra LLC’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of Terra LLC’s subsidiaries and financing vehicles. Terra LLC may redeem the 7.00% Senior Notes Due 2026 in whole or in part at any time on or after February 10, 2023, at a redemption price equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest.

The TIF6 Indenture contains certain covenants that, among other things, limit the ability of Terra LLC, subject to exceptions, to incur indebtedness in violation of the 1940 Act, and to make distributions, incur indebtedness or repurchase shares of Terra LLC’s capital stock unless it satisfies asset coverage requirements set forth in the First Supplemental Indenture after giving effect to such transaction. The TIF6 Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the 7.00% Senior Notes Due 2026 to become or to be declared due and payable.

Summarized Information

The table below presents detailed information regarding the unsecured notes payable as of:

	March 31, 2023						December 31, 2022
	Principal Balance		Carrying Value		Fair Value		Principal Balance		Carrying Value		Fair Value
6.00% Senior Notes Due 2026 (1)	$	85,125,000	$	82,653,051	$	71,130,447	$	85,125,000	$	82,487,769	$	68,100,000
7.00% Senior Notes Due 2026 (2)	38,375,000		34,323,491		36,840,000		38,375,000		34,042,904		35,381,748
	$	123,500,000	$	116,976,542	$	107,970,447	$	123,500,000	$	116,530,673	$	103,481,748

_______________

(1)Carrying value is net of unamortized issue discount of $1.8 million and $1.9 million, and unamortized deferred financing costs of $0.6 million and $0.7 million as of March 31, 2023 and December 31, 2022, respectively.

(2)Carrying value is net of unamortized purchase discount of $4.1 million and $4.3 million as of March 31, 2023 and December 31, 2022, respectively.

34

Notes to Unaudited Consolidated Financial Statements

Revolving Line of Credit

On March 12, 2021, Terra Mortgage Portfolio II, LLC, an indirect wholly-owned subsidiary of the Company, entered into a Business Loan and Security Agreement (the “Revolving Line of Credit”) with Western Alliance Bank (“WAB”) to provide for advances up to the lesser of $75.0 million or the amount determined by the borrowing base, which is based on the eligible assets pledged to the lender. Prior to March 31, 2023 borrowings under the Revolving Line of Credit bore interest at an annual rate of LIBOR + 3.25% with a combined floor of 4.0%. In connection with the transition of LIBOR, on March 31, 2023, the Revolving Line of Credit was amended and the interest rate was changed to Term SOFR + 3.35% with a combined floor of 6.0%. The Revolving Line of Credit was scheduled to mature on March 12, 2023. On January 4, 2022, the Company amended the Revolving Line of Credit to increase the maximum amount available to $125.0 million and extended the maturity date of the facility to March 12, 2024 with an annual 12-month extension available at the Company’s option, which are subject to certain conditions. On August 3, 2022, the Company further amended the Revolving Line of Credit to increase the borrowing sub-limit in New York City and to allow for loans acquired through participation agreements as eligible assets.

In connection with the Revolving Line of Credit, the Company entered into a limited guaranty (the “Guaranty”) in favor of WAB, pursuant to which the Company guarantees the payment of up to 25% of the amount outstanding under the Revolving Line of Credit. Under the Revolving Line of Credit and the Guaranty, the Company is required to maintain (i) a minimum total net worth of $250.0 million; (ii) a $3.5 million quarterly operating profit, as defined within the agreement; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00. As of March 31, 2023 and December 31, 2022, the Company was in compliance with these covenants.

The Revolving Line of Credit contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature. The Revolving Line of Credit contains various affirmative and negative covenants, including maintenance of a debt to total net worth ratio and limitations on the incurrence of liens and indebtedness, loans, distributions, change of management and ownership, changes in the nature of business and transactions with affiliates.

The Revolving Line of Credit also includes customary events of default, including a cross-default provision applicable to debt obligations of Terra Mortgage Portfolio II, LLC or the Company. The occurrence of an event of default may result in termination of the Revolving Line of Credit and acceleration of amounts due under the Revolving Line of Credit.

In connection with the closing of the Revolving Line of Credit, the Company also incurred financing fees of $0.6 million, to be amortized to interest expense over the life of the Revolving Line of Credit.

As of March 31, 2023 and December 31, 2022, borrowings under the Revolving Line of Credit were $125.0 million and $90.1 million, respectively, collateralized by $217.9 million and $177.4 million of eligible assets, respectively. For the three months ended March 31, 2023 and 2022, the Company received proceeds from the Revolving Line of Credit of $34.9 million and $26.4 million, respectively, and did not make any repayments.

Repurchase Agreements

UBS Master Repurchase Agreement

On November 8, 2021, Terra Mortgage Capital III, LLC (the “Seller”), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Uncommitted Master Repurchase Agreement (the “UBS Master Repurchase Agreement”) with UBS AG ( the “Buyer”). The UBS Master Repurchase Agreement provides for advances of up to $195 million in the aggregate, which the Company expects to use to finance certain secured performing commercial real estate loans, including senior mortgage loans, where the underlying mortgaged properties consist of value-added assets with loan-to-value ratio between 65% and 80% that are typically yielding between 2.5% and 5.0%.

Advances under the UBS Master Repurchase Agreement accrue interest at a per annum pricing rate equal to the sum of (i) the 30-day LIBOR or Term SOFR if LIBOR is not available and (ii) the applicable spread, which ranges from 1.60% to 2.25%, and have a maturity date of November 7, 2024. The actual terms of financing for each asset will be determined at the time of financing in accordance with the UBS Master Repurchase Agreement. Subject to satisfaction of certain conditions, the Seller may extend the maturity date of the UBS Master Repurchase Agreement annually thereafter on mutually agreeable terms. In connection with the UBS Master Repurchase Agreement, the Company incurred deferred financing costs of $0.6 million, which are being amortized to interest expense over the term of the facility.

35

Notes to Unaudited Consolidated Financial Statements

The UBS Master Repurchase Agreement contains margin call provisions that provide the Buyer with certain rights in the event of a decline in the credit of the underlying assets purchased under the UBS Master Repurchase Agreement. Upon the occurrence of a margin deficit event, the Buyer may require the Seller to make a payment to reduce the purchase price to eliminate any margin deficit.

In connection with the UBS Master Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of the Buyer (the “UBS Guarantee Agreement”), pursuant to which the Company will guarantee the payment of up to 25% of the amount outstanding under the UBS Master Repurchase Agreement. The UBS Master Repurchase Agreement and the UBS Guarantee Agreement contain various representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types. In addition, the UBS Guarantee Agreement contains financial covenants, which require the Company to maintain: (i) cash liquidity of at least the greater of $5 million or 5% of the then-current outstanding amount under the UBS Master Repurchase Agreement; (ii) total liquidity of at least the greater of $15 million or 10% of the then-current outstanding amount under the UBS Master Repurchase Agreement (iii) tangible net worth at an amount equal to or greater than $215.7 million plus 75% of new capital contributions thereafter; (iv) an EBITDA to interest expense ratio of not less than 1.50 to 1.00; and (v) a total indebtedness to tangible net worth ratio of not more than 3.50 to 1.00. In March 2022, the Company amended the UBS Guarantee Agreement to reduce the EBITDA to interest expense ratio of not less than 1.25 to 1.00, and as of March 31, 2023 and December 31, 2022, the Company was in compliance with these covenants.

The following tables present detailed information with respect to each borrowing under the UBS Master Repurchase Agreement as of:

	March 31, 2023
	Collateral						Borrowings Under Master Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
NB Factory TIC 1, LLC	$	28,000,000	$	28,823,787	$	28,908,756	11/8/2021	$	18,970,000	LIBOR+1.74% (LIBOR floor of 0.1%)
Grandview’s Madison Place, LLC	17,000,000		17,107,426		17,130,108		3/7/2022	13,600,000		Term SOFR + 1.965%
Grandview’s Remington Place,    LLC	23,100,000		23,201,857		23,205,196		5/6/2022	18,480,000		Term SOFR + 1.965%
	$	68,100,000	$	69,133,070	$	69,244,060		$	51,050,000

	December 31, 2022
	Collateral						Borrowings Under Master Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
NB Factory TIC 1, LLC	$	28,000,000	$	28,857,892	$	28,902,234	11/8/2021	$	18,970,000	LIBOR+1.74% (LIBOR floor of 0.1%)
Grandview’s Madison Place, LLC	17,000,000		17,105,928		17,105,928		3/7/2022	13,600,000		Term SOFR + 1.965%
Grandview’s Remington Place,    LLC	23,100,000		23,199,620		23,203,343		5/6/2022	18,480,000		Term SOFR + 1.965%
	$	68,100,000	$	69,163,440	$	69,211,505		$	51,050,000

For the three months ended March 31, 2023, the Company did not borrow or make any repayments under the UBS Master Repurchase Agreement. For the three months ended March 31, 2022, the Company borrowed $13.6 million and did not make any repayments under the UBS Master Repurchase Agreement.

Goldman Master Repurchase Agreement     

The Company entered into a credit agreement with Goldman Sachs Banks to provide for a term loan of up to $103.0 million. On February 18, 2022, Terra Mortgage Capital I, LLC (the “GS Seller”), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Uncommitted Master Repurchase and Securities Contract Agreement (the “Repurchase Agreement”) with Goldman Sachs Bank USA ( the “GS Buyer”). The Repurchase Agreement provides for advances of up to $200.0 million in the aggregate, which the Company expects to use to finance the originations of certain

36

Notes to Unaudited Consolidated Financial Statements

secured performing commercial real estate loans and the acquisitions of certain secured non-performing commercial real estate loans. The Repurchase Agreement replaced the term loan, at which time all mortgage assets under the term loan were assigned as purchased assets under the Repurchase Agreement.

Advances under the Repurchase Agreement accrue interest at a per annum pricing rate equal to the sum of (i) Term SOFR (subject to underlying loan floors on a case-by-case basis) and (ii) the applicable spread, which ranges from 1.75% to 3.00%, and have a maturity date of February 18, 2024. The actual terms of financing for each asset will be determined at the time of financing in accordance with the Repurchase Agreement. Subject to satisfaction of certain conditions, the GS Seller may extend the maturity date of the Repurchase Agreement for another 12-month term. In connection with the Repurchase Agreement, the Company incurred financing costs of $0.6 million, which are being amortized to interest expense over the term of the facility. Additionally, because the Repurchase Agreement was accounted for as a loan modification of the term loan, the remaining unamortized deferred financing fees of $1.7 million under the term loan were carried over to the Repurchase Agreement to be amortized over the life of the Repurchase Agreement.

The Repurchase Agreement contains margin call provisions that provide the GS Buyer with certain rights in the event of a decline in debt yield, loan-to-value ratio, and value of the underlying loans purchased under the Repurchase Agreement. Upon the occurrence of a margin deficit event, the GS Buyer may require the GS Seller to make a payment to reduce the purchase price to eliminate any margin deficit.

In connection with the Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of the GS Buyer (the “Guarantee Agreement”), pursuant to which the Company will guarantee the obligations of the GS Seller under the Repurchase Agreement. Subject to certain exceptions, the maximum liability under the Repurchase Agreement will not exceed 25% of the then currently outstanding repurchase obligations for performing loans and 50% of the then currently outstanding repurchase obligations for non-performing loans under the Repurchase Agreement.

The Repurchase Agreement and the Guarantee Agreement contain various representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types. In addition, the Guarantee Agreement contains financial covenants, which require the Company to maintain: (i) cash liquidity of at least the greater of $5 million or 5% of the then-current outstanding amount under the Repurchase Agreement; (ii) total liquidity in an amount equal to or greater than the lesser of $15 million or 10% of the then-current outstanding amount under the Repurchase Agreement (iii) tangible net worth at an amount no less than 75% of that at closing; (iv) an EBITDA to adjusted interest expense ratio of not less than 1.50 to 1.00; and (v) a total indebtedness to tangible net worth ratio of not more than 3.00 to 1.00. As of March 31, 2023 and December 31, 2022, the Company was in compliance with these covenants.

The following tables present detailed information with respect to each borrowing under the Repurchase Agreement as of:

	March 31, 2023
	Collateral						Borrowings Under Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
330 Tryon DE LLC	$	22,800,000	$	22,903,981	$	22,743,319	2/18/2022	$	16,514,712	Term SOFR + 2.015% (0.01% floor)
1389 Peachtree St, LP; 1401 Peachtree St, LP; and    1409 Peachtree St, LP	57,221,615		57,496,677		57,133,997		2/18/2022	42,888,134		Term SOFR + 2.465%
AGRE DCP Palm Springs, LLC	43,222,382		43,793,356		43,265,735		2/18/2022	28,094,548		Term SOFR + 1.315% (1.8% floor)
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,042,414		17,873,381		2/18/2022	14,400,000		Term SOFR + 0.865% (1.5% floor)
	$	141,243,997	$	142,236,428	$	141,016,432		$	101,897,394

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Notes to Unaudited Consolidated Financial Statements

	December 31, 2022
	Collateral						Borrowings Under Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
330 Tryon DE LLC	$	22,800,000	$	22,902,215	$	22,687,235	2/18/2022	$	18,240,000	Term SOFR + 2.015% (0.01% floor)
1389 Peachtree St, LP; 1401 Peachtree St, LP; and    1409 Peachtree St, LP	57,184,178		57,453,482		56,844,322		2/18/2022	41,587,275		Term SOFR + 2.465%
AGRE DCP Palm Springs, LLC	43,222,382		43,758,804		43,062,933		2/18/2022	28,094,548		Term SOFR + 1.315% (1.8% floor)
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,041,782		17,824,300		2/18/2022	14,400,000		Term SOFR + 0.865% (1.5% floor)
University Park Berkeley, LLC	26,342,468		26,536,122		26,472,938		2/18/2022	17,504,783		Term SOFR + 1.365% ( 1.50% floor)
	$	167,549,028	$	168,692,405	$	166,891,728		$	119,826,606

For the three months ended March 31, 2023 and 2022 the Company borrowed $1.3 million and $118.3 million, respectively, under the Repurchase Agreement and made repayments of $19.2 million and zero, respectively.

Term Loan

As previously reported by Terra BDC, on April 9, 2021, Terra BDC, as borrower, entered into a credit agreement (the “Credit Agreement”) with Eagle Point Credit Management LLC, as the administrative agent and collateral agent (“Eagle Point”), and certain funds and accounts managed by Eagle Point, as lenders (in such capacity, collectively, the “Lenders”). The Credit Agreement provides for (i) a delayed draw term loan of $25.0 million and (ii) additional incremental loans in a minimum amount of $1.0 million and multiples of $0.5 million in excess thereof, which may be approved by a Lender in its sole discretion (the “Term Loan”).

The scheduled maturity date of the Term Loan was April 9, 2025. The Term Loan bears interest on the outstanding principal amount thereof at a rate equal to 5.625% per annum; provided that if at any time Terra BDC was rated below investment grade, the interest rate would increase to 6.625% until the rating is no longer below investment grade. In connection with the entry into the Credit Agreement, Terra BDC also agreed to pay Eagle Point an upfront fee in an amount equal to 2.50% of the loan commitment amount on the initial borrowing date as described in the Credit Agreement. Terra BDC also paid, with respect to any unused portion of the Term Loan, a commitment fee of 0.75% per annum.

Terra BDC could prepay any loan, in whole or in part, together with all accrued but unpaid interest thereon, upon at least

30 but not more than 60 days’ prior notice to the Agent. If Terra BDC elected to make such prepayments prior to October 9, 2023, Terra BDC would also be required to pay a make whole premium, being the present value at such date of (1) the principal

amount being prepaid of such loan, plus (2) all remaining required interest payments due on the principal amount being prepaid of such loan through the maturity date (excluding accrued but unpaid interest to the date on which the make whole premium becomes owed), computed using a discount rate equal to the applicable U.S. Treasury rate (as set forth in the Credit Agreement) plus 50 basis points, over (B) the principal amount being prepaid of such loan; provided that the make whole premium may in no event be less than zero.

In connection with its entry into the Credit Agreement, Terra BDC also entered into a security agreement (the “Security Agreement”), by and among Terra BDC, as grantor, and Eagle Point, as administrative agent, for the benefit of the Lenders, their affiliates and Eagle Point as the secured parties thereunder. Pursuant to the Security Agreement, Terra BDC pledged substantially all of its then owned and thereafter acquired property as security for the obligations of Terra BDC under the Credit Agreement, subject to certain limitations and restrictions set forth in the Security Agreements.

On September 27, 2022, Terra BDC, Terra LLC, Eagle Point and the Lenders entered into a Consent Letter and Amendment (the “Credit Facility Amendment”) effective October 1, 2022. Pursuant to the Credit Facility Amendment (i) Eagle Point and the Lenders consented to the consummation of the BDC Merger and the assumption by Terra LLC of all of the obligations of Terra BDC under the Credit Agreement, (ii) and the Credit Agreement was amended to, among other things, change the scheduled maturity date to July 1, 2023, and remove the make whole premium on voluntary prepayments of the loans.

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Notes to Unaudited Consolidated Financial Statements

The Credit Agreement contains customary representations, warranties, reporting requirements, borrowing conditions and affirmative, negative and financial covenants. As of March 31, 2023 and December 31, 2022 , Terra LLC was in compliance with these covenants.

Mortgage Loans Payable

In connection with the acquisition of real estate properties described in Note 6, the Company entered into a loan agreement with a lender to provide financing of up to $37.0 million for the acquisition. As of March 31, 2023, $32.1 million has been funded. This mortgage loan bears interest at an annual rate of Term SOFR plus 3.5% with a Term SOFR floor of 3.75% and matures on April 9, 2027.

The following table presents certain information about mortgage loans payable as of:

			March 31, 2023						December 31, 2022
Lender	Current Interest Rate	Maturity Date	Principal Amount		Carrying Value		Carrying Value of Collateral		Principal Amount		Carrying Value		Carrying Value of Collateral
Centennial    Bank (1)	Term SOFR + 3.85% (Term SOFR Floor of 2.23%)	May 31, 2023	$	29,252,308	$	29,506,608	$	39,967,385	$	29,252,308	$	29,488,326	$	40,581,847
TPG RE   Finance   24, LTD (2)	Term SOFR +3.5% (Term SOFR Floor of 3.75%	April 9, 2027	32,100,000		31,262,090		48,798,273		—		—		—
			$	61,352,308	$	60,768,698	$	88,765,658	$	29,252,308	$	29,488,326	$	40,581,847

___________________

(1) This loan is collateralized by a multi-tenant office building that the Company acquired through foreclosure.

(2) This loan is collateralized by three industrial buildings that the Company acquired in March 2023.

Scheduled Debt Principal Payments

    Scheduled debt principal payments for each of the five calendar years following March 31, 2023 are as follows:

Years Ending December 31,	Total
2023 (April 1 through December 31)	$	54,252,308
2024	277,947,395
2025	—
2026	123,500,000
2027	32,100,000
Thereafter	—
	487,799,703
Unamortized deferred financing costs	(8,540,193)
Total	$	479,259,510

     At March 31, 2023 and December 31, 2022, the unamortized deferred debt issuance costs were $8.5 million and $8.6 million, respectively.

Obligations Under Participation Agreements

As discussed in Note 2, the Company follows the guidance in ASC 860 when accounting for loan participations. Such guidance requires the transferred interests meet certain criteria in order for the transaction to be recorded as a sale. 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. As of March 31, 2023 and December 31, 2022, obligations under participation agreements had a carrying value of approximately $13.2 million and $12.7 million, respectively,

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Notes to Unaudited Consolidated Financial Statements

and the carrying value of the loans that are associated with these obligations under participation agreements was approximately $19.5 million and $18.7 million, respectively, (see “Participation Agreements” in Note 8). The weighted-average interest rate on the obligations under participation agreements was approximately 16.8% and 16.4% as of March 31, 2023 and December 31, 2022, respectively.

Note 10. Commitments and Contingencies

Unfunded Commitments on Loans Held for Investment

Certain of the Company’s loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These fundings amounted to approximately $71.0 million and $47.3 million as of March 31, 2023 and December 31, 2022, respectively. The Company expects to maintain sufficient cash on hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on credit facilities.

Unfunded Investment Commitment

As discussed in Note 5, on August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. As of March 31, 2023 and December 31, 2022, the unfunded investment commitment was $30.3 million and $22.4 million, respectively.

Other

The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. The Manager has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.

From time to time, the Company and the Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. Additionally, as described above under “Note 6. Real Estate Owned, Net—Real Estate Operating Revenue and Expenses,” as of March 31, 2023 and December 31, 2022, the Company owned a multi-tenant office building that is subject to a ground lease. The ground lease provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9% of the fair market value of the land. The next rent reset on the ground lease is scheduled for November 1, 2025. The Company is currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v. Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No. 20STCV34217. The Company believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. The Company’s position has prevailed in all three of the prior arbitrations to reset the ground rent. Since future rent reset determinations under the ground lease cannot be known at this time, the Company did not include any potential future rent increases in calculating the present value of future rent payments. The Company intends vigorously to pursue the litigation. While the Company believes its arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty. If the landlord prevails, the future rent reset determinations could result in significantly higher ground rent, which would likely result in a significant diminution in the value of the Company’s interest in the ground lease and the office building.

See Note 8 for a discussion of the Company’s commitments to the Manager.

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Notes to Unaudited Consolidated Financial Statements

Note 11. Equity

Earnings Per Share

The following table presents earnings per share:

	Three Months Ended March 31,
	2023		2022
Net income (loss)	$	547,479	$	(757,887)
Series A preferred stock dividend declared	(3,907)		(3,906)
Net income (loss) allocable to common stock	$	543,572	$	(761,793)
Weighted-average shares outstanding - basic and diluted	24,335,373		19,487,460
Income (loss) per share - basic and diluted	$	0.02	$	(0.04)

Preferred Stock Classes

Preferred Stock

    The Company’s charter gives it authority to issue 50,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”). The Board may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, into one or more classes or series of stock. As of March 31, 2023, there were no Preferred Stock issued or outstanding. As of December 31, 2022 there were 125 shares of Series A Preferred Stock (as defined below) issued and outstanding.

Series A Preferred Stock

    On November 30, 2016, the Board classified and designated 125 shares of Preferred Stock as a separate class of Preferred Stock to be known as the 12.5% Series A Redeemable Cumulative Preferred Stock, $1,000 liquidation value per share (“Series A Preferred Stock”). In December 2016, the Company sold 125 shares of the Series A Preferred Stock for $125,000. The Series A Preferred Stock paid dividends at an annual rate of 12.5% of the liquidation preference. These dividends were cumulative and payable semi-annually in arrears on June 30 and December 31 of each year.

    The Series A Preferred Stock, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company, ranked senior to common stock. The Company, at its option, may redeem the shares, with written notice, at a redemption price of $1,000 per share, plus any accrued unpaid distribution through the date of the redemption. The Series A Preferred Stock carried a redemption premium of $50 per share if redeemed prior to January 1, 2019. The Series A Preferred Stock generally had no voting rights. However, the Series A Preferred Stockholders’ voting was required if (i) authorization or issuance of any securities senior to the Series A Preferred Stock; (ii) an amendment to the Company’s charter that has a material adverse effect on the rights and preference of the Series A Preferred Stock; and (iii) any reclassification of the Series A Preferred Stock.

In March 2023, the Series A Preferred Stock was fully redeemed at par for a total of $125,000 plus accrued dividends.

Common Stock

On October 1, 2022, in connection with the BDC Merger, the Company amended its charter to increase the shares authorized from 500,000,000 to 950,000,000, consisting of 450,000,000 shares of Class A Common Stock, $0.01 par value per share (“Class A Common Stock”), 450,000,000 shares of Class B Common Stock, and 50,000,000 shares of Preferred Stock. Concurrently, 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders and each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the BDC Merger was automatically changed into one issued and outstanding share of Class B Common Stock. As of March 31, 2023, Terra JV, LLC, former shareholders of Terra BDC and Terra Offshore Funds REIT, LLC held 70.0%, 19.9% and 10.1% of the issued and outstanding shares of the Class B Common Stock, respectively.

The Class B Common Stock rank equally with and have identical preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as each other share of the Company’s common stock, except as set forth below with respect to conversion.

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Notes to Unaudited Consolidated Financial Statements

On the date that is 180 calendar days (or, if such date is not a business day, the next business day) after the date (the “First Conversion Date”) of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date as approved by the Board, one-third of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. On the date that is 365 calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date following the First Conversion Date as approved by the Board (the “Second Conversion Date”), one-half of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. On the date that is 545 calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date following the Second Conversion Date as approved by the Board, all of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock.

Distributions

    The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with U.S. GAAP, to its stockholders each year to comply with the REIT provisions of the Internal Revenue Code. All distributions will be made at the discretion of the Board and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors as the Board deems relevant.

For the three months ended March 31, 2023 and 2022, the Company made distributions to investors totaling $4.7 million and $3.9 million, respectively, of which $4.2 million and $2.9 million were returns of capital, respectively. Additionally, for the three months ended March 31, 2023 and 2022, the Company made distributions to preferred stockholders of $3,907 and $3,906, respectively.

Dividend Reinvestment Plan

On January 20, 2023, the Board adopted a distribution reinvestment plan (the “Plan”), pursuant to which the Company’s stockholders may elect to reinvest cash distributions payable by the Company in additional shares of Class A Common Stock and Class B Common Stock, at the price per share determined pursuant to the Plan. For the three months ended March 31, 2023, the Company issued 34 shares of Class B Common Stock for a total of 478 pursuant the Plan.

Note 12. Subsequent Events

Management has evaluated subsequent events through the date the consolidated financial statements were available to be issued. Management has determined that there are no material events other than the ones below that would require adjustment to, or disclosure in, the Company’s consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto and other financial information included elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us” and “our” refer to Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”).

FORWARD-LOOKING STATEMENTS

    We make forward-looking statements in this quarterly report on Form 10-Q within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections. The forward-looking statements contained in this quarterly report on Form 10-Q may include, but are not limited to, statements as to:

•our expected financial performance, operating results and our ability to make distributions to our stockholders in the future;

•our ability to achieve the expected synergies, cost savings and other benefits from the BDC Merger (as defined below);

•risks associated with achieving expected synergies, cost savings and other benefits from our increased scale;

•the availability of attractive risk-adjusted investment opportunities in our target asset class and other real estate-related investments that satisfy our objectives and strategies;

•the origination or acquisition of our targeted assets, including the timing of originations or acquisitions;

•volatility in our industry, interest rates and spreads, the debt or equity markets, the general economy or the real estate market specifically, whether the results of market events or otherwise;

•changes in our investment objectives and business strategy;

•the availability of financing on acceptable terms or at all;

•the performance and financial condition of our borrowers;

•changes in interest rates and the market value of our assets;

•borrower defaults or decreased recovery rates from our borrowers;

•changes in prepayment rates on our loans;

•our use of financial leverage;

•actual and potential conflicts of interest with any of the following affiliated entities: Terra Fund Advisors, LLC, Terra REIT Advisors, LLC (“Terra REIT Advisors” or our “Manager”), Terra Income Advisors, LLC; Terra Capital Partners, LLC (“Terra Capital Partners”), our sponsor; Terra Secured Income Fund 5, LLC (“Terra Fund 5”); Terra JV, LLC (“Terra JV”); Terra Income Fund 6, Inc. (“Terra Fund 6” or “Terra BDC”); Terra Secured Income Fund 5 International; Terra Income Fund International; Terra Secured Income Fund 7, LLC (“Terra Fund 7”); Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”); Mavik Real Estate Special Opportunities Fund, LP (“RESOF”); or any of their affiliates;

•our dependence on our Manager or its affiliates and the availability of its senior management team and other personnel;

•liquidity transactions that may be available to us in the future, including a liquidation of our assets, a sale of our company, a listing of our shares of common stock on a national securities exchange, or an adoption of a share

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repurchase plan or a strategic business combination, in each case, which may include the distribution of our common stock indirectly owned by certain of our affiliate funds (the “Terra Funds”) to the ultimate investors in the Terra Funds, and the timing of any such transactions;

•actions and initiatives of the U.S. federal, state and local government and changes to the U.S., federal, state and local government policies and the execution and impact of these actions, initiatives and policies;

•limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our exemption exclusion or from registration under the Investment Company Act of 1940, as amended (the “1940 Act”), and to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes; and

•the degree and nature of our competition.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Part I — Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2022 and in “Part II — Item 1A. Risk Factors” in this quarterly report on Form 10-Q. Other factors that could cause actual results to differ materially include:

•changes in the economy;

•risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and

•future changes in laws or regulations and conditions in our operating areas.

We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders are advised to consult any additional disclosures that we may make directly to stockholders or through reports that we may file in the future with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Overview

    We are 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 throughout the United States, which we collectively refer to as our targeted assets. From time to time, we may acquire real estate encumbering the senior loans through foreclosure, may invest in real estate related joint ventures and may directly acquire real estate properties. Our loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. We focus on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties primarily in primary and secondary markets. We believe loans in this size range are subject to less competition, offer higher risk adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. Our investment objective is to provide attractive risk-adjusted returns to our stockholders, primarily through regular distributions. There can be no assurances that we will be successful in meeting our investment objective.

    As of March 31, 2023, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of 30 loans in 10 states with an aggregate net principal balance of $619.7 million, a weighted average coupon rate of 11.8% and a weighted average remaining term to maturity of 1.1 years.

    Each of our loans was originated by Terra Capital Partners or its affiliates. Our portfolio is diversified based on location of the underlying properties, loan structure and property type. As of March 31, 2023, our portfolio included underlying properties located in 30 markets, across 10 states and includes property types such as multifamily housing, student housing, commercial offices, medical offices, mixed-use and industrial properties. The profile of these properties ranges from stabilized and value-added properties to pre-development and construction. Our loans are structured across mezzanine debt, first mortgages, preferred equity investments and credit facilities.

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    We were incorporated under the Maryland General Corporation Law on December 31, 2015. Through December 31, 2015, our business was conducted through a series of predecessor private partnerships. At the beginning of 2016, we completed the merger of these private partnerships into a single entity as part of our plan to reorganize our business as a REIT for federal income tax purposes. Following the REIT formation transaction, Terra Fund 5 contributed the consolidated portfolio of net assets of certain Terra Funds to our company in exchange for all of the shares of our common stock. On March 2, 2020, we engaged in a series of transactions pursuant to which we issued an aggregate of 4,574,470.35 shares of common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by us, cash of $25.5 million and other working capital. Following the consummation of the BDC Merger (as defined below) and as of March 31, 2023, former Terra BDC stockholders owned approximately 19.9% of our common equity, Terra JV held 70.0% of the issued and outstanding shares of our common stock with the remainder of 10.1% held by Terra Offshore REIT; and Terra Fund 5 and Terra Fund 7 owned an 87.6% and 12.4% interest, respectively, in Terra JV.

We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2016. So long as we qualify as a REIT, we generally are not subject to U.S. federal income tax on our net taxable income to the extent that we annually distribute all of our net taxable income to our stockholders.

Recent Developments    

BDC Merger

On October 1, 2022 (the “Closing Date”), pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the "Merger Agreement"), Terra BDC merged with and into Terra LLC, our wholly owned subsidiary, with Terra LLC continuing as the surviving entity of the merger (the "BDC Merger") and as our wholly owned subsidiary. The Certificate of Merger and Articles of Merger with respect to the BDC Merger were filed with the Secretary of State of the State of Delaware and State Department of Assessments and Taxation of Maryland (the “SDAT”), respectively, with an effective time and date of 12:02 a.m., Eastern Time, on the Closing Date (the “Effective Time”).

At the Effective Time, except for any shares of Terra BDC Common Stock held by us or any of our wholly owned subsidiaries or Terra BDC, which shares were automatically retired and ceased to exist with no consideration paid therefor, each issued and outstanding share of Terra BDC Common Stock was automatically cancelled and retired and converted into the right to receive (i) 0.595 shares of our newly designated Class B Common Stock, par value $0.01 per share (“Class B Common Stock”) and (ii) cash, without interest, in lieu of any fractional shares of Class B Common Stock otherwise issuable in an amount, rounded to the nearest whole cent, determined by multiplying (x) the fraction of a share of Class B Common Stock to which such holder would otherwise be entitled by (y) $14.38.

Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of the Closing Date. Following the consummation of the BDC Merger, former Terra BDC stockholders owned approximately 19.9% of our common equity.

Portfolio Summary

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

	March 31, 2023
	Fixed Rate			Floating Rate (1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements			Total Net Loans
Number of loans	6			24			30			1			30
Principal balance	$	59,726,205		$	573,106,467		$	632,832,672		$	13,106,844		$	619,725,828
Carrying value	60,121,950			549,826,839			609,948,789			13,209,982			596,738,807
Fair value	59,314,040			553,011,148			612,325,188			13,209,983			599,115,205
Weighted average coupon rate	13.17		%	11.78		%	11.92		%	16.80		%	11.81		%
Weighted-average remaining term (years)	1.71			1.03			1.09			1.44			1.09

45

	December 31, 2022
	Fixed Rate			Floating Rate (1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements			Total Net Loans
Number of loans	8			23			31			1			31
Principal balance	$	90,990,183		$	554,805,276		$	645,795,459		$	12,584,958		$	633,210,501
Carrying value	92,274,998			534,215,769			626,490,767			12,680,594			613,810,173
Fair value	90,729,098			532,416,656			623,145,754			12,680,595			610,465,159
Weighted average coupon rate	13.82		%	11.23		%	11.59		%	16.36		%	11.50		%
Weighted-average remaining term (years)	1.35			1.10			1.14			1.69			1.13

_______________

(1)These loans pay a coupon rate of London Interbank Offered Rate (“LIBOR”) or Secured Overnight Financing Rate (“SOFR”) plus a fixed spread. Coupon rate shown was determined using LIBOR of 4.86%, average SOFR of 4.63% and forward-looking term rate based on SOFR (“Term SOFR”) of 4.80% as of March 31, 2023, and LIBOR of 4.39%, average SOFR of 4.06% and Term SOFR of 4.36% as of December 31, 2022.

(2)As of March 31, 2023 and December 31, 2022, amount included $427.3 million and $413.1 million of senior mortgages used as collateral for $277.9 million and $261.0 million of borrowings under credit facilities, respectively.

(3)As of March 31, 2023 and December 31, 2022, 22 and 21 of these loans, respectively, are subject to a LIBOR or SOFR floor, as applicable.

    In addition to our net loan portfolio, as of March 31, 2023, we owned three industrial buildings acquired in 2023 and a multi-tenant office building acquired pursuant to a foreclosure and as of December 31, 2022, we owned a multi-tenant office building acquired pursuant to a foreclosure. The real estate and related lease intangible assets and liabilities had a net carrying value of $88.8 million and $40.6 million as of March 31, 2023 and December 31, 2022, respectively. In connection with the acquisition of the industrial buildings in 2023, we obtained mortgage financing of $32.1 million for the acquisition. As of March 31, 2023, the mortgage loans payable encumbering the industrial buildings and the multi-tenant office building had an outstanding principal amount of $61.4 million and as of December 31, 2022, the mortgage loans payable encumbering the multi-tenant office building had an outstanding principal amount of $29.3 million.

Additionally, as of March 31, 2023 and December 31, 2022, we owned 23.4% and 50.0%, respectively, of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. We also beneficially owned equity interests in three joint ventures that invest in real estate properties. In 2022, in connection with a mezzanine loan we originated, we entered into a residual profit sharing arrangement with the borrower. We accounted for this arrangement as an equity investment. As of March 31, 2023 and December 31, 2022, these equity investments had total carrying value of $53.6 million and $62.5 million, respectively.

Book Value Per Share

We calculate our book value per share by dividing our net equity by the number of outstanding shares of our common stock, unless otherwise determined by our Board. Our book value per share of Class B Stock Common Stock as of March 31, 2023 and December 31, 2022 was $12.86 and $13.23, respectively.

Portfolio Investment Activity

For the three months ended March 31, 2023 and 2022, we invested $25.7 million and $26.0 million in new and add-on investments and had $39.9 million and $1.4 million of repayments, resulting in net repayments of $14.2 million and net investments of $24.6 million, respectively. Amounts are net of obligations under participation agreements, secured borrowing, borrowings under the master repurchase agreement, the term loan, the repurchase agreements and the revolving line of credit.

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Net Loan Portfolio Information

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

	March 31, 2023						December 31, 2022
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	473,858,731	$	478,713,612	80.2	%	$	456,408,889	$	461,299,182	75.1	%
Preferred equity investments	122,131,455		122,948,116		20.6	%	121,231,434		122,132,177		19.9	%
Mezzanine loans	23,735,642		23,728,656		4.0	%	26,767,345		26,770,521		4.4	%
Credit facility	—		—		—	%	28,802,833		29,080,183		4.7	%
Allowance for loan losses	—		(28,651,577)		(4.8)	%	—		(25,471,890)		(4.1)	%
Total	$	619,725,828	$	596,738,807	100.0	%	$	633,210,501	$	613,810,173	100.0	%

	March 31, 2023						December 31, 2022
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	149,099,692	$	149,449,419	25.1	%	$	171,611,750	$	172,042,063	27.9	%
Industrial	127,399,590		128,361,229		21.5	%	147,796,164		148,891,742		24.3	%
Multifamily	112,973,073		113,781,434		19.1	%	104,589,464		105,570,432		17.2	%
Mixed-use	85,128,218		86,026,507		14.4	%	64,880,450		65,838,965		10.7	%
Infill land	49,652,873		50,535,097		8.5	%	48,860,291		49,565,437		8.1	%
Hotel - full/select service	43,222,382		43,793,356		7.3	%	43,222,382		43,758,804		7.1	%
Student housing	31,000,000		31,744,890		5.3	%	31,000,000		31,774,261		5.2	%
Infrastructure	21,250,000		21,698,452		3.6	%	21,250,000		21,840,359		3.6	%
Allowance for loan losses	—		(28,651,577)		(4.8)	%	—		(25,471,890)		(4.1)	%
Total	$	619,725,828	$	596,738,807	100.0	%	$	633,210,501	$	613,810,173	100.0	%

	March 31, 2023						December 31, 2022
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	124,783,800	$	126,179,087	21.1	%	$	151,668,387	$	153,158,967	24.9	%
New York	88,108,375		88,108,375		14.8	%	91,845,479		91,877,084		14.9	%
Georgia	72,983,863		73,647,905		12.3	%	72,401,718		73,101,964		11.9	%
New Jersey	70,891,499		71,920,880		12.1	%	62,228,622		62,958,482		10.3	%
Texas	68,160,964		68,687,384		11.5	%	67,625,000		68,142,046		11.1	%
Washington	63,376,281		63,434,458		10.6	%	56,671,267		57,027,639		9.3	%
Utah	49,250,000		50,522,239		8.5	%	49,250,000		50,698,251		8.3	%
North Carolina	44,171,046		44,601,994		7.5	%	43,520,028		44,041,162		7.2	%
Arizona	31,000,000		31,288,062		5.2	%	31,000,000		31,276,468		5.1	%
Massachusetts	7,000,000		7,000,000		1.2	%	7,000,000		7,000,000		1.1	%
Allowance for loan losses	—		(28,651,577)		(4.8)	%	—		(25,471,890)		(4.1)	%
Total	$	619,725,828	$	596,738,807	100.0	%	$	633,210,501	$	613,810,173	100.0	%

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Factors Impacting Operating Results

    Our results of operations are affected by a number of factors and primarily depend on, among other things, the level of the interest income from targeted assets, the market value of our assets and the supply of, and demand for, real estate-related loans, including mezzanine loans, first mortgage loans, subordinated mortgage loans, preferred equity investments and other loans related to high quality commercial real estate in the United States, and the financing and other costs associated with our business. Interest income and borrowing costs may vary as a result of changes in interest rates, which could impact the net interest we receive on our assets. Our operating results may also be impacted by conditions in the financial markets and unanticipated credit events experienced by borrowers under our loan assets.

Credit Risk

    Credit risk represents the potential loss that we would incur if our borrowers failed to perform pursuant to the terms of their obligations to us. With respect to our loan portfolio, we seek to manage credit risk by limiting exposure to any one individual borrower and any one asset class.

    Additionally, our Manager employs an asset management approach and monitors the portfolio of investments through, at a minimum, quarterly financial review of property performance including net operating income, loan-to-value, debt service coverage ratio and the debt yield. Our Manager also requires certain borrowers to establish an interest reserve, as a form of additional collateral, for the purpose of providing for future interest or property-related operating payments.

    The performance and value of our loans depends upon the sponsors’ ability to operate or manage the development of the respective properties that serve as collateral so that each property’s value ultimately supports the repayment of the loan balance. Mezzanine loans and preferred equity investments are subordinate to senior mortgage loans and, therefore, involve a higher degree of risk. In the event of a default, mezzanine loans and preferred equity investments will be satisfied only after the senior lender’s investment is fully recovered. As a result, in the event of a default, we may not recover all of our investments.

    In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control. We seek to manage these risks through our Manager's underwriting and asset management processes.

    We maintain all of our cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation.

Concentration Risk

    We hold real estate-related loans. Thus, our loan portfolio may be subject to a more rapid change in value than would be the case if it were required to maintain a wide diversification among industries, companies and types of loans. The result of such concentration in real estate assets is that a loss in such loans could materially reduce our capital.

Interest Rate Risk

    Interest rate risk represents the effect from a change in interest rates, which could result in an adverse change in the fair value of our interest-bearing financial instruments. With respect to our business operations, increases in interest rates, in general, may over time cause: (i) the interest expense associated with variable rate borrowings to increase; (ii) the value of real estate-related loans to decline; (iii) coupons on variable rate loans to reset, although on a delayed basis, to higher interest rates; (iv) to the extent applicable under the terms of our investments, prepayments on real estate-related loans to slow; and (v) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase.

    Conversely, decreases in interest rates, in general, may over time cause: (i) the interest expense associated with variable rate borrowings to decrease; (ii) the value of real estate-related loans to increase; (iii) coupons on variable rate real estate-related loans to reset, although on a delayed basis, to lower interest rates; (iv) to the extent applicable under the terms of our investments, prepayments on real estate-related loans to increase; and (v) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease.

48

Prepayment Risk

    Prepayments can either positively or adversely affect the yields on our loans. Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we do not collect a prepayment fee in connection with a prepayment or are unable to invest the proceeds of such prepayments received, the yield on the portfolio will decline. In addition, we may acquire assets at a discount or premium and if the asset does not repay when expected, the anticipated yield may be impacted. Under certain interest rate and prepayment scenarios we may fail to recoup fully our cost of acquisition of certain loans.

Extension Risk

    Extension risk is the risk that our assets will be repaid at a slower rate than anticipated and generally increases when interest rates rise. In which case, to the extent we have financed the acquisition of an asset, we may have to finance our asset at potentially higher costs without the ability to reinvest principal into higher yielding securities because borrowers prepay their mortgages at a slower pace than originally expected, adversely impacting our net interest spread, and thus our net interest income.

Real Estate Risk

    The market values of commercial and residential mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; pandemics; natural disasters; and other acts of god. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.

Use of Leverage

    We deploy moderate amounts of leverage as part of our operating strategy, which may consist of borrowings under first mortgage financings, warehouse facilities, term loans, repurchase agreements and other credit facilities. While borrowing and leverage present opportunities for increasing total return, they may have the effect of potentially creating or increasing losses.

Market Risk

    Our loans are highly illiquid, and there is no assurance that we will achieve our investment objectives, including targeted returns. Due to the illiquidity of the loans, valuation of our loans may be difficult, as there generally will be no established markets for these loans.

49

Results of Operations

    The following table presents the comparative results of our operations:

	Three Months Ended March 31,
	2023		2022		Change
Revenues
Interest income	$	15,615,807	$	8,882,151	$	6,733,656
Real estate operating revenue	1,332,969		2,979,454		(1,646,485)
Other operating income	53,395		250,665		(197,270)
	17,002,171		12,112,270		4,889,901
Operating expenses
Operating expenses reimbursed to Manager	2,177,004		1,928,563		248,441
Asset management fee	1,997,427		1,488,095		509,332
Asset servicing fee	470,525		349,329		121,196
(Reversal of) provision for credit losses	(850,051)		50,296		(900,347)
Real estate operating expenses	1,209,912		1,217,963		(8,051)
Depreciation and amortization	681,813		1,718,372		(1,036,559)
Impairment charge	—		1,604,989		(1,604,989)
Professional fees	979,895		742,518		237,377
Directors fees	96,464		36,252		60,212
Other	215,244		83,421		131,823
	6,978,233		9,219,798		(2,241,565)
Operating income	10,023,938		2,892,472		7,131,466
Other income and expenses
Interest expense from obligations under participation agreements	(532,146)		(1,075,109)		542,963
Interest expense on repurchase agreements payable	(3,056,506)		(755,826)		(2,300,680)
Interest expense on mortgage loans payable	(746,128)		(518,617)		(227,511)
Interest expense on revolving line of credit	(1,965,534)		(524,294)		(1,441,240)
Interest expense on term loan payable	(351,563)		(164,969)		(186,594)
Interest expense on unsecured notes payable	(2,394,306)		(1,430,183)		(964,123)
Interest expense on secured borrowing	—		(552,785)		552,785
Net unrealized gains (losses) on marketable securities	6,584		(99,044)		105,628
(Loss) income from equity investment in unconsolidated investments	(436,860)		1,419,335		(1,856,195)
Realized gains on marketable securities	—		51,133		(51,133)
	(9,476,459)		(3,650,359)		(5,826,100)
Net income (loss)	$	547,479	$	(757,887)	$	1,305,366

Net Loan Portfolio

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

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

	Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
	Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)		Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)
Total portfolio
Gross loans	$	634,362,529	11.9	%	$	506,206,479	7.7	%
Obligations under participation agreements    and secured borrowing	(12,900,803)		16.8	%	(79,023,662)		10.4	%
Repurchase agreement payable	(166,262,832)		6.7	%	(102,225,409)		2.5	%
Term loan payable	—		—	%	(42,140,886)		5.3	%
Revolving line of credit	(97,062,727)		8.1	%	(44,891,269)		4.0	%
Net loans (3)	$	358,136,167	15.2	%	$	237,925,253	10.2	%
Senior loans
Gross loans	498,798,978		11.3	%	304,278,978		6.2	%
Obligations under participation agreements    and secured borrowing	—		—	%	(49,397,683)		9.9	%
Repurchase agreement payable	(166,262,832)		6.7	%	(102,225,409)		2.5	%
Term loan payable	—		—	%	(42,140,886)		5.3	%
Revolving line of credit	(97,062,727)		8.1	%	(44,891,269)		4.0	%
Net loans (3)	$	235,473,419	15.9	%	$	65,623,731	11.3	%
Subordinated loans (4)
Gross loans	135,563,551		14.0	%	201,927,501		9.6	%
Obligations under participation agreements	(12,900,803)		16.8	%	(29,625,979)		11.2	%
Net loans (3)	$	122,662,748	13.7	%	$	172,301,522	9.3	%

_______________

(1)Amount is calculated based on the number of days each loan is outstanding.

(2)Amount is calculated based on the underlying principal amount of each loan.

(3)The weighted average coupon rate represents net interest income over the period calculated using the weighted average coupon rate and weighted average principal amount shown on the table (interest income on the loans less interest expense) divided by the weighted average principal amount of the net loans during the period.

(4)Subordinated loans include mezzanine loans, preferred equity investments and credit facilities.

Interest Income

    For the three months ended March 31, 2023 as compared to the same period in 2022, interest income increased by $6.7 million, primarily due to an increase in contractual interest income as a result of an increase in the weighted average principal balance of gross loans due to new loans we originated in 2022 and loans we acquired in connection with the BDC Merger, as well as an increase in the weighted average coupon rate due to increases in the underlying index rates.

Real Estate Operating Revenue

For the three months ended March 31, 2023 as compared to the same period in 2022, real estate operating revenue decreased by $1.6 million, as a result of lease termination income recognized in the first quarter of 2022 in connection with a termination notice received in November 2021.

Other Operating Income

For the three months ended March 31, 2023 as compared to the same period in 2022, other operating income decreased by $0.2 million, primarily as a result of a decrease in application fees income on deals under application.

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Operating Expenses Reimbursed to Manager

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

For the three months ended March 31, 2023 as compared to the same period in 2022, operating expenses reimbursed to our Manager increased by $0.2 million, as a result of an increase in the allocation ratio resulting from an increase in total assets under management primarily due to loans acquired in connection with the BDC Merger.

Asset Management Fee

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

    For the three months ended March 31, 2023 as compared to the same period in 2022, asset management fees increased by $0.5 million, primarily due to an increase in total assets under management primarily resulting from loans acquired in connection with the BDC Merger.

Asset Servicing Fee

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

    For each of the three months ended March 31, 2023 as compared to the same period in 2022, asset servicing fees increased by $0.1 million, primarily due to an increase in total assets under management primarily resulting from loans acquired in connection with the BDC Merger.

(Reversal of) Provision for Credit Losses

    On January 1, 2023, we adopted the provisions of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments

— Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses. Prior to the adoption of ASU 2016-13, we recorded an allowance for credit 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) past due loan reserves, if any.

    For the three months ended March 31, 2023, we reversed $0.9 million of provision for credit losses due to an improvement in macroeconomic forecasts during the period, partially offset by incremental credit losses incurred on newly originated loans. For the three months ended March 31, 2022, we recorded provision for credit losses of $0.1 million.

Depreciation and Amortization

For the three months ended March 31, 2023 as compared to the same period in 2022, depreciation and amortization decreased by $1.0 million, primarily due to a lease termination notice received in November 2021, at which time we accelerated the amortization of lease intangibles through November 2022, with no corresponding accelerated amortization recognized in the first quarter of 2023.

Impairment Charge

For the three months ended March 31, 2023, we did not record any impairment charges. For the three months ended March 31, 2022, we recognized an impairment charge of $1.6 million, on 4.9 acres of the development land located in Pennsylvania in order to reduce the carrying value of the land to its estimated fair value, which is the estimated selling price less the cost of sale. The development land was sold in the second quarter of 2022.

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Professional Fees

    For the three months ended March 31, 2023 as compared to the same period in 2022, professional fees increased by $0.2 million, primarily due to higher costs of compliance as a result of the BDC Merger.

Directors Fees

For the three months ended March 31, 2023 as compared to the same period in 2022, directors fees increased by $0.1 million, as a result of an increase in the size of our Board due to the BDC Merger.

Other

For the three months ended March 31, 2023 as compared to the same period in 2022, other expense increased by $0.1 million, as a result of an increase in filing fees and dead deal costs.

Interest Expense from Obligations under Participation Agreements

    For the three months ended March 31, 2023 as compared to the same period in 2022, interest expense from obligations under participation agreements decreased by $0.5 million, as a result of a decrease in the weighted average principal amount outstanding on obligations under participation agreements, primarily due to the release of obligations under participation agreements with Terra BDC in connection with the BDC Merger.

Interest Expense on Repurchase Agreements Payable

    On November 8, 2021, we entered into a master repurchase agreement that provides for advances of up to $195 million which we expect to use to finance certain secured performing commercial real estate loans, including senior mortgage loans. Additionally, on February 18, 2022, we entered into another master repurchase agreement that provides for advances of up to $200 million, which we expect to use to finance the originations of certain secured performing commercial real estate loans and the acquisitions of certain secured non-performing commercial real estate loans.

    For the three months ended March 31, 2023, interest expense on repurchase agreement payable increased by $2.3 million, as a result of an increase in the weighted average principal amount outstanding on repurchase agreements payable as well as an increase in the weighted average coupon rate.

Interest Expense on Mortgage Loans Payable

For the three months ended March 31, 2023 as compared to the same period in 2022, interest expense on mortgage loan payable increased by $0.2 million, as a result of an increase in the weighted average principal amount outstanding on mortgage loan payable, primarily due to financing obtained in connection with an acquisition of real estate in March 2023, as well as in increase in the index rate on the existing mortgage loan payable.

Interest Expense on Revolving Line of Credit

    On March 12, 2021, we entered into a Business Loan and Security Agreement (the “revolving line of credit”) to provide for advances up to the lesser of $75.0 million or the amount determined by the borrowing base, which is based on the eligible assets pledged to the lender. On January 4, 2022, we amended the revolving line of credit to increase the maximum amount available to $125.0 million.

    For the three months ended March 31, 2023 as compared to the same period in 2022, interest expense on revolving line of credit increased by $1.4 million, due to an increase in weighted average principal amount outstanding on the revolving line of credit as well as an increase in the index rate on the revolving line of credit

Interest Expense on Term Loan Payable

On September 3, 2020, we entered into an indenture and credit agreement that provided for a floating rate loan of $103.0 million, $3.6 million of additional future advances, and up to $11.6 million of additional future discretionary advances, in connection with certain outstanding funding commitments under the mortgage assets owned by us and financed under the indenture and credit agreement. The loan bore interest at LIBOR plus 4.25% with a LIBOR floor of 1.0%. On February 18,

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2022, we refinanced this loan with a new repurchase agreement. Additionally, in connection with the BDC Merger, we assumed a term loan of $25.0 million. The term loan bears interest at an annual rate of 5.625% and matures on July 1, 2023.

For the three months ended March 31, 2023 as compared to the same period in 2022, interest expense on term loan payable increased by $0.2 million, as a result of interest expense recognized on the term loan that we acquired in connection with the BDC Merger on October 1, 2022, partially offset by the reversal of the previously accrued step-up interest of $0.4 million during the first quarter of 2022 in connection with the termination of the old term loan.

Interest Expense on Unsecured Notes Payable

In June 2021, we issued $85.1 million in aggregate principal amount of 6.00% notes due 2026. In connection with the BDC Merger, we assumed $38.4 million in aggregate principal amount of 7.00% notes due in 2026.

For the three months ended March 31, 2023 as compared to the same periods in 2022, interest expense on unsecured notes payable increased by $1.0 million, as a result of an increase in the weighted average principal amount outstanding due to the assumption of unsecured notes payable in connection with the BDC Merger.

Interest Expense on Secured Borrowing

In March 2020, we entered into a financing transaction where a third-party purchased an A-note position. However, the sale of the A-note position did not qualify for sale accounting treatment and therefore, the gross amount of the loan remained in the consolidated balance sheets. The portion that was sold was reflected as secured borrowing in the consolidated balance sheets, and the associated interest was reflected as interest expense on secured borrowing in the consolidated statements of operations. The secured borrowing was repaid in August 2022.

For the three months ended March 31, 2023 as compared to the same period in 2022, interest expense on secured borrowing decreased by $0.6 million as a result of a decrease in the weighted average principal amount outstanding due to repayment in August 2022.

Net Unrealized Gains (Losses) on Marketable Securities

For the three months ended March 31, 2023 we recognized net unrealized gains on marketable securities of $0.01 million, as result of an increase in the price of the marketable securities. For the three months ended March 31, 2022, we recognized net unrealized losses of $0.1 million, as result of an increase in the price of the marketable securities.

(Loss) Income from Equity Investment in Unconsolidated Investments

In August 2020, we entered into a subscription agreement with RESOF, an affiliate managed by our Manager, whereby we committed to fund up to $50.0 million to purchase partnership interest in RESOF. RESOF’s primary investment objective is to generate attractive risk-adjusted returns by purchasing performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). As of March 31, 2023 and 2022, we owned 23.4% and 27.9% of the equity interest in RESOF, respectively.

We also owned beneficial equity interests in three joint ventures that invest in real estate properties. In 2022, in connection with a mezzanine loan we originated, we entered into a residual profit sharing arrangement with the borrower. We accounted for this arrangement as an equity investment.

For the three months ended March 31, 2023, we recognized a loss from equity investment in unconsolidated investments of $0.4 million, which primarily consisted of net equity loss from the joint ventures and the mezzanine loan of $0.7 million, partially offset by equity income from RESOF of $0.3 million . For the three months ended March 31, 2022, we recognized income from equity investment in unconsolidated investments of $1.4 million, which consisted of equity income from RESOF of $1.3 million and equity income from the joint ventures of $0.1 million.

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Net Income (Loss)

    For the three months ended March 31, 2023, net income was $0.5 million, compared to net loss of $0.8 million for the same period in 2022.

Financial Condition, Liquidity and Capital Resources

    Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, funding and maintaining our assets and operations, making distributions to our stockholders and other general business needs. We use significant cash to purchase our target assets, repay principal and interest on our borrowings, make distributions to our investors and fund our operations. Our primary sources of cash generally consist of payments of principal and interest we receive on our portfolio of investments, cash generated from our operating results and unused borrowing capacity under our financing sources. We deploy moderate amounts of leverage as part of our operating strategy and use a number of sources to finance our target assets, including our senior notes, term loan, repurchase agreement and revolving line of credit. We may use other sources to finance our target assets, including bank financing and arranged financing facilities with domestic or international financing providers. In addition, we may divide the loans we originate into senior and junior tranches and dispose of the more senior tranches as an additional means of providing financing to our business.

    We may also issue additional equity, equity-related and debt securities to fund our investment strategies. We may issue these securities to unaffiliated third parties or to vehicles advised by affiliates of Terra Capital Partners or third parties. As part of our capital raising transactions, we may grant to one or more of these vehicles certain control rights over our activities including rights to approve major decisions we take as part of our business. In order to qualify as a REIT, we must distribute to our stockholders, each calendar year, dividends equal to at least 90% of our REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for our business.

    We expect to fund approximately $51.3 million of the unfunded commitments to borrowers during the next twelve months. We expect to maintain sufficient liquidity to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on our credit facilities. Additionally, we had $29.3 million of borrowings outstanding under a mortgage loan payable that bear interest at an annual rate of Term SOFR plus 3.85% with a Term SOFR floor of 2.23%, that is collateralized by an office building. The mortgage loan payable matures on May 31, 2023. We expect to exercise the extension option to extend the mortgage loan payable for another six months then sell the underlying collateral and repay the mortgage loan payable. In connection with the BDC Merger, we assumed a $25.0 million term loan. This term loan bears interest at an annual rate of 5.625% and matures on July 1, 2023. We expect to either maintain sufficient liquidity to repay the facility or refinance the facility.

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Summary of Financing

The table below summarizes our debt financing as of March 31, 2023:

Type of Financing	Maximum Amount Available		Outstanding Balance		Amount Remaining Available		Interest Rate	Maturity Date
Fixed Rate:
Senior unsecured notes	N/A		$	85,125,000	N/A		6.00%	6/30/2026
Senior unsecured notes	N/A		38,375,000		N/A		7.00%	3/31/2026
Term loan	N/A		25,000,000		N/A		5.625%	7/1/2023
			$	148,500,000
Variable Rate:
Mortgage loan payable	N/A		$	29,252,308	N/A		Term SOFR plus 3.85% with a Term SOFR floor of 2.23%	5/31/2023
Mortgage loan payable	N/A		32,100,000		N/A		Term SOFR +3.5% (Term SOFR Floor of 3.75%	4/9/2027
Line of credit	$	125,000,000	125,000,000		$	—	Term SOFR plus 3.35% with a combined floor of 6.00%	3/12/2024
UBS repurchase agreement	195,000,000		51,050,000		143,950,000		LIBOR or Term SOFR depending on repurchased asset index plus a spread ranging from 1.60% to 2.25%	11/7/2024
GS repurchase agreement	200,000,000		101,897,394		98,102,606		Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 1.75% to 3.00%)	2/18/2024
	$	520,000,000	$	339,299,702	$	242,052,606

Cash Flows Provided by Operating Activities

    For the three months ended March 31, 2023 as compared to the same period in 2022, cash flows provided by operating activities increased by $5.6 million, primarily due to an increase in net contractual interest income.

Cash Flows Used in Investing Activities

    For the three months ended March 31, 2023, cash flows used in investing activities were $52.0 million, primarily related to purchase of real estate properties of $48.8 million, origination and purchase of loans of $46.2 million and purchase of held-to-maturity debt securities of $20.0 million, partially offset by proceeds from repayments of loans of $59.2 million and return of capital on unconsolidated investments of $3.9 million.

    For the three months ended March 31, 2022, cash flows used in investing activities were $107.6 million, primarily related to origination and purchase of loans of $88.1 million and purchase of equity interests in unconsolidated investments of $21.2 million.

Cash Flows Provided by Financing Activities

    For the three months ended March 31, 2023, cash flows provided by financing activities were $43.9 million, primarily due to proceeds from borrowings under the revolving line of credit of $34.9 million, and proceeds from mortgage loan payable of $32.1 million, partially offset by repayments of borrowings under repurchase agreements of $19.2 million and distributions paid of $4.7 million.

    For the three months ended March 31, 2022, cash flows from financing activities were $78.9 million, primarily due to proceeds from borrowings under the revolving line of credit and repurchase agreements of $158.3 million and proceeds from obligations under participation agreements and secured borrowing of $18.7 million. These cash inflows were partially offset by repayments on borrowings under the term loan of $93.8 million and distributions paid of $3.9 million.

Distribution Reinvestment Plan

On January 20, 2023, our Board adopted a distribution reinvestment plan (the “Plan”), pursuant to which our stockholders may elect to reinvest cash distributions payable by us in additional shares of Class A Common Stock and Class B Common Stock, at the price per share determined pursuant to the Plan.

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Critical Accounting Policies and Use of Estimates

    Our consolidated financial statements are prepared in conformity with United States generally accepted accounting principles, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the consolidated financial statements, management has utilized available information, including industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As we execute our expected operating plans, we will describe additional critical accounting policies in the notes to our future consolidated financial statements in addition to those discussed below.

Current Expected Credit Losses Reserve

On January 1, 2023, we adopted the provisions of ASU 2016-13, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses (“CECL”). The CECL model requires the consideration of possible credit losses over the life of an instrument as opposed to only estimating credit losses upon the occurrence of a discrete loss event under the previous “incurred loss” methodology.

We utilize information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio. We utilize a loan loss model that is widely used among banks and commercial mortgage REITs and is marketed by a leading commercial mortgage-based security data analytics provider. It employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. We provide specific loan-level inputs which include loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. We select from a group of independent five-year macroeconomic forecasts included in the model that are updated regularly based on current economic trends. Based on the inputs, the loan loss model determines a loan loss rate through the generation of probability of defaults (PD) and loss given defaults (LGD) for each loan. The CECL reserve is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect the expected credit losses.

Management Agreement with Terra REIT Advisors

    We currently pay the following fees to Terra REIT Advisors pursuant to the Management Agreement:

    Origination and Extension Fee. An origination fee in the amount of 1.0% of the amount used to originate, acquire, fund or structure real estate-related investments, including any third-party expenses related to such loan. In the event that the term of any real estate-related loan is extended, our Manager also receives an origination fee equal to the lesser of (i) 1.0% of the principal amount of the loan being extended or (ii) the amount of fee paid by the borrower in connection with such extension.

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

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

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

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

    Transaction Breakup Fee. In the event that we receive any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, our Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by our Manager with respect to its evaluation and pursuit of such transactions.

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

The following table presents a summary of fees paid and costs reimbursed to our Manager in connection with providing services to us:

	Three Months Ended March 31,
	2023		2022
Origination and extension fee expense (1)(2)	$	471,448	$	686,365
Asset management fee	1,997,427		1,488,095
Asset servicing fee	470,525		349,329
Operating expenses reimbursed to Manager	2,177,004		1,928,563
Disposition fee (3)	290,813		—
Total	$	5,407,217	$	4,452,352

_______________

(1)Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan.

(2)Amount for the three months ended March 31, 2023 excluded $0.5 million of origination fee paid to the Manager in connection with the acquisition of the three industrial buildings in 2023. Amount for the three months ended March 31, 2022 excluded $0.2 million of origination fees paid to our Manager in connection with our equity investment in an unconsolidated investment. These origination fees were capitalized to the carrying value of the unconsolidated investment as a transaction cost.

(3)Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations.

Cost Sharing and Reimbursement Agreement with Terra LLC

We have entered into a cost sharing and reimbursement agreement with Terra LLC, effective October 1, 2022 pursuant to which Terra LLC will be responsible for its allocable share of our expenses, including fees paid by us to our Manager based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on our consolidated financial statements.

Participation Agreements

    We have further diversified our exposure to loans and borrowers by entering into participation agreements whereby we transferred a portion of certain of our loans on a pari passu basis to related parties, primarily other affiliated funds managed by our Manager or its affiliates, and to a lesser extent, unrelated parties. We have also sold a portion of a loan to a third party that did not qualify for sale accounting. In connection with the BDC Merger, the obligations under participation agreements with Terra BDC totaling $37.0 million were effectively extinguished.

    As of March 31, 2023, the principal balance of our participation obligation was $13.1 million, which was a participation obligation to a third party.

    The loans that are subject to participation agreements are held in our name, but each of the participant’s rights and obligations, including with respect to interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon their respective pro rata participation interest in such participated investments, as specified in the respective participation agreements. We do not have

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direct liability to a participant with respect to the underlying loan and the participants’ share of the investments is repayable only from the proceeds received from the related borrower/issuer of the investments and, therefore, the participants also are subject to credit risk (i.e., risk of default by the underlying borrower/issuer).

    Pursuant to the participation agreement with these entities, we receive and allocate the interest income and other related investment income to the participants based on their respective pro rata participation interest. The affiliated fund participant pays related expenses also based on their respective pro rata participation interest (i.e., asset management and asset servicing fees, disposition fees) directly to our Manager, as per the terms of each respective affiliate’s management agreement.

    Other than for U.S. federal income tax purposes, our loan participations do not qualify for sale treatment. As such, the investments remain on our combined consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. Similarly, interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations.

    For the three months ended March 31, 2023, the weighted average outstanding principal balance on obligations under participation agreements was approximately $12.9 million, and the weighted average interest rate was approximately 16.8%, compared to weighted average outstanding principal balance of approximately $79.0 million, and weighted average interest rate of approximately 10.4% for the three months ended March 31, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

    We may be subject to financial market risks, including changes in interest rates. To the extent that we borrow money to make investments, our net investment income will be dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. In periods of rising interest rates, our cost of funds would increase, which may reduce our net investment income. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

    As of March 31, 2023, we had eight investments with an aggregate principal balance of $244.7 million, net of obligations under participation agreements, that provide for interest income at an annual rate of LIBOR plus a spread, six of which are subject to a LIBOR floor. A decrease of 100 basis points in LIBOR would decrease our annual interest income, net of interest expense on participation agreements, by approximately $2.4 million, and an increase of 100 basis points in LIBOR would increase our annual interest income, net of interest expense on participation agreements, by approximately $2.4 million. Additionally, we had 16 investments with an aggregate principal balance of $316.5 million that provide for interest income at an annual rate of SOFR or Term SOFR, plus a spread, all of which were subject to a SOFR or Term SOFR floor. A decrease of 100 basis points in SOFR or Term SOFR would decrease our annual interest income by $3.2 million, and an increase of 100 basis points in SOFR or Term SOFR would increase our annual interest income by $3.2 million.

    Additionally, as of March 31, 2023, we had $29.3 million of borrowings outstanding under a mortgage loan payable that bear interest at an annual rate of Term SOFR plus a spread that is collateralized by an office building; $32.1 million of borrowings outstanding under another mortgage loan payable that bear interest an annual rate of Term SOFR plus a spread that is collateralized by three industrial buildings, a revolving line of credit with an outstanding balance of $125.0 million that bears interest at an annual rate of Term SOFR plus a spread that is collateralized by $217.9 million of first mortgages; a repurchase agreement with an outstanding balance of $51.1 million that bears interest at an annual rate of LIBOR or Term SOFR, as applicable, plus a spread that is collateralized by $68.1 million of first mortgages; and another repurchase agreement with an outstanding balance of $101.9 million that bears interest at an annual rate of Term SOFR plus a spread that is collateralized by $141.2 million of first mortgages. A decrease of 100 basis points in LIBOR and Term SOFR would decrease our annual interest expense by approximately $3.4 million, and an increase of 100 basis points in LIBOR and Term SOFR would increase our annual interest expense by approximately $3.4 million.

     In July 2017, the U.K. Financial Conduct Authority, which regulates the LIBOR administrator, IBA, announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021, which has subsequently been delayed to June 30, 2023. The Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions convened by the U.S. Federal Reserve, has recommended SOFR as a more robust reference rate alternative to U.S. dollar LIBOR. SOFR is calculated based on overnight transactions under repurchase agreements, backed by Treasury securities. SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR). SOFR is therefore likely to be lower than LIBOR and is less likely to correlate with the funding costs of

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financial institutions. Whether or not SOFR attains market traction as a LIBOR replacement tool remains in question. As such, the future of LIBOR at this time is uncertain.

    Potential changes, or uncertainty related to such potential changes, may adversely affect the market for LIBOR-based loans, including our portfolio of LIBOR-indexed, floating-rate loans, or the cost of our borrowings. In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based loans, including the value of the LIBOR-indexed, floating-rate loans in our portfolio, or the cost of our borrowings. In the event LIBOR is unavailable, our investment documents provide for a substitute index, on a basis generally consistent with market practice, intended to put us in substantially the same economic position as LIBOR.

    We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts, subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. For the three months ended March 31, 2023 and 2022, we did not engage in interest rate hedging activities.

Prepayment Risks

    Prepayments can either positively or adversely affect the yields on our loans. Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we do not collect a prepayment fee in connection with a prepayment or are unable to invest the proceeds of such prepayments received, the yield on the portfolio will decline. In addition, we may acquire assets at a discount or premium and if the asset does not repay when expected, the anticipated yield may be impacted. Under certain interest rate and prepayment scenarios we may fail to recoup fully our cost of acquisition of certain loans.

Extension Risk

    Extension risk is the risk that our assets will be repaid at a slower rate than anticipated and generally increases when interest rates rise. In which case, to the extent we have financed the acquisition of an asset, we may have to finance our asset at potentially higher costs without the ability to reinvest principal into higher yielding securities because borrowers prepay their mortgages at a slower pace than originally expected, adversely impacting our net interest spread, and thus our net interest income.

Real Estate Risk

    The market values of commercial and residential mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; pandemics; natural disasters; and other acts of god. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.

Credit Risk

    We are subject to varying degrees of credit risk in connection with holding a portfolio of our target assets. With respect to our loan portfolio, we seek to manage credit risk by limiting exposure to any one individual borrower and any one asset class.

    Additionally, our Manager employs an asset management approach and monitors the portfolio of investments through, at a minimum, quarterly financial review of property performance including net operating income, loan-to-value, debt service coverage ratio and the debt yield. Our Manager also requires certain borrowers to establish a cash reserve, as a form of additional collateral, for the purpose of providing for future interest or property-related operating payments.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2023. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.

Changes in Internal Control Over Financial Reporting

    During the most recent fiscal quarter, there was no change in our internal controls over financial reporting, as defined under

Rule 13a-15(f) under the Exchange Act, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Additionally, as of March 31, 2023, we owned a multi-tenant office building that is subject to a ground lease. The ground lease provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9% of the fair market value of the land. The next rent reset on the ground lease is scheduled for November 1, 2025. We are currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v. Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No. 20STCV34217. We believe this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. Our position has prevailed in all three of the prior arbitrations to reset the ground rent. We intend vigorously to pursue the litigation. While we believe our arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty. If the landlord prevails, the future rent reset determinations could result in significantly higher ground rent, which would likely result in a significant diminution in the value of our interest in the ground lease and the office building.

Item 1A. Risk Factors.

    There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None

61

Item 6.  Exhibits.

The following exhibits are filed with this report. Documents other than those designated as being filed herewith are incorporated herein by reference.

Exhibit No.	Description and Method of Filing
2.1	Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated January 1, 2016 (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019).
2.2	Amendment No. 1 to the Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated December 31, 2016 (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019).
2.3	Agreement and Plan of Merger, dated February 28, 2020, by and among Terra Property Trust, Inc., Terra Property Trust 2, Inc. and Terra Secured Income Fund 7, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 000-56117) filed with the SEC on March 5, 2020).
2.4	Agreement and Plan of Merger, dated as of May 2, 2022, by and among Terra Property Trust, Inc., Terra Income Fund 6, Inc., Terra Merger Sub, LLC, Terra Income Advisors, LLC and Terra REIT Advisors, LLC (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the SEC on May 5, 2022).
3.1	Amended and Restated Bylaws of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).
3.2	Articles of Amendment and Restatement of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).
3.3	Articles of Supplementary of Terra Property Trust, Inc. Designating 12.5% Services A Redeemable Cumulative Preferred Stock (incorporated by reference to Exhibit 3.3 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).
3.4	Articles of Amendment and Restatement of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-40496) filed with the SEC on October 3, 2022).
4.1	Indenture, dated June 10, 2021, by and between Terra Property Trust, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A (File No. 001-40496) filed with the SEC on June 14, 2021).
4.2	First Supplemental Indenture, dated June 10, 2021, by and between Terra Property Trust, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form 8-A (File No. 001-40496) filed with the SEC on June 14, 2021).
4.3	Form of Global Note representing the notes (included in Exhibit 4.2).
4.4	Indenture, dated February 10, 2021, by and between Terra Income Fund 6, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of Terra Income Fund 6, Inc.'s Current Report on Form 8-K filed with the SEC on February 10, 2021).
4.5	First Supplemental Indenture, dated February 10, 2021, by and between Terra Income Fund 6, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 of Terra Income Fund 6, Inc.’s Current Report on Form 8-K filed with the SEC on February 10, 2021).
4.6	Second Supplemental Indenture, dated October 1, 2022, by and among Terra Income Fund 6, Inc., Terra Merger Sub, LLC and U.S. Bank National Association, as trustee (incorporated by reference to exhibit 4.4 of Terra Income Fund 6, LLC’s Current Report on Form 8-K filed with the SEC on October 3, 2022).
4.7	Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form 10-K filed on March 13, 2023).

62

Exhibit No.	Description and Method of Filing
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File Included as Exhibit 101 (embedded within the Inline XBRL document)

* Filed herewith.

** Furnished herewith.

63

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 12, 2023

TERRA PROPERTY TRUST, INC.
By:	/s/ Vikram S. Uppal
	Vikram S. Uppal
	Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Gregory M. Pinkus
	Gregory M. Pinkus
	Chief Financial Officer and Chief Operating Officer,
	(Principal Financial and Accounting Officer)

64

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Vikram S. Uppal, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Terra Property Trust, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 12, 2023
		/s/ Vikram S. Uppal
		Vikram S. Uppal
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory M. Pinkus, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Terra Property Trust, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 12, 2023
		/s/ Gregory M. Pinkus
		Gregory M. Pinkus
		Chief Financial Officer and Chief Operating Officer
		(Principal Financial and Principal Accounting Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Terra Property Trust, Inc. (the “Company”) for the quarterly period ended March 31, 2023, as filed with the Securities Exchange Commission on the date hereof (the “Report”), I, Vikram S. Uppal, Chief Executive Officer, and I, Gregory M. Pinkus, Chief Financial Officer, each certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	May 12, 2023
		/s/ Vikram S. Uppal
		Vikram S. Uppal
		Chief Executive Officer
		(Principal Executive Officer)
		/s/ Gregory M. Pinkus
		Gregory M. Pinkus
		Chief Financial Officer and Chief Operating Officer
		(Principal Financial and Principal Accounting Officer)

Pursuant to the Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended.

XML

Cover - shares	3 Months Ended
	Mar. 31, 2023	May 12, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-40496
Entity Registrant Name	Terra Property Trust, Inc.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	81-0963486
Entity Address, Address Line One	205 West 28th Street
Entity Address, Address Line Two	12th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10001
City Area Code	212
Local Phone Number	753-5100
Title of 12(b) Security	6.00% Notes due 2026
Trading Symbol	TPTA
Security Exchange Name	NYSE
Title of 12(g) Security	Class B Common Stock, $0.01 par value per share
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		24,335,429
Entity Central Index Key	0001674356
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Assets
Cash and cash equivalents	$ 28,869,594	$ 28,567,825
Restricted cash	4,611,794	4,633,204
Cash held in escrow by lender	3,571,083	3,268,563
Equity investment in unconsolidated investments	53,566,840	62,498,340
Held-to-maturity debt securities	20,025,024	0
Real estate owned, net (Note 6)
Land, building and building improvements, net	94,828,089	46,660,226
Lease intangible assets, net	6,605,936	2,568,461
Operating lease right-of-use asset	27,374,554	27,378,786
Deal deposit	0	4,241,892
Interest receivable	5,227,742	4,100,501
Other assets	3,851,770	2,928,327
Total assets	858,481,215	813,336,892
Liabilities:
Term loan payable	25,000,000	25,000,000
Unsecured notes payable, net of debt issuance cost	116,976,542	116,530,673
Repurchase agreements payable, net of deferred financing fees	151,772,313	169,304,710
Obligations under participation agreements (Note 8 )	13,209,982	12,680,594
Mortgage loans payable, net of deferred financing fees and other	60,768,698	29,488,326
Revolving line of credit payable, net of deferred financing fees	124,741,957	89,807,448
Interest reserve and other deposits held on investments	4,611,794	4,633,204
Operating lease liability	27,374,554	27,378,786
Lease intangible liabilities, net (Note 6)	12,668,367	8,646,840
Due to Manager (Note 8)	3,871,022	3,935,997
Interest payable	1,482,773	1,058,001
Accounts payable and accrued expenses	1,854,679	1,452,236
Unearned income	378,018	378,018
Other liabilities	739,507	1,159,885
Total liabilities	545,450,206	491,454,718
Commitments and contingencies (Note 10)
Equity:
Additional paid-in capital	444,450,291	444,449,813
Accumulated deficit	(131,662,636)	(122,935,993)
Total equity	313,031,009	321,882,174
Total liabilities and equity	858,481,215	813,336,892
Loans Held For Investment
Assets
Loans held for investment, net of allowance for credit losses	571,176,710	584,417,939
Loans Held For Investment Acquired Through Participation
Assets
Loans held for investment, net of allowance for credit losses	38,772,079	42,072,828
Preferred Stock
Equity:
Preferred stock	$ 0	$ 0
Preferred stock, issued (in shares)	0	0
12.5% Series A Cumulative Non-Voting Preferred Stock
Equity:
Preferred stock	$ 0	$ 125,000
Preferred stock, issued (in shares)	0	125
Preferred stock outstanding (in shares)	0	125
Class A Common Stock
Equity:
Common stock	$ 0	$ 0
Class B Common Stock
Equity:
Common stock	$ 243,354	$ 243,354

XML

Consolidated Balance Sheets (Parentheticals) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Loans held for investment, net of allowance for credit losses	$ 28,651,577	$ 25,471,890
Preferred stock, par value (in usd per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	50,000,000	50,000,000
Loans Held For Investment
Loans held for investment, net of allowance for credit losses	$ 28,504,829	$ 25,471,890
Loans Held For Investment Acquired Through Participation
Loans held for investment, net of allowance for credit losses	$ 146,748	$ 0
Preferred Stock
Preferred stock, par value (in usd per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	50,000,000	50,000,000
Preferred stock, issued (in shares)	0	0
12.5% Series A Cumulative Non-Voting Preferred Stock
Preferred stock, authorized (in shares)	125	125
Preferred stock, issued (in shares)	0	125
Preferred stock outstanding (in shares)	0	125
Preferred stock, dividend rate, percentage	12.50%	12.50%
Class A Common Stock
Common stock, par or stated value per share (in usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	450,000,000	450,000,000
Common stock, shares, issued (in shares)	0	0
Class B Common Stock
Common stock, par or stated value per share (in usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	450,000,000	450,000,000
Common stock, shares, issued (in shares)	24,335,404	24,335,370
Common stock, shares, outstanding (in shares)	24,335,404	24,335,370

XML

Consolidated Statements of Operations - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenues
Interest income	$ 15,615,807	$ 8,882,151
Real estate operating revenue	1,332,969	2,979,454
Other operating income	53,395	250,665
Total revenues	17,002,171	12,112,270
Operating expenses
Operating expenses reimbursed to Manager	2,177,004	1,928,563
Asset management fee	1,997,427	1,488,095
Asset servicing fee	470,525	349,329
(Reversal of) provision for credit losses	(850,051)	50,296
Real estate operating expenses	1,209,912	1,217,963
Depreciation and amortization	681,813	1,718,372
Impairment charge	0	1,604,989
Professional fees	979,895	742,518
Directors fees	96,464	36,252
Other	215,244	83,421
Operating expenses	6,978,233	9,219,798
Operating income	10,023,938	2,892,472
Other income and expenses
Interest expense from obligations under participation agreements	(532,146)	(1,075,109)
Interest expense on repurchase agreements payable	(3,056,506)	(755,826)
Interest expense on mortgage loans payable	(746,128)	(518,617)
Interest expense on revolving line of credit	(1,965,534)	(524,294)
Interest expense on term loan payable	(351,563)	(164,969)
Interest expense on unsecured notes payable	(2,394,306)	(1,430,183)
Interest expense on secured borrowing	0	(552,785)
Net unrealized gains (losses) on marketable securities	6,584	(99,044)
(Loss) income from equity investment in unconsolidated investments	(436,860)	1,419,335
Realized gains on marketable securities	0	51,133
Total other income and expense	(9,476,459)	(3,650,359)
Net income (loss)	547,479	(757,887)
Series A preferred stock dividend declared	(3,907)	(3,906)
Net income (loss) allocable to common stock	$ 543,572	$ (761,793)
Loss per share — basic (in usd per share)	$ 0.02	$ (0.04)
Loss per share — diluted (in usd per share)	$ 0.02	$ (0.04)
Weighted-average shares — basic (in shares)	24,335,373	19,487,460
Weighted-average shares — diluted (in shares)	24,335,373	19,487,460
Distributions declared per common share (in usd per share)	$ 0.19	$ 0.20

XML

Consolidated Statements of Changes in Equity - USD ($)	Total	Cumulative Effect, Period of Adoption, Adjustment	Preferred Stock 12.5% Series A Cumulative Non-Voting Preferred Stock	Preferred Stock Preferred Stock	Common Stock	Common Stock Class A Common Stock	Common Stock Class B Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment
Beginning balance at Dec. 31, 2021	$ 273,843,578		$ 125,000	$ 0	$ 194,875			$ 373,443,672	$ (99,919,969)
Beginning balance (in shares) at Dec. 31, 2021			125		19,487,460
Distributions declared on common shares	(3,893,595)								(3,893,595)
Distributions declared on preferred shares	(3,906)								(3,906)
Net income	(757,887)								(757,887)
Ending balance at Mar. 31, 2022	269,188,190		$ 125,000	0	$ 194,875			373,443,672	(104,575,357)
Ending balance (in shares) at Mar. 31, 2022			125		19,487,460
Beginning balance at Dec. 31, 2022	$ 321,882,174	$ (4,619,723)	$ 125,000	0		$ 0	$ 243,354	444,449,813	(122,935,993)	$ (4,619,723)
Beginning balance (in shares) at Dec. 31, 2022			125			0	24,335,370
Shares issued from reinvestment of shareholder distributions (in shares)	34						34
Shares issued from reinvestment of shareholder distributions	$ 478							478
Redemption of 12.5% Series A Cumulative Non-Voting Preferred Stock (in shares)			(125)
Redemption of Series A Preferred Stock	(125,000)		$ (125,000)
Distributions declared on common shares	(4,650,492)								(4,650,492)
Distributions declared on preferred shares	(3,907)								(3,907)
Net income	547,479								547,479
Ending balance at Mar. 31, 2023	$ 313,031,009		$ 0	$ 0		$ 0	$ 243,354	$ 444,450,291	$ (131,662,636)
Ending balance (in shares) at Mar. 31, 2023			0			0	24,335,404

XML

Consolidated Statements of Changes in Equity (Parentheticals)	12 Months Ended
	Dec. 31, 2022
12.5% Series A Cumulative Non-Voting Preferred Stock
Preferred stock, dividend rate, percentage	12.50%

XML

Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net income (loss)	$ 547,479	$ (757,887)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	681,813	1,718,516
(Reversal of) provision for credit losses	(850,051)	50,296
Impairment charge	0	1,604,989
Amortization of net purchase premiums on loans	346,780	15,348
Straight-line rent adjustments	27,813	359,056
Amortization of deferred financing costs	535,276	520,991
Amortization of discount on unsecured notes payable	402,571	113,147
Amortization of above- and below-market rent intangibles	(34,764)	(246,375)
Amortization and accretion of investment-related fees, net	(4,745)	(195,932)
Amortization of above-market rent ground lease	(32,587)	(32,588)
Realized gain on marketable securities	0	(51,133)
Unrealized losses (gains) on marketable securities	(6,584)	99,044
Distributions received in excess of equity income (equity income in excess of distributions received)	5,061,178	(1,119,913)
Changes in operating assets and liabilities:
Deal deposits	4,241,892	0
Interest receivable	(1,127,241)	(556,972)
Due from related party	(138,508)	2,605,639
Other assets	(806,166)	(705,897)
Due to Manager	0	336,805
Unearned income	0	261,193
Interest payable	424,772	(428,783)
Accounts payable and accrued expenses	402,443	317,529
Other liabilities	(1,010,363)	(797,996)
Net cash provided by operating activities	8,661,008	3,109,077
Cash flows from investing activities:
Origination and purchase of loans	(46,214,722)	(88,119,821)
Proceeds from repayments of loans	59,177,506	750,000
Purchase of real estate properties	(48,798,273)	0
Purchase of held-to-maturity debt securities	(20,025,024)	0
Return of capital on equity interests in unconsolidated investments	3,870,322	0
Purchase of equity interests in unconsolidated investments	0	(21,164,384)
Proceeds from sale of marketable securities	0	628,715
Distributions in excess equity income	0	336,000
Net cash used in investing activities	(51,990,191)	(107,569,490)
Cash flows from financing activities:
Proceeds from borrowings under repurchase agreements	1,300,858	131,949,549
Proceeds from borrowings under revolving line of credit	34,864,135	26,377,654
Proceeds from borrowings under the term loan	32,100,000	0
Proceeds from obligations under participation agreements	521,886	15,863,187
Repayments of borrowings under repurchase agreements	(19,230,071)	0
Distributions paid	(4,653,921)	(3,893,595)
Change in interest reserve and other deposits held on investments	(21,410)	646,956
Payment of financing costs	(844,415)	(895,247)
Redemption of Series A Preferred Stock	(125,000)	0
Repayment of borrowings under the term loan	0	(93,763,471)
Proceeds from secured borrowing	0	2,850,520
Repayments of Debt	0	(204,967)
Net cash provided by financing activities	43,912,062	78,930,586
Net increase (decrease) in cash, cash equivalents and restricted cash	582,879	(25,529,827)
Cash, cash equivalents and restricted cash at beginning of period	36,469,592	51,098,647
Cash, cash equivalents and restricted cash at end of period (Note 2)	37,052,471	25,568,820
Supplemental Disclosure of Cash Flows Information:
Cash paid for interest	7,683,565	4,920,363
Supplemental non-cash information:
Reinvestment of stockholder distributions	$ 478	$ 0

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Business

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business

Business

    Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) was incorporated under the Maryland General Corporation Law 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.

    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.

    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 exemption from registration as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”).

    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 (the “Board”) (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 October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Merger Agreement”), Terra Income Fund 6, Inc. (“Terra BDC”), merged with and into Terra Income Fund 6, LLC (“Terra LLC”), a wholly owned subsidiary of the Company, with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as a wholly owned subsidiary of the Company (Note 3).

As of March 31, 2023, Terra JV, LLC (“Terra JV”), former shareholders of Terra BDC and Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”) held 70.0%, 19.9% and 10.1% of the issued and outstanding shares of the Company’s common stock, respectively.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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.

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 VIEs unless a limited partner holds substantive kick-out or participating rights over a 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, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”). 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 amortized cost less allowance for credit losses.

Current Expected Credit Losses Reserve

Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses, became effective for the Company on January 1, 2023. ASC 326 mandates the use of a current expected credit loss (“CECL”) model for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” credit model previously required under United States generally accepted accounting principles (“U.S. GAAP”). The CECL model requires the consideration of possible credit losses over the life of an instrument as opposed to only estimating credit losses upon the occurrence of a discrete loss event under the previous “incurred loss” methodology. The CECL model applies to the Company’s loan portfolio and the held-to-maturity debt securities which are carried at amortized cost, including future funding commitments for which the Company does not have the unconditional right to cancel. Amortized cost is defined as the principal amount outstanding, adjusted for the accretion of purchase discounts and disposition fees, and amortization of purchase premiums and origination fees, and includes accrued interest receivable related to these loans and securities. As permitted by ASC 326, the Company elected not to measure an allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheet), but rather write off in a timely manner by reversing interest income that would likely be uncollectible. The Company’s adoption of the CECL model resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to accumulated deficit as of January 1, 2023. Subsequent to the adoption of the CECL model, any increase or decrease to the CECL reserve is recorded in earnings on the consolidated statements of operations.

The Company utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio. The Company does not have a meaningful history of realized credit losses on its loan portfolio so it has subscribed to a third-party database service to provide the Company with industry losses for its loans. The Company utilizes a loan loss model that is widely used among banks and commercial mortgage REITs and is marketed by a leading commercial mortgage-based security data analytics provider. It employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. The Company provides specific loan-level inputs which include loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding

commitments. The Company selects from a group of independent five-year macroeconomic forecasts included in the model that are updated regularly based on current economic trends. Because the Company’s loan portfolio is comprised of a small number of loans, the Company measures the CECL reserve based on an evaluation of each loan as its own segregated asset. Based on the inputs, the loan loss model determines a loan loss rate through the generation of probability of defaults (PD) and loss given defaults (LGD) for each loan. The CECL reserve is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect the expected credit losses.

The calculation of the estimate of expected credit loss considers historical experience and current conditions for each loan and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy, current portfolio composition, level of historical loss forecast estimates, material changes in growth and credit strategy and other factors that may affect its loss experience. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed.

Beyond the Company’s reasonable and supportable forecast period, the Company generally reverts to historical loss information, pooled by asset type and investment structure, over the remaining loan period, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. The Company generally expects to use an average historical loss for reversion, utilizing an immediate or straight-line method for the remaining life of the loans.

The Company also performs a qualitative assessment beyond model estimates and applies qualitative adjustments as necessary. The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the Company to determine the amount of the expected loss more accurately and reasonably for these investments. The Company also evaluates the contractual life of its loans to determine if changes are needed for contractual extension options, renewals, modifications, and prepayments.

During the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, the Company considers that loan non-performing. For all non-performing loans, such as those in default, collateral-dependent or modified loans, including historical troubled debt restructurings, the Company removes these loans from the industry loss rate approach described above and analyzes them separately. The credit loss reserve for these loans is calculated as any excess of the amortized cost of the loan over (i) the present value of expected future cash flows discounted at the appropriate discount rate or (ii) the fair value of collateral, if repayment is expected solely from the collateral.

Some of the Company’s loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL model because the Company does not have an unconditional right to cancel such commitments. The CECL reserve related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets. This CECL reserve is estimated using the same method outlined above for the Company’s outstanding loan balances, and increases or decreases in the CECL reserve relating to unfunded commitments are also recorded in earnings on the consolidated statements of operations.

    As discussed below in Recent Accounting Pronouncements, the Company adopted the provisions of Accounting Standards Update (“ASU”) 2022-02 Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) concurrently with the adoption of CECL on January 1, 2023, prospectively.

Equity Investment in Unconsolidated Investments

The Company accounts for its equity interests in unconsolidated investments 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.

The Company evaluates its equity investment unconsolidated investments on a periodic basis to determine if there are any indicators that the value of its equity investments may be impaired and whether or not that impairment is other-than-temporary. To the extent an impairment has occurred and is determined to be other-than-temporary, the Company measures the charge as the excess of the carrying value of its investment over its estimated fair value, which is determined by calculating its share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint venture agreements.

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.

Held-to-Maturity Debt Securities

The Company classifies debt securities for which it has both the positive intent and ability to hold until maturity of the security as held-to-maturity debt securities. These securities are recorded at amortized cost with changes in amortized cost recognized in earnings until realized. Held-to-maturity debt securities are subject to the CECL reserve described above.

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. 

    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 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. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of income and principal becomes doubtful. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. 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 as of:

	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	28,869,594	$	9,858,153
Restricted cash	4,611,794		8,058,767
Cash held in escrow by lender	3,571,083		7,651,900
Total cash, cash equivalents and restricted cash shown in the consolidated    statements of cash flows	$	37,052,471	$	25,568,820

 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 previously financed certain of its senior loans through borrowings under an indenture and credit agreement. The Company accounted for the borrowings as a term loan, which was carried at the contractual amount (cost), net of unamortized deferred financing fees. On February 18, 2022, the Company refinanced the Term Loan (as defined below) with a new repurchase agreement. See “Goldman Master Purchase Agreement” in Note 9 for additional information. In connection with the BDC Merger, the Company assumed a $25.0 million term loan. The Company classified this term loan as term loan payable on the consolidated balance sheets.

Repurchase Agreements

The Company finances certain of its senior loans held for investment through repurchase transactions under master repurchase agreements. The Company accounts for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. See “Repurchase Agreements” in Note 9 for additional information.

Fair Value Measurements

    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, unsecured notes, mortgage loan payable, term loan payable, repurchase agreement payment 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 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 dividends equal to 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) 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, 2023, the Company has satisfied all the requirements for a REIT.

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

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, 2023 and 2022, 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 2019-2022 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 outstanding as of March 31, 2023 and common stock and preferred stock outstanding as of December 31, 2022. 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. Actual results may ultimately differ from those estimates, and those differences could be material.

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, may invest in real estate related joint ventures and may directly acquire real estate properties. 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 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. The Company adopted this ASU and related amendments on January 1, 2023. The adoption of ASU 2016-13 resulted in an incremental reserve of approximately $4.6 million, which included reserve on future loan funding commitments. The Company recorded the cumulative effect of initially applying this guidance as an adjustment to Accumulated deficit using the modified retrospective method of adoption.

    London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. In July 2017, the U.K. Financial Conduct Authority, which regulates the LIBOR administrator, ICE Benchmark Administration Limited (“IBA”), announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021, which has subsequently been delayed to June 30, 2023. 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”). In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) — Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”). ASU 2022-06 deferred the sunset date of ASU 2020-04 to December 31, 2024. 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.In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates troubled debt restructuring guidance for organizations that adopted the amendments in ASU 2016-13 while providing for additional disclosures for loan modifications. ASU 2022-02 also amends the vintage disclosure guidance for public business entities. The Company adopted the provisions of ASU 2022-02 concurrently with the adoption of ASU 2016-03. The adoption of ASU 2022-02 did not have any material impact on the Company’s financial condition and results of operations.

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BDC Merger

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

BDC Merger

Note 3. BDC Merger

BDC Merger

On October 1, 2022 (the “Closing Date”), pursuant to the Merger Agreement, Terra BDC merged with and into Terra LLC, with Terra LLC surviving as a wholly owned subsidiary of the Company. The Certificate of Merger and Articles of Merger with respect to the BDC Merger were filed with the Secretary of State of the State of Delaware and State Department of Assessments and Taxation of Maryland (the “SDAT”), respectively, with an effective time and date of 12:02 a.m., Eastern Time, on the Closing Date (the “Effective Time”).

At the Effective Time, except for any shares of common stock, par value $0.001 per share, of Terra BDC (“Terra BDC Common Stock”) held by the Company or any wholly owned subsidiary of the Company or Terra BDC, which shares were automatically retired and ceased to exist with no consideration paid therefor, each issued and outstanding share of Terra BDC Common Stock was automatically cancelled and retired and converted into the right to receive (i) 0.595 shares of the newly designated Class B Common Stock, par value $0.01 per share (“Class B Common Stock”) and (ii) cash, without interest, in lieu of any fractional shares of Class B Common Stock otherwise issuable in an amount, rounded to the nearest whole cent, determined by multiplying (x) the fraction of a share of Class B Common Stock to which such holder would otherwise be entitled by (y) $14.38.

Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of the Closing Date. Following the consummation of the BDC Merger, former Terra BDC stockholders owned approximately 19.9% of the common equity of the Company.

The Company and Terra BDC prepared their respective financial statements in accordance with generally accepted accounting principles in the United States. The BDC Merger is accounted for using the acquisition method of accounting, with the Company being treated as the accounting acquirer. In identifying the Company as the acquiring entity for accounting purposes, the Company and Terra BDC took into account a number of factors, including the relative size of the merging companies, which entity issues additional shares in conjunction with the BDC Merger, the relative voting interests of the respective stockholders after consummation of the BDC Merger, and the composition of the Board and senior management of the combined company after consummation of the BDC Merger.

The Company, as the acquirer, accounted for the BDC Merger as an asset acquisition and all direct acquisition-related costs are capitalized to the total cost of the assets acquired and liabilities assumed. Pursuant to Accounting Standard Codification Topic 805, Business Combination, total cost is allocated to the assets acquired and liabilities assumed on a relative fair value basis.

The following table summarizes the total consideration and the fair values of assets acquired and liabilities assumed in the BDC Merger:

Total Consideration
Fair value of Terra Property Trust shares of common stock issued	$	71,054,620
Cash paid for fractional shares	12,920
Transaction costs	2,283,785
	$	73,351,325
Assets Acquired and Liabilities Assumed at Fair Value
Cash and cash equivalents	$	24,321,951
Restricted cash	260,614
Loans held for investment	77,562,528
Loans held for investment acquired through participation	36,793,313
Interest receivable	1,367,044
Other assets	55,465
Term loan payable	(25,000,000)
Unsecured notes payable	(33,770,000)
Obligations under participation agreements	(6,114,979)
Interest reserve and other deposits held on investments	(260,614)
Due to manager	(682,541)
Interest payable	(53,186)
Accounts payable and accrued expenses	(740,824)
Other liabilities	(387,446)
Net assets acquired	$	73,351,325

The fair value of the 4,847,910 shares of the Class B Common Stock was determined based on the Company’s net asset value per share of $14.66 as of October 1, 2022.

Net Gain on Extinguishment of Obligations Under Participation Agreements

As discussed in Note 8, 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. As a result of the BDC Merger, the obligations under participation agreements with Terra BDC totaling $37.0 million were effectively extinguished and the Company recognized a net gain of $3.4 million, representing the difference between the carrying value of the Company’s obligations under participation agreements and the fair value of Terra BDC’s investments acquired through participation agreements.

Appointment of Directors

As of the Effective Time and in accordance with the Merger Agreement, the size of the Board was increased by three members and each of Spencer Goldenberg, Adrienne Everett and Gaurav Misra (each a “Terra BDC Designee”, and collectively, the “Terra BDC Designees”) were elected to the Board to fill the vacancies created by such increase, with each Terra BDC Designee to serve until the Company’s next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Each of the other members of the Board immediately prior to the Effective Time continued as members following the Effective Time.

Voting Support Agreement

On the Closing Date, the Company, Terra JV and Terra Offshore REIT entered into a Voting Support Agreement (the “2022 Voting Agreement”). Pursuant to the 2022 Voting Agreement, effective as of the Closing Date, Terra JV and Terra Offshore REIT have agreed to, at any meeting of the Company’s stockholders called for the purpose of electing directors (or by

any consent in writing or by electronic transmission in lieu of any such meeting), cast all votes entitled to be cast by each of them in favor of the election of the Terra BDC Designees until the earlier of (i) the first anniversary of the Closing Date, (ii) the TPT Class B Common Stock Distributions (as defined in the 2022 Voting Agreement) or (iii) an amendment and restatement of the amended and restated management agreement between the Company and Terra REIT Advisors approved by the Company’s Board, including the Terra BDC Designees.

Indemnification Agreements

The Company has entered into customary indemnification agreements with each member of the Board (including each Terra BDC Designee). These agreements, among other things, require the Company to indemnify each director to the maximum extent permitted by Maryland law, including indemnification of expenses such as attorney’s fees, judgments, fines and settlement amounts incurred in any action or proceeding, including any action or proceeding by or in right of the Company, arising out of his or her service as a director.

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Loans Held for Investment

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Loans Held for Investment

Note 4. Loans Held for Investment

The Company elected the practical expedient under ASC 326 to exclude accrued interest from amortized cost. As of March 31, 2023 and December 31, 2022, accrued interest receivable of $4.8 million and $4.1 million, respectively, is included in interest receivable on the consolidated balance sheets, and is excluded from the amortized cost of loans held for investment.

Portfolio Summary

The following table provides a summary of the Company’s loan portfolio as of:

	March 31, 2023									December 31, 2022
	Fixed Rate			Floating Rate (1)(2)(3)			Total			Fixed Rate			Floating Rate (1)(2)(3)			Total
Number of loans	6			24			30			8			23			31
Principal balance	$	59,726,205		$	573,106,467		$	632,832,672		$	90,990,183		$	554,805,276		$	645,795,459
Carrying value	$	60,121,950		$	549,826,839		$	609,948,789		$	92,274,998		$	534,215,769		$	626,490,767
Fair value	$	59,314,040		$	553,011,148		$	612,325,188		$	90,729,098		$	532,416,656		$	623,145,754
Weighted-average coupon rate	13.17		%	11.78		%	11.92		%	13.82		%	11.23		%	11.59		%
Weighted-average remaining  term (years)	1.71			1.03			1.09			1.35			1.10			1.14

_______________

(1)These loans pay a coupon rate of LIBOR or Secured Overnight Financing Rate (“SOFR”), as applicable, plus a fixed spread. Coupon rate shown was determined using LIBOR of 4.86%, average SOFR of 4.63% and forward-looking term rate based on SOFR (“Term SOFR”) of 4.80% as of March 31, 2023 and LIBOR of 4.39%, average SOFR of 4.06% and Term SOFR of 4.36% as of December 31, 2022.

(2)As of March 31, 2023 and December 31, 2022, amount included $427.3 million and $413.1 million of senior mortgages used as collateral for $277.9 million and $261.0 million of borrowings under credit facilities, respectively (Note 9).

(3)As of March 31, 2023 and December 31, 2022, twenty-two and twenty-one of these loans, respectively, are subject to a LIBOR or SOFR floor, as applicable.

Lending Activities

The following tables present the activities of the Company’s loan portfolio:

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2023	$	584,417,939	$	42,072,828	$	626,490,767
Cumulative effect of credit loss accounting standard effective    January 1, 2023 (Note 2)	(4,250,052)		—		(4,250,052)
New loans made	46,214,722		—		46,214,722
Principal repayments received	(55,895,298)		(3,282,208)		(59,177,506)
Net amortization of premiums on loans	(346,780)		—		(346,780)
Accrual, payment and accretion of investment-related fees and other,    net	(34,186)		(18,541)		(52,727)
Reversal of provision for credit losses	1,070,365		—		1,070,365
Balance, March 31, 2023	$	571,176,710	$	38,772,079	$	609,948,789

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2022	$	457,329,582	$	12,343,732	$	469,673,314
New loans made	87,538,133		581,688		88,119,821
Principal repayments received	(750,000)		—		(750,000)
Net amortization of premiums on loans	(15,348)		—		(15,348)
Accrual, payment and accretion of investment-related fees and other,    net	1,029,625		11,884		1,041,509
Provision for credit losses	(50,296)		—		(50,296)
Balance, March 31, 2022	$	545,081,696	$	12,937,304	$	558,019,000

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, 2023						December 31, 2022
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	473,858,731	$	478,713,612	78.4	%	$	456,408,889	$	461,299,182	73.7	%
Preferred equity investments	122,131,455		122,948,116		20.2	%	121,231,434		122,132,177		19.5	%
Mezzanine loans	36,842,486		36,938,638		6.1	%	39,352,303		39,451,115		6.3	%
Credit facility	—		—		—	%	28,802,833		29,080,183		4.6	%
Allowance for credit losses	—		(28,651,577)		(4.7)	%	—		(25,471,890)		(4.1)	%
Total	$	632,832,672	$	609,948,789	100.0	%	$	645,795,459	$	626,490,767	100.0	%

	March 31, 2023						December 31, 2022
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	162,206,536	$	162,659,401	26.6	%	$	184,196,708	$	184,722,657	29.4	%
Industrial	127,399,590		128,361,229		21.0	%	147,796,164		148,891,742		23.8	%
Multifamily	112,973,073		113,781,434		18.7	%	104,589,464		105,570,432		16.9	%
Mixed-use	85,128,218		86,026,507		14.1	%	64,880,450		65,838,965		10.5	%
Infill land	49,652,873		50,535,097		8.3	%	48,860,291		49,565,437		7.9	%
Hotel - full/select service	43,222,382		43,793,356		7.2	%	43,222,382		43,758,804		7.0	%
Student housing	31,000,000		31,744,890		5.2	%	31,000,000		31,774,261		5.1	%
Infrastructure	21,250,000		21,698,452		3.6	%	21,250,000		21,840,359		3.5	%
Allowance for credit losses	—		(28,651,577)		(4.7)	%	—		(25,471,890)		(4.1)	%
Total	$	632,832,672	$	609,948,789	100.0	%	$	645,795,459	$	626,490,767	100.0	%

	March 31, 2023						December 31, 2022
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	137,890,644	$	139,389,069	22.9	%	$	164,253,345	$	165,839,561	26.5	%
New York	88,108,375		88,108,375		14.4	%	91,845,479		91,877,084		14.7	%
Georgia	72,983,863		73,647,905		12.1	%	72,401,718		73,101,964		11.7	%
New Jersey	70,891,499		71,920,880		11.8	%	62,228,622		62,958,482		10.0	%
Texas	68,160,964		68,687,384		11.3	%	67,625,000		68,142,046		10.9	%
Washington	63,376,281		63,434,458		10.4	%	56,671,267		57,027,639		9.1	%
Utah	49,250,000		50,522,239		8.3	%	49,250,000		50,698,251		8.1	%
North Carolina	44,171,046		44,601,994		7.3	%	43,520,028		44,041,162		7.0	%
Arizona	31,000,000		31,288,062		5.1	%	31,000,000		31,276,468		5.0	%
Massachusetts	7,000,000		7,000,000		1.1	%	7,000,000		7,000,000		1.1	%
Allowance for credit losses	—		(28,651,577)		(4.7)	%	—		(25,471,890)		(4.1)	%
Total	$	632,832,672	$	609,948,789	100.0	%	$	645,795,459	$	626,490,767	100.0	%

Current Expected Credit Losses Reserve

As described in Note 2, on January 1, 2023, the Company adopted the provisions of ASU 2016-13, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses. The adoption of ASU 2016-13 resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to accumulated deficits as of January 1, 2023.

The following table presents the activity in allowance for credit loss for funded loans:

	Three Months Ended March 31,
	2023		2022
Allowance for credit losses, beginning of period	$	25,471,890	$	13,658,481
Cumulative effect of credit loss accounting standard effective    January 1, 2023 (Note 2)	4,250,052		—
(Reversal of) provision for credit losses (1)	(1,070,365)		50,296
Charge-offs	—		—
Recoveries	—		—
Allowance for credit losses, end of period	$	28,651,577	$	13,708,777

_______________

(1)Prior to the adoption of the CECL model on January 1, 2023, the Company recorded an allowance for credit 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) non-performing loan reserves, if any.

Certain of the Company’s loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These unfunded commitments amounted to approximately $71.0 million and $47.3 million as of March 31, 2023 and December 31, 2022, respectively. The following table presents the activity in the liability for credit losses on unfunded commitments:

	Three Months Ended March 31, 2023
Liability for credit losses on unfunded commitments, beginning of period	$	—
Cumulative effect of credit loss accounting standard effective January 1, 2023 (Note 2)	369,671
Provision for credit losses	220,314
Liability for credit losses on unfunded commitments, end of period	$	589,985

The liability for credit losses on unfunded commitments is included in other liabilities on the consolidated balance sheets.

Accrued Interest Receivable

The Company elected not to measure a CECL reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely matter. If the Company determines it has uncollectible accrued interest receivable, it generally would reverse the accrued and unpaid interest against interest income and no longer accrues for interest. For the three months ended March 31, 2023 and 2022, the Company did not reverse any interest income accrual because all accrued interest income were deemed collectible. As of March 31, 2023 and 2022, the Company had three and two loans that were in default, and suspended interest income accrual of $3.4 million and $1.1 million for the three months ended March 31, 2023 and 2022, respectively, because recovery of such income was doubtful. As of March 31, 2023 and December 31, 2022, there was no outstanding interest receivable on these loans.

Non-Performing Loans

As discussed in Note 2, for loans that are considered non-performing, the Company removes them from the industry loss rate approach and analyzes them separately. As of March 31, 2023 and December 31, 2022, the Company had four non-performing loans with total carrying value of $89.5 million and $89.9 million, respectively. The allowance for credit losses for these non-performing loans were $25.5 million as of both March 31, 2023 and December 31, 2022.

Loan Risk Rating

The Company 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:

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

    The following table presents the amortized cost of the Company’s loan portfolio by year of origination and loan risk rating as of March 31, 2023:

 

	March 31, 2023
Loan Risk Rating	Number of Loans		Amortized Cost		% of Total		Amortized Cost by Year Originated
							2023		2022		2021		2020		2019		Prior
1	—		$	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—
2	2		25,042,414		3.9	%	—		—		—		—		18,042,414		7,000,000
3	24		524,084,633		82.1	%	2,218,577		250,427,639		116,762,096		27,561,203		124,194,015		2,921,103
4	—		—		—	%	—		—		—		—		—		—
5	—		—		—	%	—		—		—		—		—		—
Non-performing	4		89,473,319		14.0	%	—		—		—		—		1,364,944		88,108,375
	30	30	638,600,366		100.0	%	$	2,218,577	$	250,427,639	$	116,762,096	$	27,561,203	$	143,601,373	$	98,029,478
Allowance for credit losses			(28,651,577)
Total, net of allowance for credit losses			$	609,948,789

The following table presents the principal balance and the amortized cost of the Company’s loans based on the loan risk rating as of December 31, 2022:

	December 31, 2022
Loan Risk Rating	Number of Loans	Principal Balance		Amortized Cost		% of Total
1	—	$	—	$	—	—	%
2	2	25,000,000		25,041,782		3.8	%
3	25	530,867,244		536,992,660		82.4	%
4	—	—		—		—	%
5	—	—		—		—	%
Non-performing (1)	4	89,928,215		89,928,215		13.8	%
	31	$	645,795,459	651,962,657		100.0	%
Allowance for credit losses				(25,471,890)
Total, net of allowance for credit losses				$	626,490,767

_______________

(1)Because these loans have an event of default, they were removed from the pool of loans on which a general allowance was calculated and were evaluated for collectability individually. As of December 31, 2022, the specific allowance for credit losses on these loans were $25.5 million, as a result of a decline in the fair value of the respective collateral.

Troubled Debt Restructuring

As of December 31, 2022, there was one investment that qualified as troubled debt restructuring.

In December 2022, the borrower of a $40.1 million senior loan experienced financial difficulty and offered to repay the loan for $38.7 million. The remaining $1.4 million was converted to subordinated equity that accrues dividends at 8.0% and the Company is entitled to receive waterfall profit upon a sale. The Company does not anticipate a full recovery of the equity position and does not expect to receive any additional income. As a result, the remaining $1.4 million is reflected as a loan receivable and it is fully reserved for as of March 31, 2023 and December 31, 2022. The Company classified this loan modification as a TDR as it met all the conditions to be considered a TDR pursuant to ASC 310-40.

The following table summarizes the recorded investment of TDR as of the date of restructuring:

Number of loans modified	1
Pre-modified recorded carrying value	$	40,072,138
Post-modified recorded carrying value (1)	$	1,364,944

_______________

(1) As of March 31, 2023 and December 31, 2022 the principal balance of this loan was the same as the carrying value. The Company recorded an allowance for credit losses of $1.4 million to fully reserve for the unpaid principal balance. There was no income from this investment from the date of modification on December 28, 2022 through March 31, 2023.

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Equity Investment in Unconsolidated Investments

3 Months Ended

Mar. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Equity Investment in Unconsolidated Investments

Note 5. Equity Investment in Unconsolidated Investments

The Company owns interests in a limited partnership and three joint ventures. The Company accounts for its interests in these investments under the equity method of accounting (Note 2). The Company classifies distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.

Equity Investment in a Limited Partnership

On August 3, 2020, the Company entered into a subscription agreement with Mavik Real Estate Special Opportunities Fund, LP (“RESOF”) whereby the Company committed to fund up to $50.0 million to purchase a limited partnership interest in RESOF. RESOF’s primary investment objective is to generate attractive risk-adjusted returns by purchasing performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). The general partner of RESOF is Mavik Real Estate Special Opportunities Fund GP, LLC, which is a subsidiary of the Company’s sponsor, Terra Capital Partners. As of March 31, 2023 and December 31, 2022, the unfunded commitment was $30.3 million and $22.4 million, respectively.

The Company evaluated its equity interest in RESOF and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in RESOF is accounted for as an equity method investment. As of March 31, 2023 and December 31, 2022, the Company owned 23.4% and 27.9% of the equity interest in RESOF, respectively. As of March 31, 2023 and December 31, 2022, the carrying value of the Company’s investment in RESOF was $28.6 million and $36.8 million, respectively. For the three months ended March 31, 2023, the Company recorded equity income from RESOF of $0.3 million, and received distributions from RESOF of $3.8 million. For the three months ended March 31, 2022, the Company recorded equity income from RESOF of $1.3 million and received no distributions from RESOF.

In connection with the equity investment in RESOF, the Company paid origination fees to the Manager totaling $0.5 million, to be amortized to equity income on a straight-line basis over the life of RESOF.

The following tables present summarized financial information of the Company’s equity investment in RESOF. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share:

	As of
	March 31, 2023		December 31, 2022
Investments at fair value (cost of $164,364,984 and $176,035,290, respectively)	$	166,309,340	$	178,283,703
Other assets	36,931,099		23,918,841
Total assets	203,240,439		202,202,544
Revolving line of credit, net of financing costs	27,607,079		14,795,985
Obligations under participation agreement (proceeds of $38,444,357 and     $41,726,565, respectively)	38,753,105		41,962,861
Other liabilities	19,189,912		17,120,804
Total liabilities	85,550,096		73,879,650
Partners’ capital	$	117,690,343	$	128,322,894

	Three Months Ended March 31,
	2023		2022
Total investment income	$	8,111,779	$	4,844,664
Total expenses	3,166,795		1,293,316
Net investment income	4,944,984		3,551,348
Unrealized (depreciation) appreciation on investments	(595,911)		69,051
Net increase in partners’ capital resulting from operations	$	4,349,073	$	3,620,399

Equity Investment in Joint Ventures

As of March 31, 2023 and December 31, 2022, the Company beneficially owned equity interests in three joint ventures that invest in real estate properties. The Company evaluated its equity interests in the joint ventures and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interests in the joint ventures are accounted for as equity method investments. In September 2022, the Company sold a 53% effective interest in two joint ventures and 59% effective interest in another joint venture for a total of $33.7 million and recognized a gain on sale of $0.8 million.

In December 2022, the Company originated a $10.0 million mezzanine loan to a borrower to finance the acquisition of a real estate portfolio. In connection with this mezzanine loan, the Company entered into a residual profit sharing agreement with the borrower where the borrower will pay the Company an additional amount of 35.0% of remaining net cash flow from the sale of the real estate portfolio. The Company accounts for this arrangement using the equity method of accounting.

The following table presents a summary of the Company’s equity investment in unconsolidated investments as of:

		March 31, 2023			December 31, 2022
Entity	Co-owner (1)	Beneficial Ownership Interest	Carrying Value		Beneficial Ownership Interest	Carrying Value
LEL Arlington JV LLC (1)	Affiliate/Third party	27.2%	$	6,885,336	27.2%	$	7,271,603
LEL NW 49th JV LLC (1)	Affiliate/Third party	27.2%	1,607,801		27.2%	1,521,556
TCG Corinthian FL Portfolio     JV LLV (1)(2)	Affiliate/Third Party	30.6%	6,370,863		30.6%	6,896,816
SF-Dallas Industrial, LLC (3)	N/A	N/A	10,065,935		N/A	10,013,691
			$	24,929,935		$	25,703,666

_______________

(1)The Company sold a portion of the interest in this investment to an affiliate in September 2022.

(2)This investment was purchased from a third party in March 2022.

(3)This investment that meets the definition of an equity investment was entered into in December 2022.

The following tables present estimated combined summarized financial information of the Company’s equity investment in the joint ventures. Amounts provided are the total amounts attributable to the joint ventures and do not represent the Company’s proportionate share:

	As of
	March 31, 2023		December 31, 2022
Net investments in real estate	$	192,052,300	$	192,616,298
Other assets	10,956,841		12,817,388
Total assets	203,009,141		205,433,686
Mortgage loan payable	147,924,249		147,740,645
Other liabilities	3,221,660		3,104,624
Total liabilities	151,145,909		150,845,269
Members’ capital	$	51,863,232	$	54,588,417

	Three Months Ended March 31,
	2023		2022
Revenues	$	3,924,579	$	2,450,438
Operating expenses	(2,143,267)		(816,681)
Depreciation and amortization expense	(1,965,037)		(690,831)
Interest expense	(2,559,954)		(1,085,561)
Unrealized (losses) gains	(826,501)		235,511
Net (loss) income	$	(3,570,180)	$	92,876

For the three months ended March 31, 2023, the Company recorded net equity loss from the joint ventures and the mezzanine loan of $0.7 million, and received distributions from the joint ventures of $0.3 million. For the three months ended March 31, 2022, the Company recorded equity income from the joint ventures of $0.1 million and received distributions from the joint venture of $0.3. In connection with these investments, the Company paid origination fee to the Manager totaling $0.5 million, to be amortized to equity income over the life of the respective joint venture.

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Real Estate Owned, Net

3 Months Ended

Mar. 31, 2023

Real Estate [Abstract]

Real Estate Owned, Net

Note 6. Real Estate Owned, Net

Real Estate Activities

2023 — In March 2023, the Company purchased three industrial properties located in Texas for total costs of $48.8 million, including capitalized transaction costs. This acquisition was deemed to be real estate asset acquisition, and therefore transaction costs were capitalized to the cost basis of the assets.

The following table presents an allocation of the total capitalized costs:

	Total Capitalized Costs
Land	$	9,327,855
Buildings and Improvements	39,248,352
Intangible asset and liability:
In-please lease (weighted-average expected life of 2.63 years)	4,315,333
Below-market rent (weighted-average expected life of 2.69 years)	(4,093,267)
	$	48,798,273

2022 — In June 2022, the Company sold the 4.9 acres of land it owned in Pennsylvania for net proceeds of $8.6 million, and recognized a net loss on sale of $0.1 million excluding impairment charges of $1.6 million and $3.4 million recognized in March 2022 and December 2021, respectively.

Real Estate Owned, Net

    Real estate owned is comprised of three single-tenant industrial buildings located in Texas and a multi-tenant office building located in California, with lease intangible assets and liabilities. The following table presents the components of real estate owned, net as of:

	March 31, 2023						December 31, 2022
	Cost		Accumulated Depreciation/Amortization		Net		Cost		Accumulated Depreciation/Amortization		Net
Real estate:
Land	$	9,327,855	$	—	$	9,327,855	$	—	$	—	$	—
Building and building    improvements	90,974,321		(6,034,760)		84,939,561		51,725,969		(5,711,468)		46,014,501
Tenant improvements	1,854,640		(1,293,967)		560,673		1,854,640		(1,224,648)		629,992
Furniture and fixtures	236,000		(236,000)		—		236,000		(220,267)		15,733
Total real estate	102,392,816		(7,564,727)		94,828,089		53,816,609		(7,156,383)		46,660,226
Lease intangible assets:
In-place lease	19,297,871		(12,766,548)		6,531,323		14,982,538		(12,493,079)		2,489,459
Above-market rent	156,542		(81,929)		74,613		156,542		(77,540)		79,002
Total intangible assets	19,454,413		(12,848,477)		6,605,936		15,139,080		(12,570,619)		2,568,461
Lease intangible liabilities:
Below-market rent	(6,848,189)		2,467,800		(4,380,389)		(2,754,922)		2,428,647		(326,275)
Above-market ground lease	(8,896,270)		608,292		(8,287,978)		(8,896,270)		575,705		(8,320,565)
Total intangible liabilities	(15,744,459)		3,076,092		(12,668,367)		(11,651,192)		3,004,352		(8,646,840)
Total real estate	$	106,102,770	$	(17,337,112)	$	88,765,658	$	57,304,497	$	(16,722,650)	$	40,581,847

Real Estate Operating Revenues and Expenses

    The following table presents the components of real estate operating revenues and expenses that are included in the consolidated statements of operations:

	Three Months Ended March 31,
	2023		2022
Real estate operating revenues:
Lease revenue	$	1,085,459	$	1,754,561
Other operating income	247,510		1,224,893
Total	$	1,332,969	$	2,979,454
Real estate operating expenses:
Utilities	$	36,414	$	45,334
Real estate taxes	354,680		346,432
Repairs and maintenances	207,365		157,416
Management fees	39,418		67,868
Lease expense, including amortization of above-market ground lease	487,163		487,163
Other operating expenses	84,872		113,750
Total	$	1,209,912	$	1,217,963

Leases

    As of March 31, 2023, the Company owned three industrial buildings that were leased to three tenants and a multi-tenant office building also leased to three tenants. As of December 31, 2022, the Company owned a multi-tenant office building that was leased to three tenants. In addition, the office building is subject to a ground lease whereby the Company is the lessee (or a tenant) to the ground lease. The ground lease had a remaining lease term of 63.6 years as of March 31, 2023, and provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9% of the fair market value of the land. The next rent reset on the ground lease is scheduled for November 1, 2025. The Company is currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v. Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No. 20STCV34217. The Company believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. The Company’s position has prevailed in all three of the prior arbitrations to reset the ground rent. Since future rent reset determinations under the ground lease cannot be known at this time, the Company did not include any potential future rent increases in calculating the present value of future rent payments. The Company intends vigorously to pursue the litigation. While the Company believes its arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty. If the landlord prevails, the future rent reset determinations could result in significantly higher ground rent, which would likely result in a significant diminution in the value of the Company’s interest in the ground lease and the office building.

Scheduled Future Minimum Rent Income 

    Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at March 31, 2023 are as follows: 

Years Ending December 31,	Total
2023 (April 1 through December 31)	$	4,265,856
2024	5,845,112
2025	1,810,128
2026	1,443,553
2027	848,014
Thereafter	1,815,497
Total	$	16,028,160

Scheduled Annual Net Amortization of Intangibles 

    Based on the intangible assets and liabilities recorded at March 31, 2023, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows:

Years Ending December 31,	Net Decrease in Real Estate Operating Revenue (1)		Increase in Depreciation and Amortization (1)		Decrease in Rent Expense (1)		Total
2023 (April 1 through December 31)	$	(1,403,903)	$	2,220,354	$	(97,761)	$	718,690
2024	(1,884,920)		3,044,369		(130,348)		1,029,101
2025	(646,536)		737,423		(130,348)		(39,461)
2026	(272,505)		378,019		(130,348)		(24,834)
2027	(97,912)		151,158		(130,348)		(77,102)
Thereafter	—		—		(7,668,825)		(7,668,825)
Total	$	(4,305,776)	$	6,531,323	$	(8,287,978)	$	(6,062,431)

_______________

(1)Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to lease revenues; amortization of in-place lease intangibles is included in depreciation and amortization; and amortization of above-market ground lease is recorded as a reduction to rent expense.

Supplemental Ground Lease Disclosures

    Supplemental balance sheet information related to the ground lease was as follows as of:    

	March 31, 2023			December 31, 2022
Operating lease
Operating lease right-of-use asset	$	27,374,554		$	27,378,786
Operating lease liability	$	27,374,554		$	27,378,786
Weighted average remaining lease term — operating lease (years)	63.6			63.8
Weighted average discount rate — operating lease	7.6		%	7.6		%

    The component of lease expense for the ground lease was as follows:

	Three Months Ended March 31,
	2023		2022
Operating lease cost	$	519,750	$	519,750

Supplemental non-cash information related to the ground lease was as follows:

	Three Months Ended March 31,
	2023		2022
Amounts included in the measurement of lease liability:
Operating cash flows from an operating lease	$	519,750	$	519,750
Right-of-use asset obtained in exchange for lease obligations:
Operating lease	$	519,750	$	519,750

    Maturities of operating lease liability as of December 31, 2022 was as follows:

Years Ending December 31,	Operating Lease
2023 (April 1 through December 31)	$	1,559,250
2024	2,079,000
2025	2,079,000
2026	2,079,000
2027	2,079,000
Thereafter	122,227,875
Total lease payments	132,103,125
Less: Imputed interest	(104,728,571)
Total	$	27,374,554

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Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 7. Fair Value Measurements

    The Company follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets

for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:

Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access.

Level 2 — Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

      Level 3 — Significant unobservable inputs are based on the best information available in the circumstances, to the extent observable inputs are not available, including the Company’s own assumptions used in determining the fair value of investments. Fair value for these investments are determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment.

     In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

As of March 31, 2023 and December 31, 2022, 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, held-to-maturity debt securities, obligations under participation agreements, term loan payable, repurchase agreement payable, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities and derivatives are financial instruments that are reported at fair value.

Financial Instruments Carried at Fair Value on a Recurring Basis

    From time to time, the Company may invest in short-term debt and equity securities which are classified as available-for-sale securities, which are presented at fair value and included in Other assets in the consolidated balance sheet. 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 the securities are realized.

As discussed in Note 9, in March 2023, the Company entered into a loan agreement with a lender to provide financing for the acquisition of real estate properties (Note 6). In connection with the financing, the Company purchased an interest rate cap for $258,500 to effectively cap the related index rate at 5.0%. The interest rate cap meets all the criteria of a derivative under ASC 815, but it does not met the criteria under ASC 815-20-25 to qualify for hedging accounting. As such, the interest rate cap is reported at fair value and is included in other assets in the consolidated balance sheet, and the change in the fair value of the interest rate cap is reported in income.

The following tables present fair value measurements of marketable securities and derivatives, by major class according to the fair value hierarchy as of:

	March 31, 2023
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Debt securities	$	154,544	$	—	$	—	$	154,544
Derivatives:
Interest rate cap	—		—		258,500		258,500
Total	$	154,544	$	—	$	258,500	$	413,044

	December 31, 2022
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Debt securities	$	147,960	$	—	$	—	$	147,960
Total	$	147,960	$	—	$	—	$	147,960

    

The following table presents the activities of the marketable securities and derivatives:

	Three Months Ended March 31,
	2023				2022
	Marketable Securities		Derivatives		Marketable Securities
Beginning balance	$	147,960	$	—	$	1,310,000
Purchases	—		258,500		—
Proceeds from sale	—		—		(628,715)
Unsettled sale	—		—		(123,223)
Reclassification of net realized gains on marketable securities    into earnings	—		—		51,133
Unrealized (losses) gains on marketable securities	6,584		—		(99,044)
Ending balance	$	154,544	$	258,500	$	510,151

Financial Instruments Not Carried at Fair Value

In the first quarter of 2023, the Company purchased $20.0 million of corporate bonds with a coupon rate of 6.125% that mature on May 15, 2023. The Company classified these bonds as held-to-maturity debt securities, as it has the intent and ability to hold these securities until maturity.

The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of:

		March 31, 2023						December 31, 2022
	Level	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Loans:
Loans held for investment	3	$	594,388,315	$	599,828,287	$	573,572,071	$	604,068,894	$	609,889,829	$	581,182,892
Loans held for investment    acquired through    participation	3	38,444,357		38,772,079		38,753,117		41,726,565		42,072,828		41,962,862
Allowance for loan losses		—		(28,651,577)		—		—		(25,471,890)		—
Total loans		$	632,832,672	$	609,948,789	$	612,325,188	$	645,795,459	$	626,490,767	$	623,145,754
Other investment:
Held-to-maturity debt    securities	1	$	20,000,000	$	20,025,024	$	19,800,000	$	—	$	—	$	—
Liabilities:
Term loan payable	3	$	25,000,000	$	25,000,000	$	25,000,000	$	25,000,000	$	25,000,000	$	25,000,000
Unsecured notes payable	1	123,500,000		116,976,542		107,970,447		123,500,000		116,530,673		103,481,748
Repurchase agreement payable	3	152,947,394		151,772,313		152,947,394		170,876,606		169,304,710		170,876,606
Obligations under participation    agreements	3	13,106,844		13,209,982		13,209,983		12,584,958		12,680,594		12,680,595
Mortgage loan payable	3	61,352,308		60,768,698		61,606,608		29,252,308		29,488,326		29,394,870
Revolving line of credit    payable	3	125,000,000		124,741,957		125,000,000		90,135,865		89,807,448		90,135,865
Total liabilities		$	500,906,546	$	492,469,492	$	485,734,432	$	451,349,737	$	442,811,751	$	431,569,684

    The Company estimated that its other financial assets and liabilities, not included in the tables above, had fair values that approximated their carrying values at both March 31, 2023 and December 31, 2022 due to their short-term nature.

Valuation Process for Fair Value Measurement

    The fair value of the Company’s investment in equity securities, held-to-maturity debt securities and its unsecured notes payable is determined based on quoted prices in an active market and is classified as Level 1 of the fair value hierarchy.

    Market quotations are not readily available for the Company’s real estate-related loan investments, all of which are included in Level 3 of the fair value hierarchy, and therefore these investments are valued utilizing a yield approach, i.e. a discounted cash flow methodology to arrive at an estimate of the fair value of each respective investment in the portfolio using an estimated market yield. In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, which may include available current market data on applicable yields of comparable debt/preferred equity instruments; market credit spreads and yield curves; the investment’s yield; covenants of the investment, including prepayment provisions; the portfolio company’s ability to make payments, net operating income and debt-service coverage ratio; construction progress reports and construction budget analysis; the nature, quality and realizable value of any collateral (and loan-to-value ratio); the forces that influence the local markets in which the asset (the collateral) is purchased and sold, such as capitalization rates, occupancy rates, rental rates and replacement costs; and the anticipated duration of each real estate-related loan investment.

The Manager designates a valuation committee to oversee the entire valuation process of the Company’s Level 3 loans. The valuation committee is comprised of members of the Manager’s senior management, deal and portfolio management teams, who meet on a quarterly basis, or more frequently as needed, to review the Company investments being valued as well as the inputs used in the proprietary valuation model. Valuations determined by the valuation committee are supported by pertinent data and, in addition to a proprietary valuation model, are based on market data, industry accepted third-party valuation models and discount rates or other methods the valuation committee deems to be appropriate. Because there is no readily available market for these investments, the fair values of these investments are approved in good faith by the Company’s board of directors (which is made up exclusively of independent directors).

    The fair values of the Company’s mortgage loan payable, secured borrowing, term loan payable and revolving line of credit are determined by discounting the contractual cash flows at the interest rate the Company estimates such arrangements would bear if executed in the current market.

The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of March 31, 2023 and December 31, 2022. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.

	Fair Value at March 31, 2023		Primary Valuation Technique	Unobservable Inputs	March 31, 2023
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	573,572,071	Discounted cash flow	Discount rate	9.00	%	16.80	%	11.29	%
Loans held for investment acquired through    participation, net	38,753,117		Discounted cash flow	Discount rate	15.30	%	17.50	%	17.08	%
Total Level 3 Assets	$	612,325,188
Liabilities:
Repurchase agreement payable	$	152,947,394	Discounted cash flow	Discount rate	5.56	%	7.27	%	6.67	%
Obligations under participation agreements	13,209,983		Discounted cash flow	Discount rate	16.80	%	16.80	%	16.80	%
Mortgage loan payable	61,606,608		Discounted cash flow	Discount rate	8.30	%	8.65	%	8.47	%
Term loan payable	25,000,000		Discounted cash flow	Discount rate	5.63	%	5.63	%	5.63	%
Revolving line of credit	125,000,000		Discounted cash flow	Discount rate	8.15	%	8.15	%	8.15	%
Total Level 3 Liabilities	$	377,763,985

	Fair Value at December 31, 2022		Primary Valuation Technique	Unobservable Inputs	December 31, 2022
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	581,182,892	Discounted cash flow	Discount rate	8.71	%	19.36	%	11.46	%
Loans held for investment acquired through    participation, net	41,962,862		Discounted cash flow	Discount rate	15.25	%	17.06	%	16.67	%
Total Level 3 Assets	$	623,145,754
Liabilities:
Repurchase agreement payable	$	170,876,606	Discounted cash flow	Discount rate	5.22	%	6.17	%	6.82	%
Obligations under participation agreements	12,680,595		Discounted cash flow	Discount rate	16.36	%	16.36	%	16.36	%
Mortgage loan payable	29,394,870		Discounted cash flow	Discount rate	8.24	%	8.24	%	8.24	%
Term loan payable	25,000,000		Discounted cash flow	Discount rate	5.63	%	5.63	%	5.63	%
Revolving line of credit	90,135,865		Discounted cash flow	Discount rate	7.64	%	7.64	%	7.64	%
Total Level 3 Liabilities	$	328,087,936

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Related Party Transactions

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Management Agreement

The Company entered into the Management Agreement with the Manager whereby the Manager is responsible for its day-to-day operations. The Management Agreement runs co-terminus with the amended and restated operating agreement for Terra Fund 5, which is scheduled to terminate on December 31, 2023 unless Terra Fund 5 is dissolved earlier. The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations:

	Three Months Ended March 31,
	2023		2022
Origination and extension fee expense (1)(2)	$	471,448	$	686,365
Asset management fee	1,997,427		1,488,095
Asset servicing fee	470,525		349,329
Operating expenses reimbursed to Manager	2,177,004		1,928,563
Disposition fee (3)	290,813		—
Total	$	5,407,217	$	4,452,352

_______________

(1)Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan.

(2)Amount for the three months ended March 31, 2023 excluded $0.5 million of origination fee paid to the Manager in connection with the acquisition of the three industrial buildings in 2023. Amount for the three months ended March 31, 2022 excluded $0.2 million of origination fee paid to the Manager in connection with the Company’s equity investment in an unconsolidated investment. This origination fee was capitalized to the carrying value of the unconsolidated investment as a transaction cost.

(3)Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations.

Origination and Extension Fee Expense

Pursuant to the Management Agreement, the Manager or its affiliates receives an origination fee in the amount of 1% of the amount used to originate, fund, acquire or structure real estate-related investments, including any third-party expenses related to such loans. In the event that the term of any real estate-related loan held by the Company is extended, the Manager also receives an extension fee equal to the lesser of (i) 1% of the principal amount of the loan being extended or (ii) the amount of fee paid to the Company by the borrower in connection with such extension.

Asset Management Fee

Under the terms of the Management Agreement, the Manager or its affiliates provides the Company with certain investment management services in return for a management fee. The Company pays a monthly asset management fee at an annual rate of 1% of the aggregate funds under management, which includes the loan origination price or aggregate gross acquisition price, as defined in the Management Agreement, for each real estate related loan and cash held by the Company.

Asset Servicing Fee

The Manager or its affiliates receives from the Company a monthly servicing fee at an annual rate of 0.25% of the aggregate gross origination price or acquisition price, as defined in the Management Agreement, for each real estate-related loan held by the Company.

Transaction Breakup Fee

    In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of March 31, 2023 and December 31, 2022, the Company has not received any breakup fees.

Operating Expenses

The Company reimburses the Manager for operating expenses incurred in connection with services provided to the operations of the Company, including the Company’s allocable share of the Manager’s overhead, such as rent, employee costs, utilities, and technology costs.

Disposition Fee

Pursuant to the Management Agreement, the Manager or its affiliates receives a disposition fee in the amount of 1% of the gross sale price received by the Company from the disposition of any real estate-related loan, or any portion of, or interest in, any real estate-related loan. The disposition fee is paid concurrently with the closing of any such disposition of all or any portion of any real estate-related loan or any interest therein, which is the lesser of (i) 1% of the principal amount of the loan or debt-related loan prior to such transaction or (ii) the amount of the fee paid by the borrower in connection with such transaction. If the Company takes ownership of a property as a result of a workout or foreclosure of a loan, the Company will pay a disposition fee upon the sale of such property equal to 1% of the sales price.

Cost Sharing and Reimbursement Agreement

The Company and Terra LLC have entered into a cost sharing and reimbursement agreement effective October 1, 2022, pursuant to which Terra LLC is responsible for its allocable share of the Company’s expenses, including fees paid by the Company to the Manager based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on the Company’s consolidated financial statements.

Distributions Paid

For the three months ended March 31, 2023 and 2022, the Company made distributions to investors totaling $4.7 million and $3.9 million, respectively, of which $4.2 million and $2.9 million were returns of capital, respectively (Note 11).

Due to Manager

    As of both March 31, 2023 and December 31, 2022, approximately $3.9 million was due to the Manager, as reflected on the consolidated balance sheets, primarily related to the present value of the disposition fees on individual loans due to the Manager.

Mavik Real Estate Special Opportunities Fund, LP

On August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. For more information on this investment, please see Note 5.

Participation Agreements

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 “Participants”). The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity.

ASC 860, Transfers and Servicing (“ASC 860”), establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (See “Participation interests” in Note 2 and “Obligations under Participation Agreements and Secured Borrowing” in (Note 9).

Participation Interests Purchased by the Company

From time to time, the Company may purchase investments from affiliates pursuant to participation agreements. In accordance with the terms of each participation agreement, each Participant’s rights and obligations, as well as the proceeds received from the related borrower/issuer of the loan, are based upon their respective pro rata participation interest in the loan.

The table below lists the participation interests purchased by the Company pursuant to participation agreements as of:

	March 31, 2023
	Participating Interests	Principal Balance		Carrying Value
Mesa AZ Industrial Owner, LLC (1)	38.27%	$	31,000,000	$	31,288,062
UNJ Sole Member, LLC (1)	40.80%	7,444,357		7,484,017
		$	38,444,357	$	38,772,079

	December 31, 2022
	Participating Interests	Principal Balance		Carrying Value
Havemeyer TSM LLC (1)(2)	23.00%	$	3,282,208	$	3,313,813
Mesa AZ Industrial Owner, LLC (1)	38.27%	31,000,000		31,276,468
UNJ Sole Member, LLC (1)	40.80%	7,444,357		7,482,547
		$	41,726,565	$	42,072,828

________________

(1)The loan is held in the name of Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager.

(2)This loan was repaid in February 2023.

Transfers of Participation Interest by the Company

    The following tables summarize the loans that were subject to participation agreements with affiliated entities and third-parties as of:

					Transfers Treated as Obligations Under Participation Agreements as of March 31, 2023
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
610 Walnut Investors LLC (1)	$	19,398,129	$	19,533,518	67.57	%	$	13,106,844	$	13,209,982
	$	19,398,129	$	19,533,518			$	13,106,844	$	13,209,982

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2022
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
610 Walnut Investors LLC (1)	$	18,625,738	$	18,738,386	67.57	%	$	12,584,958	$	12,680,594
	$	18,625,738	$	18,738,386			$	12,584,958	$	12,680,594

________________

(1)Participant was a third party.

These investments are held in the name of the Company, but each of the Participant’s rights and obligations, including interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon their respective pro rata participation interest in such participated investments, as specified in the respective participation agreement. The Participants’ share of the investments is repayable only from the proceeds received from the related borrower/issuer of the investments and, therefore, the Participants also are subject to credit risk (i.e., risk of default by the underlying borrower/issuer). Pursuant to the participation agreements with these entities, the Company receives and allocates the interest income and other related investment income to the Participants based on their respective pro rata participation interest. The Participants pay any expenses, including any fees to the Manager, only on their respective pro rata participation interest, subject to the terms of the respective governing fee arrangements.

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Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Debt

Note 9. Debt

Unsecured Notes Payable

The 6.00% Senior Notes Due 2026

On June 10, 2021, the Company issued $78.5 million in aggregate principal amount of its 6.00% notes due 2026 (the “initial note”), for net proceeds of $76.0 million after deducting underwriting commissions of $2.5 million, but before offering expenses payable by the Company. On June 25, 2021, the underwriters partially exercised their option to purchase an additional $6.6 million of the notes for net proceeds of $6.4 million (the “additional notes” and, together with the initial notes, the “6.00% Senior Notes Due 2026”), after deducting underwriting commissions of $0.2 million, but before offering expenses payable by us, which closed on June 29, 2021. Interest on the 6.00% Senior Notes Due 2026 is paid quarterly in arrears every March 30, June 30, September 30 and December 30, at a fixed rate of 6.00% per year, beginning September 30, 2021. The 6.00% Senior Notes Due 2026 mature on June 30, 2026, unless redeemed earlier by the Company, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after June 10, 2023.

In connection with the issuance of the 6.00% Senior Notes Due 2026, the Company entered into (i) an Indenture, dated June 10, 2021 (the “Base Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”), and (ii) the First Supplemental Indenture thereto, dated June 10, 2021 (the “Supplemental Indenture” and, collectively with the Base Indenture, the “Indenture”), by and between the Company and the Trustee. The Indenture contains certain covenants that, among other things, limit the ability of the Company, subject to exceptions, to make distributions in excess of 90% of the Company’s taxable income, incur indebtedness (as defined in the Indenture) or purchase shares of the Company’s capital stock unless the Company has an asset coverage ratio (as defined in the Indenture) of at least 150% after giving effect to such transaction. The Indenture also provides for customary events of default which, if any of them occurs,

would permit or require the principal of and accrued interest on the notes to become or to be declared due and payable. As of March 31, 2023 and December 31, 2022, the Company was in compliance with the covenants included in the Indenture.

The 7.00% Senior Notes Due 2026

As previously reported by Terra BDC, on February 10, 2021, Terra BDC issued $34.8 million in aggregate principal amount of 7.00% fixed-rate notes due 2026, for net proceeds of $33.7 million after deducting underwriting commissions of $1.1 million and on February 26, 2021, the underwriters exercised the option to purchase an additional $3.6 million of the notes for net proceeds of $3.5 million, after deducting underwriting commissions of $0.1 million (collectively the “7.00% Senior Notes Due 2026”).

Pursuant to the Merger Agreement, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the 7.00% Senior Notes Due 2026 outstanding as of the Effective Time and the performance of every covenant of the Indenture, dated February 10, 2021 (the “TIF6 Indenture”), between Terra BDC and the Trustee, as supplemented by the First Supplemental Indenture, dated February 10, 2021, by and between Terra BDC and the Trustee (the “First Supplemental Indenture”), to be performed or observed by Terra BDC, including, without limitation, the execution and delivery to the Trustee of a supplement to the TIF6 Indenture in form satisfactory to the Trustee.

On the Closing Date, Terra BDC, Terra LLC and the Trustee entered into a Second Supplemental Indenture pursuant to which Terra LLC assumed the payment of the 7.00% Senior Notes Due 2026 and the performance of every covenant of the TIF6 Indenture, as supplemented by the First Supplemental Indenture, to be performed or observed by Terra BDC.

The 7.00% Senior Notes Due 2026 will mature on March 31, 2026, unless earlier repurchased or redeemed. The 7.00% Senior Notes Due 2026 bear interest at a rate of 7.00% per annum, payable on March 30, June 30, September 30 and December 30 of each year. The 7.00% Senior Notes Due 2026 are Terra LLC’s direct unsecured obligations and rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by Terra LLC; effectively subordinated in right of payment to any of Terra LLC’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of Terra LLC’s subsidiaries and financing vehicles. Terra LLC may redeem the 7.00% Senior Notes Due 2026 in whole or in part at any time on or after February 10, 2023, at a redemption price equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest.

The TIF6 Indenture contains certain covenants that, among other things, limit the ability of Terra LLC, subject to exceptions, to incur indebtedness in violation of the 1940 Act, and to make distributions, incur indebtedness or repurchase shares of Terra LLC’s capital stock unless it satisfies asset coverage requirements set forth in the First Supplemental Indenture after giving effect to such transaction. The TIF6 Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the 7.00% Senior Notes Due 2026 to become or to be declared due and payable.

Summarized Information

The table below presents detailed information regarding the unsecured notes payable as of:

	March 31, 2023						December 31, 2022
	Principal Balance		Carrying Value		Fair Value		Principal Balance		Carrying Value		Fair Value
6.00% Senior Notes Due 2026 (1)	$	85,125,000	$	82,653,051	$	71,130,447	$	85,125,000	$	82,487,769	$	68,100,000
7.00% Senior Notes Due 2026 (2)	38,375,000		34,323,491		36,840,000		38,375,000		34,042,904		35,381,748
	$	123,500,000	$	116,976,542	$	107,970,447	$	123,500,000	$	116,530,673	$	103,481,748

_______________

(1)Carrying value is net of unamortized issue discount of $1.8 million and $1.9 million, and unamortized deferred financing costs of $0.6 million and $0.7 million as of March 31, 2023 and December 31, 2022, respectively.

(2)Carrying value is net of unamortized purchase discount of $4.1 million and $4.3 million as of March 31, 2023 and December 31, 2022, respectively.

Revolving Line of Credit

On March 12, 2021, Terra Mortgage Portfolio II, LLC, an indirect wholly-owned subsidiary of the Company, entered into a Business Loan and Security Agreement (the “Revolving Line of Credit”) with Western Alliance Bank (“WAB”) to provide for advances up to the lesser of $75.0 million or the amount determined by the borrowing base, which is based on the eligible assets pledged to the lender. Prior to March 31, 2023 borrowings under the Revolving Line of Credit bore interest at an annual rate of LIBOR + 3.25% with a combined floor of 4.0%. In connection with the transition of LIBOR, on March 31, 2023, the Revolving Line of Credit was amended and the interest rate was changed to Term SOFR + 3.35% with a combined floor of 6.0%. The Revolving Line of Credit was scheduled to mature on March 12, 2023. On January 4, 2022, the Company amended the Revolving Line of Credit to increase the maximum amount available to $125.0 million and extended the maturity date of the facility to March 12, 2024 with an annual 12-month extension available at the Company’s option, which are subject to certain conditions. On August 3, 2022, the Company further amended the Revolving Line of Credit to increase the borrowing sub-limit in New York City and to allow for loans acquired through participation agreements as eligible assets.

In connection with the Revolving Line of Credit, the Company entered into a limited guaranty (the “Guaranty”) in favor of WAB, pursuant to which the Company guarantees the payment of up to 25% of the amount outstanding under the Revolving Line of Credit. Under the Revolving Line of Credit and the Guaranty, the Company is required to maintain (i) a minimum total net worth of $250.0 million; (ii) a $3.5 million quarterly operating profit, as defined within the agreement; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00. As of March 31, 2023 and December 31, 2022, the Company was in compliance with these covenants.

The Revolving Line of Credit contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature. The Revolving Line of Credit contains various affirmative and negative covenants, including maintenance of a debt to total net worth ratio and limitations on the incurrence of liens and indebtedness, loans, distributions, change of management and ownership, changes in the nature of business and transactions with affiliates.

The Revolving Line of Credit also includes customary events of default, including a cross-default provision applicable to debt obligations of Terra Mortgage Portfolio II, LLC or the Company. The occurrence of an event of default may result in termination of the Revolving Line of Credit and acceleration of amounts due under the Revolving Line of Credit.

In connection with the closing of the Revolving Line of Credit, the Company also incurred financing fees of $0.6 million, to be amortized to interest expense over the life of the Revolving Line of Credit.

As of March 31, 2023 and December 31, 2022, borrowings under the Revolving Line of Credit were $125.0 million and $90.1 million, respectively, collateralized by $217.9 million and $177.4 million of eligible assets, respectively. For the three months ended March 31, 2023 and 2022, the Company received proceeds from the Revolving Line of Credit of $34.9 million and $26.4 million, respectively, and did not make any repayments.

Repurchase Agreements

UBS Master Repurchase Agreement

On November 8, 2021, Terra Mortgage Capital III, LLC (the “Seller”), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Uncommitted Master Repurchase Agreement (the “UBS Master Repurchase Agreement”) with UBS AG ( the “Buyer”). The UBS Master Repurchase Agreement provides for advances of up to $195 million in the aggregate, which the Company expects to use to finance certain secured performing commercial real estate loans, including senior mortgage loans, where the underlying mortgaged properties consist of value-added assets with loan-to-value ratio between 65% and 80% that are typically yielding between 2.5% and 5.0%.

Advances under the UBS Master Repurchase Agreement accrue interest at a per annum pricing rate equal to the sum of (i) the 30-day LIBOR or Term SOFR if LIBOR is not available and (ii) the applicable spread, which ranges from 1.60% to 2.25%, and have a maturity date of November 7, 2024. The actual terms of financing for each asset will be determined at the time of financing in accordance with the UBS Master Repurchase Agreement. Subject to satisfaction of certain conditions, the Seller may extend the maturity date of the UBS Master Repurchase Agreement annually thereafter on mutually agreeable terms. In connection with the UBS Master Repurchase Agreement, the Company incurred deferred financing costs of $0.6 million, which are being amortized to interest expense over the term of the facility.

The UBS Master Repurchase Agreement contains margin call provisions that provide the Buyer with certain rights in the event of a decline in the credit of the underlying assets purchased under the UBS Master Repurchase Agreement. Upon the occurrence of a margin deficit event, the Buyer may require the Seller to make a payment to reduce the purchase price to eliminate any margin deficit.

In connection with the UBS Master Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of the Buyer (the “UBS Guarantee Agreement”), pursuant to which the Company will guarantee the payment of up to 25% of the amount outstanding under the UBS Master Repurchase Agreement. The UBS Master Repurchase Agreement and the UBS Guarantee Agreement contain various representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types. In addition, the UBS Guarantee Agreement contains financial covenants, which require the Company to maintain: (i) cash liquidity of at least the greater of $5 million or 5% of the then-current outstanding amount under the UBS Master Repurchase Agreement; (ii) total liquidity of at least the greater of $15 million or 10% of the then-current outstanding amount under the UBS Master Repurchase Agreement (iii) tangible net worth at an amount equal to or greater than $215.7 million plus 75% of new capital contributions thereafter; (iv) an EBITDA to interest expense ratio of not less than 1.50 to 1.00; and (v) a total indebtedness to tangible net worth ratio of not more than 3.50 to 1.00. In March 2022, the Company amended the UBS Guarantee Agreement to reduce the EBITDA to interest expense ratio of not less than 1.25 to 1.00, and as of March 31, 2023 and December 31, 2022, the Company was in compliance with these covenants.

The following tables present detailed information with respect to each borrowing under the UBS Master Repurchase Agreement as of:

	March 31, 2023
	Collateral						Borrowings Under Master Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
NB Factory TIC 1, LLC	$	28,000,000	$	28,823,787	$	28,908,756	11/8/2021	$	18,970,000	LIBOR+1.74% (LIBOR floor of 0.1%)
Grandview’s Madison Place, LLC	17,000,000		17,107,426		17,130,108		3/7/2022	13,600,000		Term SOFR + 1.965%
Grandview’s Remington Place,    LLC	23,100,000		23,201,857		23,205,196		5/6/2022	18,480,000		Term SOFR + 1.965%
	$	68,100,000	$	69,133,070	$	69,244,060		$	51,050,000

	December 31, 2022
	Collateral						Borrowings Under Master Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
NB Factory TIC 1, LLC	$	28,000,000	$	28,857,892	$	28,902,234	11/8/2021	$	18,970,000	LIBOR+1.74% (LIBOR floor of 0.1%)
Grandview’s Madison Place, LLC	17,000,000		17,105,928		17,105,928		3/7/2022	13,600,000		Term SOFR + 1.965%
Grandview’s Remington Place,    LLC	23,100,000		23,199,620		23,203,343		5/6/2022	18,480,000		Term SOFR + 1.965%
	$	68,100,000	$	69,163,440	$	69,211,505		$	51,050,000

For the three months ended March 31, 2023, the Company did not borrow or make any repayments under the UBS Master Repurchase Agreement. For the three months ended March 31, 2022, the Company borrowed $13.6 million and did not make any repayments under the UBS Master Repurchase Agreement.

Goldman Master Repurchase Agreement     

The Company entered into a credit agreement with Goldman Sachs Banks to provide for a term loan of up to $103.0 million. On February 18, 2022, Terra Mortgage Capital I, LLC (the “GS Seller”), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Uncommitted Master Repurchase and Securities Contract Agreement (the “Repurchase Agreement”) with Goldman Sachs Bank USA ( the “GS Buyer”). The Repurchase Agreement provides for advances of up to $200.0 million in the aggregate, which the Company expects to use to finance the originations of certain

secured performing commercial real estate loans and the acquisitions of certain secured non-performing commercial real estate loans. The Repurchase Agreement replaced the term loan, at which time all mortgage assets under the term loan were assigned as purchased assets under the Repurchase Agreement.

Advances under the Repurchase Agreement accrue interest at a per annum pricing rate equal to the sum of (i) Term SOFR (subject to underlying loan floors on a case-by-case basis) and (ii) the applicable spread, which ranges from 1.75% to 3.00%, and have a maturity date of February 18, 2024. The actual terms of financing for each asset will be determined at the time of financing in accordance with the Repurchase Agreement. Subject to satisfaction of certain conditions, the GS Seller may extend the maturity date of the Repurchase Agreement for another 12-month term. In connection with the Repurchase Agreement, the Company incurred financing costs of $0.6 million, which are being amortized to interest expense over the term of the facility. Additionally, because the Repurchase Agreement was accounted for as a loan modification of the term loan, the remaining unamortized deferred financing fees of $1.7 million under the term loan were carried over to the Repurchase Agreement to be amortized over the life of the Repurchase Agreement.

The Repurchase Agreement contains margin call provisions that provide the GS Buyer with certain rights in the event of a decline in debt yield, loan-to-value ratio, and value of the underlying loans purchased under the Repurchase Agreement. Upon the occurrence of a margin deficit event, the GS Buyer may require the GS Seller to make a payment to reduce the purchase price to eliminate any margin deficit.

In connection with the Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of the GS Buyer (the “Guarantee Agreement”), pursuant to which the Company will guarantee the obligations of the GS Seller under the Repurchase Agreement. Subject to certain exceptions, the maximum liability under the Repurchase Agreement will not exceed 25% of the then currently outstanding repurchase obligations for performing loans and 50% of the then currently outstanding repurchase obligations for non-performing loans under the Repurchase Agreement.

The Repurchase Agreement and the Guarantee Agreement contain various representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types. In addition, the Guarantee Agreement contains financial covenants, which require the Company to maintain: (i) cash liquidity of at least the greater of $5 million or 5% of the then-current outstanding amount under the Repurchase Agreement; (ii) total liquidity in an amount equal to or greater than the lesser of $15 million or 10% of the then-current outstanding amount under the Repurchase Agreement (iii) tangible net worth at an amount no less than 75% of that at closing; (iv) an EBITDA to adjusted interest expense ratio of not less than 1.50 to 1.00; and (v) a total indebtedness to tangible net worth ratio of not more than 3.00 to 1.00. As of March 31, 2023 and December 31, 2022, the Company was in compliance with these covenants.

The following tables present detailed information with respect to each borrowing under the Repurchase Agreement as of:

	March 31, 2023
	Collateral						Borrowings Under Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
330 Tryon DE LLC	$	22,800,000	$	22,903,981	$	22,743,319	2/18/2022	$	16,514,712	Term SOFR + 2.015% (0.01% floor)
1389 Peachtree St, LP; 1401 Peachtree St, LP; and    1409 Peachtree St, LP	57,221,615		57,496,677		57,133,997		2/18/2022	42,888,134		Term SOFR + 2.465%
AGRE DCP Palm Springs, LLC	43,222,382		43,793,356		43,265,735		2/18/2022	28,094,548		Term SOFR + 1.315% (1.8% floor)
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,042,414		17,873,381		2/18/2022	14,400,000		Term SOFR + 0.865% (1.5% floor)
	$	141,243,997	$	142,236,428	$	141,016,432		$	101,897,394

	December 31, 2022
	Collateral						Borrowings Under Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
330 Tryon DE LLC	$	22,800,000	$	22,902,215	$	22,687,235	2/18/2022	$	18,240,000	Term SOFR + 2.015% (0.01% floor)
1389 Peachtree St, LP; 1401 Peachtree St, LP; and    1409 Peachtree St, LP	57,184,178		57,453,482		56,844,322		2/18/2022	41,587,275		Term SOFR + 2.465%
AGRE DCP Palm Springs, LLC	43,222,382		43,758,804		43,062,933		2/18/2022	28,094,548		Term SOFR + 1.315% (1.8% floor)
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,041,782		17,824,300		2/18/2022	14,400,000		Term SOFR + 0.865% (1.5% floor)
University Park Berkeley, LLC	26,342,468		26,536,122		26,472,938		2/18/2022	17,504,783		Term SOFR + 1.365% ( 1.50% floor)
	$	167,549,028	$	168,692,405	$	166,891,728		$	119,826,606

For the three months ended March 31, 2023 and 2022 the Company borrowed $1.3 million and $118.3 million, respectively, under the Repurchase Agreement and made repayments of $19.2 million and zero, respectively.

Term Loan

As previously reported by Terra BDC, on April 9, 2021, Terra BDC, as borrower, entered into a credit agreement (the “Credit Agreement”) with Eagle Point Credit Management LLC, as the administrative agent and collateral agent (“Eagle Point”), and certain funds and accounts managed by Eagle Point, as lenders (in such capacity, collectively, the “Lenders”). The Credit Agreement provides for (i) a delayed draw term loan of $25.0 million and (ii) additional incremental loans in a minimum amount of $1.0 million and multiples of $0.5 million in excess thereof, which may be approved by a Lender in its sole discretion (the “Term Loan”).

The scheduled maturity date of the Term Loan was April 9, 2025. The Term Loan bears interest on the outstanding principal amount thereof at a rate equal to 5.625% per annum; provided that if at any time Terra BDC was rated below investment grade, the interest rate would increase to 6.625% until the rating is no longer below investment grade. In connection with the entry into the Credit Agreement, Terra BDC also agreed to pay Eagle Point an upfront fee in an amount equal to 2.50% of the loan commitment amount on the initial borrowing date as described in the Credit Agreement. Terra BDC also paid, with respect to any unused portion of the Term Loan, a commitment fee of 0.75% per annum.

Terra BDC could prepay any loan, in whole or in part, together with all accrued but unpaid interest thereon, upon at least

30 but not more than 60 days’ prior notice to the Agent. If Terra BDC elected to make such prepayments prior to October 9, 2023, Terra BDC would also be required to pay a make whole premium, being the present value at such date of (1) the principal

amount being prepaid of such loan, plus (2) all remaining required interest payments due on the principal amount being prepaid of such loan through the maturity date (excluding accrued but unpaid interest to the date on which the make whole premium becomes owed), computed using a discount rate equal to the applicable U.S. Treasury rate (as set forth in the Credit Agreement) plus 50 basis points, over (B) the principal amount being prepaid of such loan; provided that the make whole premium may in no event be less than zero.

In connection with its entry into the Credit Agreement, Terra BDC also entered into a security agreement (the “Security Agreement”), by and among Terra BDC, as grantor, and Eagle Point, as administrative agent, for the benefit of the Lenders, their affiliates and Eagle Point as the secured parties thereunder. Pursuant to the Security Agreement, Terra BDC pledged substantially all of its then owned and thereafter acquired property as security for the obligations of Terra BDC under the Credit Agreement, subject to certain limitations and restrictions set forth in the Security Agreements.

On September 27, 2022, Terra BDC, Terra LLC, Eagle Point and the Lenders entered into a Consent Letter and Amendment (the “Credit Facility Amendment”) effective October 1, 2022. Pursuant to the Credit Facility Amendment (i) Eagle Point and the Lenders consented to the consummation of the BDC Merger and the assumption by Terra LLC of all of the obligations of Terra BDC under the Credit Agreement, (ii) and the Credit Agreement was amended to, among other things, change the scheduled maturity date to July 1, 2023, and remove the make whole premium on voluntary prepayments of the loans.

The Credit Agreement contains customary representations, warranties, reporting requirements, borrowing conditions and affirmative, negative and financial covenants. As of March 31, 2023 and December 31, 2022 , Terra LLC was in compliance with these covenants.

Mortgage Loans Payable

In connection with the acquisition of real estate properties described in Note 6, the Company entered into a loan agreement with a lender to provide financing of up to $37.0 million for the acquisition. As of March 31, 2023, $32.1 million has been funded. This mortgage loan bears interest at an annual rate of Term SOFR plus 3.5% with a Term SOFR floor of 3.75% and matures on April 9, 2027.

The following table presents certain information about mortgage loans payable as of:

			March 31, 2023						December 31, 2022
Lender	Current Interest Rate	Maturity Date	Principal Amount		Carrying Value		Carrying Value of Collateral		Principal Amount		Carrying Value		Carrying Value of Collateral
Centennial    Bank (1)	Term SOFR + 3.85% (Term SOFR Floor of 2.23%)	May 31, 2023	$	29,252,308	$	29,506,608	$	39,967,385	$	29,252,308	$	29,488,326	$	40,581,847
TPG RE   Finance   24, LTD (2)	Term SOFR +3.5% (Term SOFR Floor of 3.75%	April 9, 2027	32,100,000		31,262,090		48,798,273		—		—		—
			$	61,352,308	$	60,768,698	$	88,765,658	$	29,252,308	$	29,488,326	$	40,581,847

___________________

(1) This loan is collateralized by a multi-tenant office building that the Company acquired through foreclosure.

(2) This loan is collateralized by three industrial buildings that the Company acquired in March 2023.

Scheduled Debt Principal Payments

    Scheduled debt principal payments for each of the five calendar years following March 31, 2023 are as follows:

Years Ending December 31,	Total
2023 (April 1 through December 31)	$	54,252,308
2024	277,947,395
2025	—
2026	123,500,000
2027	32,100,000
Thereafter	—
	487,799,703
Unamortized deferred financing costs	(8,540,193)
Total	$	479,259,510

     At March 31, 2023 and December 31, 2022, the unamortized deferred debt issuance costs were $8.5 million and $8.6 million, respectively.

Obligations Under Participation Agreements

As discussed in Note 2, the Company follows the guidance in ASC 860 when accounting for loan participations. Such guidance requires the transferred interests meet certain criteria in order for the transaction to be recorded as a sale. 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. As of March 31, 2023 and December 31, 2022, obligations under participation agreements had a carrying value of approximately $13.2 million and $12.7 million, respectively,

and the carrying value of the loans that are associated with these obligations under participation agreements was approximately $19.5 million and $18.7 million, respectively, (see “Participation Agreements” in Note 8). The weighted-average interest rate on the obligations under participation agreements was approximately 16.8% and 16.4% as of March 31, 2023 and December 31, 2022, respectively.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Unfunded Commitments on Loans Held for Investment

Certain of the Company’s loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These fundings amounted to approximately $71.0 million and $47.3 million as of March 31, 2023 and December 31, 2022, respectively. The Company expects to maintain sufficient cash on hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on credit facilities.

Unfunded Investment Commitment

As discussed in Note 5, on August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. As of March 31, 2023 and December 31, 2022, the unfunded investment commitment was $30.3 million and $22.4 million, respectively.

Other

The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. The Manager has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.

From time to time, the Company and the Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. Additionally, as described above under “Note 6. Real Estate Owned, Net—Real Estate Operating Revenue and Expenses,” as of March 31, 2023 and December 31, 2022, the Company owned a multi-tenant office building that is subject to a ground lease. The ground lease provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9% of the fair market value of the land. The next rent reset on the ground lease is scheduled for November 1, 2025. The Company is currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v. Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No. 20STCV34217. The Company believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. The Company’s position has prevailed in all three of the prior arbitrations to reset the ground rent. Since future rent reset determinations under the ground lease cannot be known at this time, the Company did not include any potential future rent increases in calculating the present value of future rent payments. The Company intends vigorously to pursue the litigation. While the Company believes its arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty. If the landlord prevails, the future rent reset determinations could result in significantly higher ground rent, which would likely result in a significant diminution in the value of the Company’s interest in the ground lease and the office building.

See Note 8 for a discussion of the Company’s commitments to the Manager.

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Equity

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

Equity

Equity

Earnings Per Share

The following table presents earnings per share:

	Three Months Ended March 31,
	2023		2022
Net income (loss)	$	547,479	$	(757,887)
Series A preferred stock dividend declared	(3,907)		(3,906)
Net income (loss) allocable to common stock	$	543,572	$	(761,793)
Weighted-average shares outstanding - basic and diluted	24,335,373		19,487,460
Income (loss) per share - basic and diluted	$	0.02	$	(0.04)

Preferred Stock Classes

Preferred Stock

    The Company’s charter gives it authority to issue 50,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”). The Board may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, into one or more classes or series of stock. As of March 31, 2023, there were no Preferred Stock issued or outstanding. As of December 31, 2022 there were 125 shares of Series A Preferred Stock (as defined below) issued and outstanding.

Series A Preferred Stock

    On November 30, 2016, the Board classified and designated 125 shares of Preferred Stock as a separate class of Preferred Stock to be known as the 12.5% Series A Redeemable Cumulative Preferred Stock, $1,000 liquidation value per share (“Series A Preferred Stock”). In December 2016, the Company sold 125 shares of the Series A Preferred Stock for $125,000. The Series A Preferred Stock paid dividends at an annual rate of 12.5% of the liquidation preference. These dividends were cumulative and payable semi-annually in arrears on June 30 and December 31 of each year.

    The Series A Preferred Stock, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company, ranked senior to common stock. The Company, at its option, may redeem the shares, with written notice, at a redemption price of $1,000 per share, plus any accrued unpaid distribution through the date of the redemption. The Series A Preferred Stock carried a redemption premium of $50 per share if redeemed prior to January 1, 2019. The Series A Preferred Stock generally had no voting rights. However, the Series A Preferred Stockholders’ voting was required if (i) authorization or issuance of any securities senior to the Series A Preferred Stock; (ii) an amendment to the Company’s charter that has a material adverse effect on the rights and preference of the Series A Preferred Stock; and (iii) any reclassification of the Series A Preferred Stock.

In March 2023, the Series A Preferred Stock was fully redeemed at par for a total of $125,000 plus accrued dividends.

Common Stock

On October 1, 2022, in connection with the BDC Merger, the Company amended its charter to increase the shares authorized from 500,000,000 to 950,000,000, consisting of 450,000,000 shares of Class A Common Stock, $0.01 par value per share (“Class A Common Stock”), 450,000,000 shares of Class B Common Stock, and 50,000,000 shares of Preferred Stock. Concurrently, 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders and each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the BDC Merger was automatically changed into one issued and outstanding share of Class B Common Stock. As of March 31, 2023, Terra JV, LLC, former shareholders of Terra BDC and Terra Offshore Funds REIT, LLC held 70.0%, 19.9% and 10.1% of the issued and outstanding shares of the Class B Common Stock, respectively.

The Class B Common Stock rank equally with and have identical preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as each other share of the Company’s common stock, except as set forth below with respect to conversion.

On the date that is 180 calendar days (or, if such date is not a business day, the next business day) after the date (the “First Conversion Date”) of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date as approved by the Board, one-third of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. On the date that is 365 calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date following the First Conversion Date as approved by the Board (the “Second Conversion Date”), one-half of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. On the date that is 545 calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date following the Second Conversion Date as approved by the Board, all of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock.

Distributions

    The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with U.S. GAAP, to its stockholders each year to comply with the REIT provisions of the Internal Revenue Code. All distributions will be made at the discretion of the Board and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors as the Board deems relevant.

For the three months ended March 31, 2023 and 2022, the Company made distributions to investors totaling $4.7 million and $3.9 million, respectively, of which $4.2 million and $2.9 million were returns of capital, respectively. Additionally, for the three months ended March 31, 2023 and 2022, the Company made distributions to preferred stockholders of $3,907 and $3,906, respectively.

Dividend Reinvestment Plan

On January 20, 2023, the Board adopted a distribution reinvestment plan (the “Plan”), pursuant to which the Company’s stockholders may elect to reinvest cash distributions payable by the Company in additional shares of Class A Common Stock and Class B Common Stock, at the price per share determined pursuant to the Plan. For the three months ended March 31, 2023, the Company issued 34 shares of Class B Common Stock for a total of 478 pursuant the Plan.

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Subsequent Events	3 Months Ended
	Mar. 31, 2023
Subsequent Events [Abstract]
Subsequent Events	Note 12. Subsequent EventsManagement has evaluated subsequent events through the date the consolidated financial statements were available to be issued. Management has determined that there are no material events other than the ones below that would require adjustment to, or disclosure in, the Company’s consolidated financial statements.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Principles of Consolidation

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.

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 VIEs unless a limited partner holds substantive kick-out or participating rights over a 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

Loans Held for Investment

    The Company originates, acquires, and structures, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”). 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 amortized cost less allowance for credit losses.

Current Expected Credit Losses Reserve

Current Expected Credit Losses Reserve

Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses, became effective for the Company on January 1, 2023. ASC 326 mandates the use of a current expected credit loss (“CECL”) model for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” credit model previously required under United States generally accepted accounting principles (“U.S. GAAP”). The CECL model requires the consideration of possible credit losses over the life of an instrument as opposed to only estimating credit losses upon the occurrence of a discrete loss event under the previous “incurred loss” methodology. The CECL model applies to the Company’s loan portfolio and the held-to-maturity debt securities which are carried at amortized cost, including future funding commitments for which the Company does not have the unconditional right to cancel. Amortized cost is defined as the principal amount outstanding, adjusted for the accretion of purchase discounts and disposition fees, and amortization of purchase premiums and origination fees, and includes accrued interest receivable related to these loans and securities. As permitted by ASC 326, the Company elected not to measure an allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheet), but rather write off in a timely manner by reversing interest income that would likely be uncollectible. The Company’s adoption of the CECL model resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to accumulated deficit as of January 1, 2023. Subsequent to the adoption of the CECL model, any increase or decrease to the CECL reserve is recorded in earnings on the consolidated statements of operations.

The Company utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio. The Company does not have a meaningful history of realized credit losses on its loan portfolio so it has subscribed to a third-party database service to provide the Company with industry losses for its loans. The Company utilizes a loan loss model that is widely used among banks and commercial mortgage REITs and is marketed by a leading commercial mortgage-based security data analytics provider. It employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. The Company provides specific loan-level inputs which include loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding

commitments. The Company selects from a group of independent five-year macroeconomic forecasts included in the model that are updated regularly based on current economic trends. Because the Company’s loan portfolio is comprised of a small number of loans, the Company measures the CECL reserve based on an evaluation of each loan as its own segregated asset. Based on the inputs, the loan loss model determines a loan loss rate through the generation of probability of defaults (PD) and loss given defaults (LGD) for each loan. The CECL reserve is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect the expected credit losses.

The calculation of the estimate of expected credit loss considers historical experience and current conditions for each loan and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy, current portfolio composition, level of historical loss forecast estimates, material changes in growth and credit strategy and other factors that may affect its loss experience. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed.

Beyond the Company’s reasonable and supportable forecast period, the Company generally reverts to historical loss information, pooled by asset type and investment structure, over the remaining loan period, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. The Company generally expects to use an average historical loss for reversion, utilizing an immediate or straight-line method for the remaining life of the loans.

The Company also performs a qualitative assessment beyond model estimates and applies qualitative adjustments as necessary. The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the Company to determine the amount of the expected loss more accurately and reasonably for these investments. The Company also evaluates the contractual life of its loans to determine if changes are needed for contractual extension options, renewals, modifications, and prepayments.

During the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, the Company considers that loan non-performing. For all non-performing loans, such as those in default, collateral-dependent or modified loans, including historical troubled debt restructurings, the Company removes these loans from the industry loss rate approach described above and analyzes them separately. The credit loss reserve for these loans is calculated as any excess of the amortized cost of the loan over (i) the present value of expected future cash flows discounted at the appropriate discount rate or (ii) the fair value of collateral, if repayment is expected solely from the collateral.

Some of the Company’s loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL model because the Company does not have an unconditional right to cancel such commitments. The CECL reserve related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets. This CECL reserve is estimated using the same method outlined above for the Company’s outstanding loan balances, and increases or decreases in the CECL reserve relating to unfunded commitments are also recorded in earnings on the consolidated statements of operations.

    As discussed below in Recent Accounting Pronouncements, the Company adopted the provisions of Accounting Standards Update (“ASU”) 2022-02 Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) concurrently with the adoption of CECL on January 1, 2023, prospectively

Equity Investment in Unconsolidated Investments

Equity Investment in Unconsolidated Investments

The Company accounts for its equity interests in unconsolidated investments 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.

The Company evaluates its equity investment unconsolidated investments on a periodic basis to determine if there are any indicators that the value of its equity investments may be impaired and whether or not that impairment is other-than-temporary. To the extent an impairment has occurred and is determined to be other-than-temporary, the Company measures the charge as the excess of the carrying value of its investment over its estimated fair value, which is determined by calculating its share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint venture agreements.

Marketable Securities

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.

Held-to-Maturity Debt Securities

The Company classifies debt securities for which it has both the positive intent and ability to hold until maturity of the security as held-to-maturity debt securities. These securities are recorded at amortized cost with changes in amortized cost recognized in earnings until realized. Held-to-maturity debt securities are subject to the CECL reserve described above.

Real Estate Owned, Net

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

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. 

    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 is recognized on a straight-line basis over the lease term.

Revenue Recognition

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. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of income and principal becomes doubtful. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. 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

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 as of:

	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	28,869,594	$	9,858,153
Restricted cash	4,611,794		8,058,767
Cash held in escrow by lender	3,571,083		7,651,900
Total cash, cash equivalents and restricted cash shown in the consolidated    statements of cash flows	$	37,052,471	$	25,568,820

Participation Interests

Participation InterestsLoan 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

Term Loan     The Company previously financed certain of its senior loans through borrowings under an indenture and credit agreement. The Company accounted for the borrowings as a term loan, which was carried at the contractual amount (cost), net of unamortized deferred financing fees. On February 18, 2022, the Company refinanced the Term Loan (as defined below) with a new repurchase agreement. See “Goldman Master Purchase Agreement” in Note 9 for additional information. In connection with the BDC Merger, the Company assumed a $25.0 million term loan. The Company classified this term loan as term loan payable on the consolidated balance sheets.

Repurchase Agreements

Repurchase AgreementsThe Company finances certain of its senior loans held for investment through repurchase transactions under master repurchase agreements. The Company accounts for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. See “Repurchase Agreements” in Note 9 for additional information.

Fair Value Measurements

Fair Value Measurements

    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, unsecured notes, mortgage loan payable, term loan payable, repurchase agreement payment 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.

The Company follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets

for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:

Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access.

Level 2 — Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

      Level 3 — Significant unobservable inputs are based on the best information available in the circumstances, to the extent observable inputs are not available, including the Company’s own assumptions used in determining the fair value of investments. Fair value for these investments are determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment.

     In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

As of March 31, 2023 and December 31, 2022, 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, held-to-maturity debt securities, obligations under participation agreements, term loan payable, repurchase agreement payable, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities and derivatives are financial instruments that are reported at fair value.

Deferred Financing Costs

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

Income Taxes

    The Company has elected to be taxed as a REIT under 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 dividends equal to 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) 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, 2023, the Company has satisfied all the requirements for a REIT.

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

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, 2023 and 2022, 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 2019-2022 federal tax returns remain subject to examination by the Internal Revenue Service.

Earnings Per Share

Earnings Per Share

    The Company has a simple equity capital structure with only common stock outstanding as of March 31, 2023 and common stock and preferred stock outstanding as of December 31, 2022. 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

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. Actual results may ultimately differ from those estimates, and those differences could be material.

Segment Information

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, may invest in real estate related joint ventures and may directly acquire real estate properties. 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

Recent Accounting Pronouncements

    In June 2016, the Financial Accounting Standards Board (“FASB”) issued 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. The Company adopted this ASU and related amendments on January 1, 2023. The adoption of ASU 2016-13 resulted in an incremental reserve of approximately $4.6 million, which included reserve on future loan funding commitments. The Company recorded the cumulative effect of initially applying this guidance as an adjustment to Accumulated deficit using the modified retrospective method of adoption.

    London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. In July 2017, the U.K. Financial Conduct Authority, which regulates the LIBOR administrator, ICE Benchmark Administration Limited (“IBA”), announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021, which has subsequently been delayed to June 30, 2023. 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”). In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) — Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”). ASU 2022-06 deferred the sunset date of ASU 2020-04 to December 31, 2024. 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.In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates troubled debt restructuring guidance for organizations that adopted the amendments in ASU 2016-13 while providing for additional disclosures for loan modifications. ASU 2022-02 also amends the vintage disclosure guidance for public business entities. The Company adopted the provisions of ASU 2022-02 concurrently with the adoption of ASU 2016-03. The adoption of ASU 2022-02 did not have any material impact on the Company’s financial condition and results of operations.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Schedule of Cash, Cash Equivalents and Restricted Cash

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 as of:

	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	28,869,594	$	9,858,153
Restricted cash	4,611,794		8,058,767
Cash held in escrow by lender	3,571,083		7,651,900
Total cash, cash equivalents and restricted cash shown in the consolidated    statements of cash flows	$	37,052,471	$	25,568,820

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BDC Merger (Tables)

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table summarizes the total consideration and the fair values of assets acquired and liabilities assumed in the BDC Merger:

Total Consideration
Fair value of Terra Property Trust shares of common stock issued	$	71,054,620
Cash paid for fractional shares	12,920
Transaction costs	2,283,785
	$	73,351,325
Assets Acquired and Liabilities Assumed at Fair Value
Cash and cash equivalents	$	24,321,951
Restricted cash	260,614
Loans held for investment	77,562,528
Loans held for investment acquired through participation	36,793,313
Interest receivable	1,367,044
Other assets	55,465
Term loan payable	(25,000,000)
Unsecured notes payable	(33,770,000)
Obligations under participation agreements	(6,114,979)
Interest reserve and other deposits held on investments	(260,614)
Due to manager	(682,541)
Interest payable	(53,186)
Accounts payable and accrued expenses	(740,824)
Other liabilities	(387,446)
Net assets acquired	$	73,351,325

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Loans Held for Investment (Tables)

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Schedule of Company's Loan Portfolio

The following table provides a summary of the Company’s loan portfolio as of:

	March 31, 2023									December 31, 2022
	Fixed Rate			Floating Rate (1)(2)(3)			Total			Fixed Rate			Floating Rate (1)(2)(3)			Total
Number of loans	6			24			30			8			23			31
Principal balance	$	59,726,205		$	573,106,467		$	632,832,672		$	90,990,183		$	554,805,276		$	645,795,459
Carrying value	$	60,121,950		$	549,826,839		$	609,948,789		$	92,274,998		$	534,215,769		$	626,490,767
Fair value	$	59,314,040		$	553,011,148		$	612,325,188		$	90,729,098		$	532,416,656		$	623,145,754
Weighted-average coupon rate	13.17		%	11.78		%	11.92		%	13.82		%	11.23		%	11.59		%
Weighted-average remaining  term (years)	1.71			1.03			1.09			1.35			1.10			1.14

_______________

(1)These loans pay a coupon rate of LIBOR or Secured Overnight Financing Rate (“SOFR”), as applicable, plus a fixed spread. Coupon rate shown was determined using LIBOR of 4.86%, average SOFR of 4.63% and forward-looking term rate based on SOFR (“Term SOFR”) of 4.80% as of March 31, 2023 and LIBOR of 4.39%, average SOFR of 4.06% and Term SOFR of 4.36% as of December 31, 2022.

(2)As of March 31, 2023 and December 31, 2022, amount included $427.3 million and $413.1 million of senior mortgages used as collateral for $277.9 million and $261.0 million of borrowings under credit facilities, respectively (Note 9).

(3)As of March 31, 2023 and December 31, 2022, twenty-two and twenty-one of these loans, respectively, are subject to a LIBOR or SOFR floor, as applicable.

Schedule of Lending Activities

The following tables present the activities of the Company’s loan portfolio:

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2023	$	584,417,939	$	42,072,828	$	626,490,767
Cumulative effect of credit loss accounting standard effective    January 1, 2023 (Note 2)	(4,250,052)		—		(4,250,052)
New loans made	46,214,722		—		46,214,722
Principal repayments received	(55,895,298)		(3,282,208)		(59,177,506)
Net amortization of premiums on loans	(346,780)		—		(346,780)
Accrual, payment and accretion of investment-related fees and other,    net	(34,186)		(18,541)		(52,727)
Reversal of provision for credit losses	1,070,365		—		1,070,365
Balance, March 31, 2023	$	571,176,710	$	38,772,079	$	609,948,789

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2022	$	457,329,582	$	12,343,732	$	469,673,314
New loans made	87,538,133		581,688		88,119,821
Principal repayments received	(750,000)		—		(750,000)
Net amortization of premiums on loans	(15,348)		—		(15,348)
Accrual, payment and accretion of investment-related fees and other,    net	1,029,625		11,884		1,041,509
Provision for credit losses	(50,296)		—		(50,296)
Balance, March 31, 2022	$	545,081,696	$	12,937,304	$	558,019,000

Schedule of Accounts, Loans and Financing Receivable

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, 2023						December 31, 2022
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	473,858,731	$	478,713,612	78.4	%	$	456,408,889	$	461,299,182	73.7	%
Preferred equity investments	122,131,455		122,948,116		20.2	%	121,231,434		122,132,177		19.5	%
Mezzanine loans	36,842,486		36,938,638		6.1	%	39,352,303		39,451,115		6.3	%
Credit facility	—		—		—	%	28,802,833		29,080,183		4.6	%
Allowance for credit losses	—		(28,651,577)		(4.7)	%	—		(25,471,890)		(4.1)	%
Total	$	632,832,672	$	609,948,789	100.0	%	$	645,795,459	$	626,490,767	100.0	%

	March 31, 2023						December 31, 2022
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	162,206,536	$	162,659,401	26.6	%	$	184,196,708	$	184,722,657	29.4	%
Industrial	127,399,590		128,361,229		21.0	%	147,796,164		148,891,742		23.8	%
Multifamily	112,973,073		113,781,434		18.7	%	104,589,464		105,570,432		16.9	%
Mixed-use	85,128,218		86,026,507		14.1	%	64,880,450		65,838,965		10.5	%
Infill land	49,652,873		50,535,097		8.3	%	48,860,291		49,565,437		7.9	%
Hotel - full/select service	43,222,382		43,793,356		7.2	%	43,222,382		43,758,804		7.0	%
Student housing	31,000,000		31,744,890		5.2	%	31,000,000		31,774,261		5.1	%
Infrastructure	21,250,000		21,698,452		3.6	%	21,250,000		21,840,359		3.5	%
Allowance for credit losses	—		(28,651,577)		(4.7)	%	—		(25,471,890)		(4.1)	%
Total	$	632,832,672	$	609,948,789	100.0	%	$	645,795,459	$	626,490,767	100.0	%

	March 31, 2023						December 31, 2022
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	137,890,644	$	139,389,069	22.9	%	$	164,253,345	$	165,839,561	26.5	%
New York	88,108,375		88,108,375		14.4	%	91,845,479		91,877,084		14.7	%
Georgia	72,983,863		73,647,905		12.1	%	72,401,718		73,101,964		11.7	%
New Jersey	70,891,499		71,920,880		11.8	%	62,228,622		62,958,482		10.0	%
Texas	68,160,964		68,687,384		11.3	%	67,625,000		68,142,046		10.9	%
Washington	63,376,281		63,434,458		10.4	%	56,671,267		57,027,639		9.1	%
Utah	49,250,000		50,522,239		8.3	%	49,250,000		50,698,251		8.1	%
North Carolina	44,171,046		44,601,994		7.3	%	43,520,028		44,041,162		7.0	%
Arizona	31,000,000		31,288,062		5.1	%	31,000,000		31,276,468		5.0	%
Massachusetts	7,000,000		7,000,000		1.1	%	7,000,000		7,000,000		1.1	%
Allowance for credit losses	—		(28,651,577)		(4.7)	%	—		(25,471,890)		(4.1)	%
Total	$	632,832,672	$	609,948,789	100.0	%	$	645,795,459	$	626,490,767	100.0	%

The following table presents the amortized cost of the Company’s loan portfolio by year of origination and loan risk rating as of March 31, 2023:

 

	March 31, 2023
Loan Risk Rating	Number of Loans		Amortized Cost		% of Total		Amortized Cost by Year Originated
							2023		2022		2021		2020		2019		Prior
1	—		$	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—
2	2		25,042,414		3.9	%	—		—		—		—		18,042,414		7,000,000
3	24		524,084,633		82.1	%	2,218,577		250,427,639		116,762,096		27,561,203		124,194,015		2,921,103
4	—		—		—	%	—		—		—		—		—		—
5	—		—		—	%	—		—		—		—		—		—
Non-performing	4		89,473,319		14.0	%	—		—		—		—		1,364,944		88,108,375
	30	30	638,600,366		100.0	%	$	2,218,577	$	250,427,639	$	116,762,096	$	27,561,203	$	143,601,373	$	98,029,478
Allowance for credit losses			(28,651,577)
Total, net of allowance for credit losses			$	609,948,789

The following table presents the principal balance and the amortized cost of the Company’s loans based on the loan risk rating as of December 31, 2022:

	December 31, 2022
Loan Risk Rating	Number of Loans	Principal Balance		Amortized Cost		% of Total
1	—	$	—	$	—	—	%
2	2	25,000,000		25,041,782		3.8	%
3	25	530,867,244		536,992,660		82.4	%
4	—	—		—		—	%
5	—	—		—		—	%
Non-performing (1)	4	89,928,215		89,928,215		13.8	%
	31	$	645,795,459	651,962,657		100.0	%
Allowance for credit losses				(25,471,890)
Total, net of allowance for credit losses				$	626,490,767

_______________

(1)Because these loans have an event of default, they were removed from the pool of loans on which a general allowance was calculated and were evaluated for collectability individually. As of December 31, 2022, the specific allowance for credit losses on these loans were $25.5 million, as a result of a decline in the fair value of the respective collateral.

Schedule of Allowance for Loan Losses

The following table presents the activity in allowance for credit loss for funded loans:

	Three Months Ended March 31,
	2023		2022
Allowance for credit losses, beginning of period	$	25,471,890	$	13,658,481
Cumulative effect of credit loss accounting standard effective    January 1, 2023 (Note 2)	4,250,052		—
(Reversal of) provision for credit losses (1)	(1,070,365)		50,296
Charge-offs	—		—
Recoveries	—		—
Allowance for credit losses, end of period	$	28,651,577	$	13,708,777

_______________

(1)Prior to the adoption of the CECL model on January 1, 2023, the Company recorded an allowance for credit 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) non-performing loan reserves, if any.

The following table presents the activity in the liability for credit losses on unfunded commitments:

	Three Months Ended March 31, 2023
Liability for credit losses on unfunded commitments, beginning of period	$	—
Cumulative effect of credit loss accounting standard effective January 1, 2023 (Note 2)	369,671
Provision for credit losses	220,314
Liability for credit losses on unfunded commitments, end of period	$	589,985

Schedule of Recorded Investment of TDR

The following table summarizes the recorded investment of TDR as of the date of restructuring:

Number of loans modified	1
Pre-modified recorded carrying value	$	40,072,138
Post-modified recorded carrying value (1)	$	1,364,944

_______________

(1) As of March 31, 2023 and December 31, 2022 the principal balance of this loan was the same as the carrying value. The Company recorded an allowance for credit losses of $1.4 million to fully reserve for the unpaid principal balance. There was no income from this investment from the date of modification on December 28, 2022 through March 31, 2023.

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Equity Investment in Unconsolidated Investments (Tables)

3 Months Ended

Mar. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Equity Method Investments

The following tables present summarized financial information of the Company’s equity investment in RESOF. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share:

	As of
	March 31, 2023		December 31, 2022
Investments at fair value (cost of $164,364,984 and $176,035,290, respectively)	$	166,309,340	$	178,283,703
Other assets	36,931,099		23,918,841
Total assets	203,240,439		202,202,544
Revolving line of credit, net of financing costs	27,607,079		14,795,985
Obligations under participation agreement (proceeds of $38,444,357 and     $41,726,565, respectively)	38,753,105		41,962,861
Other liabilities	19,189,912		17,120,804
Total liabilities	85,550,096		73,879,650
Partners’ capital	$	117,690,343	$	128,322,894

	Three Months Ended March 31,
	2023		2022
Total investment income	$	8,111,779	$	4,844,664
Total expenses	3,166,795		1,293,316
Net investment income	4,944,984		3,551,348
Unrealized (depreciation) appreciation on investments	(595,911)		69,051
Net increase in partners’ capital resulting from operations	$	4,349,073	$	3,620,399

The following tables present estimated combined summarized financial information of the Company’s equity investment in the joint ventures. Amounts provided are the total amounts attributable to the joint ventures and do not represent the Company’s proportionate share:

	As of
	March 31, 2023		December 31, 2022
Net investments in real estate	$	192,052,300	$	192,616,298
Other assets	10,956,841		12,817,388
Total assets	203,009,141		205,433,686
Mortgage loan payable	147,924,249		147,740,645
Other liabilities	3,221,660		3,104,624
Total liabilities	151,145,909		150,845,269
Members’ capital	$	51,863,232	$	54,588,417

	Three Months Ended March 31,
	2023		2022
Revenues	$	3,924,579	$	2,450,438
Operating expenses	(2,143,267)		(816,681)
Depreciation and amortization expense	(1,965,037)		(690,831)
Interest expense	(2,559,954)		(1,085,561)
Unrealized (losses) gains	(826,501)		235,511
Net (loss) income	$	(3,570,180)	$	92,876

Schedule of Joint Venture Ownership Interests

The following table presents a summary of the Company’s equity investment in unconsolidated investments as of:

		March 31, 2023			December 31, 2022
Entity	Co-owner (1)	Beneficial Ownership Interest	Carrying Value		Beneficial Ownership Interest	Carrying Value
LEL Arlington JV LLC (1)	Affiliate/Third party	27.2%	$	6,885,336	27.2%	$	7,271,603
LEL NW 49th JV LLC (1)	Affiliate/Third party	27.2%	1,607,801		27.2%	1,521,556
TCG Corinthian FL Portfolio     JV LLV (1)(2)	Affiliate/Third Party	30.6%	6,370,863		30.6%	6,896,816
SF-Dallas Industrial, LLC (3)	N/A	N/A	10,065,935		N/A	10,013,691
			$	24,929,935		$	25,703,666

_______________

(1)The Company sold a portion of the interest in this investment to an affiliate in September 2022.

(2)This investment was purchased from a third party in March 2022.

(3)This investment that meets the definition of an equity investment was entered into in December 2022.

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Real Estate Owned, Net (Tables)

3 Months Ended

Mar. 31, 2023

Real Estate [Abstract]

Schedule of Real Estate Owned, Net

The following table presents an allocation of the total capitalized costs:

	Total Capitalized Costs
Land	$	9,327,855
Buildings and Improvements	39,248,352
Intangible asset and liability:
In-please lease (weighted-average expected life of 2.63 years)	4,315,333
Below-market rent (weighted-average expected life of 2.69 years)	(4,093,267)
	$	48,798,273

The following table presents the components of real estate owned, net as of:

	March 31, 2023						December 31, 2022
	Cost		Accumulated Depreciation/Amortization		Net		Cost		Accumulated Depreciation/Amortization		Net
Real estate:
Land	$	9,327,855	$	—	$	9,327,855	$	—	$	—	$	—
Building and building    improvements	90,974,321		(6,034,760)		84,939,561		51,725,969		(5,711,468)		46,014,501
Tenant improvements	1,854,640		(1,293,967)		560,673		1,854,640		(1,224,648)		629,992
Furniture and fixtures	236,000		(236,000)		—		236,000		(220,267)		15,733
Total real estate	102,392,816		(7,564,727)		94,828,089		53,816,609		(7,156,383)		46,660,226
Lease intangible assets:
In-place lease	19,297,871		(12,766,548)		6,531,323		14,982,538		(12,493,079)		2,489,459
Above-market rent	156,542		(81,929)		74,613		156,542		(77,540)		79,002
Total intangible assets	19,454,413		(12,848,477)		6,605,936		15,139,080		(12,570,619)		2,568,461
Lease intangible liabilities:
Below-market rent	(6,848,189)		2,467,800		(4,380,389)		(2,754,922)		2,428,647		(326,275)
Above-market ground lease	(8,896,270)		608,292		(8,287,978)		(8,896,270)		575,705		(8,320,565)
Total intangible liabilities	(15,744,459)		3,076,092		(12,668,367)		(11,651,192)		3,004,352		(8,646,840)
Total real estate	$	106,102,770	$	(17,337,112)	$	88,765,658	$	57,304,497	$	(16,722,650)	$	40,581,847

Real Estate Operating Revenues and Expenses

    The following table presents the components of real estate operating revenues and expenses that are included in the consolidated statements of operations:

	Three Months Ended March 31,
	2023		2022
Real estate operating revenues:
Lease revenue	$	1,085,459	$	1,754,561
Other operating income	247,510		1,224,893
Total	$	1,332,969	$	2,979,454
Real estate operating expenses:
Utilities	$	36,414	$	45,334
Real estate taxes	354,680		346,432
Repairs and maintenances	207,365		157,416
Management fees	39,418		67,868
Lease expense, including amortization of above-market ground lease	487,163		487,163
Other operating expenses	84,872		113,750
Total	$	1,209,912	$	1,217,963

Scheduled of Future Minimum Rent Income

Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at March 31, 2023 are as follows: 

Years Ending December 31,	Total
2023 (April 1 through December 31)	$	4,265,856
2024	5,845,112
2025	1,810,128
2026	1,443,553
2027	848,014
Thereafter	1,815,497
Total	$	16,028,160

Scheduled of Annual Net Amortization of Intangibles

Based on the intangible assets and liabilities recorded at March 31, 2023, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows:

Years Ending December 31,	Net Decrease in Real Estate Operating Revenue (1)		Increase in Depreciation and Amortization (1)		Decrease in Rent Expense (1)		Total
2023 (April 1 through December 31)	$	(1,403,903)	$	2,220,354	$	(97,761)	$	718,690
2024	(1,884,920)		3,044,369		(130,348)		1,029,101
2025	(646,536)		737,423		(130,348)		(39,461)
2026	(272,505)		378,019		(130,348)		(24,834)
2027	(97,912)		151,158		(130,348)		(77,102)
Thereafter	—		—		(7,668,825)		(7,668,825)
Total	$	(4,305,776)	$	6,531,323	$	(8,287,978)	$	(6,062,431)

_______________

(1)Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to lease revenues; amortization of in-place lease intangibles is included in depreciation and amortization; and amortization of above-market ground lease is recorded as a reduction to rent expense.

Lessee, Operating Lease, Assets and Liabilities

Supplemental balance sheet information related to the ground lease was as follows as of:    

	March 31, 2023			December 31, 2022
Operating lease
Operating lease right-of-use asset	$	27,374,554		$	27,378,786
Operating lease liability	$	27,374,554		$	27,378,786
Weighted average remaining lease term — operating lease (years)	63.6			63.8
Weighted average discount rate — operating lease	7.6		%	7.6		%

Schedule of Lease Expense

The component of lease expense for the ground lease was as follows:

	Three Months Ended March 31,
	2023		2022
Operating lease cost	$	519,750	$	519,750

Schedule of Non-cash Information

Supplemental non-cash information related to the ground lease was as follows:

	Three Months Ended March 31,
	2023		2022
Amounts included in the measurement of lease liability:
Operating cash flows from an operating lease	$	519,750	$	519,750
Right-of-use asset obtained in exchange for lease obligations:
Operating lease	$	519,750	$	519,750

Schedule of Maturities of Operating Lease Liabilities

Maturities of operating lease liability as of December 31, 2022 was as follows:

Years Ending December 31,	Operating Lease
2023 (April 1 through December 31)	$	1,559,250
2024	2,079,000
2025	2,079,000
2026	2,079,000
2027	2,079,000
Thereafter	122,227,875
Total lease payments	132,103,125
Less: Imputed interest	(104,728,571)
Total	$	27,374,554

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Schedule of Fair Value Measurements of Marketable Securities, by Major Class

The following tables present fair value measurements of marketable securities and derivatives, by major class according to the fair value hierarchy as of:

	March 31, 2023
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Debt securities	$	154,544	$	—	$	—	$	154,544
Derivatives:
Interest rate cap	—		—		258,500		258,500
Total	$	154,544	$	—	$	258,500	$	413,044

	December 31, 2022
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Debt securities	$	147,960	$	—	$	—	$	147,960
Total	$	147,960	$	—	$	—	$	147,960

Schedule of Activities of the Marketable Securities

The following table presents the activities of the marketable securities and derivatives:

	Three Months Ended March 31,
	2023				2022
	Marketable Securities		Derivatives		Marketable Securities
Beginning balance	$	147,960	$	—	$	1,310,000
Purchases	—		258,500		—
Proceeds from sale	—		—		(628,715)
Unsettled sale	—		—		(123,223)
Reclassification of net realized gains on marketable securities    into earnings	—		—		51,133
Unrealized (losses) gains on marketable securities	6,584		—		(99,044)
Ending balance	$	154,544	$	258,500	$	510,151

Schedule of Fair Value Measurements, Nonrecurring

The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of:

		March 31, 2023						December 31, 2022
	Level	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Loans:
Loans held for investment	3	$	594,388,315	$	599,828,287	$	573,572,071	$	604,068,894	$	609,889,829	$	581,182,892
Loans held for investment    acquired through    participation	3	38,444,357		38,772,079		38,753,117		41,726,565		42,072,828		41,962,862
Allowance for loan losses		—		(28,651,577)		—		—		(25,471,890)		—
Total loans		$	632,832,672	$	609,948,789	$	612,325,188	$	645,795,459	$	626,490,767	$	623,145,754
Other investment:
Held-to-maturity debt    securities	1	$	20,000,000	$	20,025,024	$	19,800,000	$	—	$	—	$	—
Liabilities:
Term loan payable	3	$	25,000,000	$	25,000,000	$	25,000,000	$	25,000,000	$	25,000,000	$	25,000,000
Unsecured notes payable	1	123,500,000		116,976,542		107,970,447		123,500,000		116,530,673		103,481,748
Repurchase agreement payable	3	152,947,394		151,772,313		152,947,394		170,876,606		169,304,710		170,876,606
Obligations under participation    agreements	3	13,106,844		13,209,982		13,209,983		12,584,958		12,680,594		12,680,595
Mortgage loan payable	3	61,352,308		60,768,698		61,606,608		29,252,308		29,488,326		29,394,870
Revolving line of credit    payable	3	125,000,000		124,741,957		125,000,000		90,135,865		89,807,448		90,135,865
Total liabilities		$	500,906,546	$	492,469,492	$	485,734,432	$	451,349,737	$	442,811,751	$	431,569,684

Schedule of Fair Value Measurement Inputs and Valuation Techniques

The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of March 31, 2023 and December 31, 2022. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.

	Fair Value at March 31, 2023		Primary Valuation Technique	Unobservable Inputs	March 31, 2023
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	573,572,071	Discounted cash flow	Discount rate	9.00	%	16.80	%	11.29	%
Loans held for investment acquired through    participation, net	38,753,117		Discounted cash flow	Discount rate	15.30	%	17.50	%	17.08	%
Total Level 3 Assets	$	612,325,188
Liabilities:
Repurchase agreement payable	$	152,947,394	Discounted cash flow	Discount rate	5.56	%	7.27	%	6.67	%
Obligations under participation agreements	13,209,983		Discounted cash flow	Discount rate	16.80	%	16.80	%	16.80	%
Mortgage loan payable	61,606,608		Discounted cash flow	Discount rate	8.30	%	8.65	%	8.47	%
Term loan payable	25,000,000		Discounted cash flow	Discount rate	5.63	%	5.63	%	5.63	%
Revolving line of credit	125,000,000		Discounted cash flow	Discount rate	8.15	%	8.15	%	8.15	%
Total Level 3 Liabilities	$	377,763,985

	Fair Value at December 31, 2022		Primary Valuation Technique	Unobservable Inputs	December 31, 2022
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	581,182,892	Discounted cash flow	Discount rate	8.71	%	19.36	%	11.46	%
Loans held for investment acquired through    participation, net	41,962,862		Discounted cash flow	Discount rate	15.25	%	17.06	%	16.67	%
Total Level 3 Assets	$	623,145,754
Liabilities:
Repurchase agreement payable	$	170,876,606	Discounted cash flow	Discount rate	5.22	%	6.17	%	6.82	%
Obligations under participation agreements	12,680,595		Discounted cash flow	Discount rate	16.36	%	16.36	%	16.36	%
Mortgage loan payable	29,394,870		Discounted cash flow	Discount rate	8.24	%	8.24	%	8.24	%
Term loan payable	25,000,000		Discounted cash flow	Discount rate	5.63	%	5.63	%	5.63	%
Revolving line of credit	90,135,865		Discounted cash flow	Discount rate	7.64	%	7.64	%	7.64	%
Total Level 3 Liabilities	$	328,087,936

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Related Party Transactions (Tables)

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations:

	Three Months Ended March 31,
	2023		2022
Origination and extension fee expense (1)(2)	$	471,448	$	686,365
Asset management fee	1,997,427		1,488,095
Asset servicing fee	470,525		349,329
Operating expenses reimbursed to Manager	2,177,004		1,928,563
Disposition fee (3)	290,813		—
Total	$	5,407,217	$	4,452,352

_______________

(1)Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan.

(2)Amount for the three months ended March 31, 2023 excluded $0.5 million of origination fee paid to the Manager in connection with the acquisition of the three industrial buildings in 2023. Amount for the three months ended March 31, 2022 excluded $0.2 million of origination fee paid to the Manager in connection with the Company’s equity investment in an unconsolidated investment. This origination fee was capitalized to the carrying value of the unconsolidated investment as a transaction cost.

(3)Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations.

The table below lists the participation interests purchased by the Company pursuant to participation agreements as of:

	March 31, 2023
	Participating Interests	Principal Balance		Carrying Value
Mesa AZ Industrial Owner, LLC (1)	38.27%	$	31,000,000	$	31,288,062
UNJ Sole Member, LLC (1)	40.80%	7,444,357		7,484,017
		$	38,444,357	$	38,772,079

	December 31, 2022
	Participating Interests	Principal Balance		Carrying Value
Havemeyer TSM LLC (1)(2)	23.00%	$	3,282,208	$	3,313,813
Mesa AZ Industrial Owner, LLC (1)	38.27%	31,000,000		31,276,468
UNJ Sole Member, LLC (1)	40.80%	7,444,357		7,482,547
		$	41,726,565	$	42,072,828

________________

(1)The loan is held in the name of Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager.

(2)This loan was repaid in February 2023.

The following tables summarize the loans that were subject to participation agreements with affiliated entities and third-parties as of:

					Transfers Treated as Obligations Under Participation Agreements as of March 31, 2023
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
610 Walnut Investors LLC (1)	$	19,398,129	$	19,533,518	67.57	%	$	13,106,844	$	13,209,982
	$	19,398,129	$	19,533,518			$	13,106,844	$	13,209,982

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2022
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
610 Walnut Investors LLC (1)	$	18,625,738	$	18,738,386	67.57	%	$	12,584,958	$	12,680,594
	$	18,625,738	$	18,738,386			$	12,584,958	$	12,680,594

________________

(1)Participant was a third party.

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Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Schedule of Unsecured Notes Payable

The table below presents detailed information regarding the unsecured notes payable as of:

	March 31, 2023						December 31, 2022
	Principal Balance		Carrying Value		Fair Value		Principal Balance		Carrying Value		Fair Value
6.00% Senior Notes Due 2026 (1)	$	85,125,000	$	82,653,051	$	71,130,447	$	85,125,000	$	82,487,769	$	68,100,000
7.00% Senior Notes Due 2026 (2)	38,375,000		34,323,491		36,840,000		38,375,000		34,042,904		35,381,748
	$	123,500,000	$	116,976,542	$	107,970,447	$	123,500,000	$	116,530,673	$	103,481,748

_______________

(1)Carrying value is net of unamortized issue discount of $1.8 million and $1.9 million, and unamortized deferred financing costs of $0.6 million and $0.7 million as of March 31, 2023 and December 31, 2022, respectively.

(2)Carrying value is net of unamortized purchase discount of $4.1 million and $4.3 million as of March 31, 2023 and December 31, 2022, respectively.

Schedule of Debt

The following tables present detailed information with respect to each borrowing under the UBS Master Repurchase Agreement as of:

	March 31, 2023
	Collateral						Borrowings Under Master Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
NB Factory TIC 1, LLC	$	28,000,000	$	28,823,787	$	28,908,756	11/8/2021	$	18,970,000	LIBOR+1.74% (LIBOR floor of 0.1%)
Grandview’s Madison Place, LLC	17,000,000		17,107,426		17,130,108		3/7/2022	13,600,000		Term SOFR + 1.965%
Grandview’s Remington Place,    LLC	23,100,000		23,201,857		23,205,196		5/6/2022	18,480,000		Term SOFR + 1.965%
	$	68,100,000	$	69,133,070	$	69,244,060		$	51,050,000

	December 31, 2022
	Collateral						Borrowings Under Master Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
NB Factory TIC 1, LLC	$	28,000,000	$	28,857,892	$	28,902,234	11/8/2021	$	18,970,000	LIBOR+1.74% (LIBOR floor of 0.1%)
Grandview’s Madison Place, LLC	17,000,000		17,105,928		17,105,928		3/7/2022	13,600,000		Term SOFR + 1.965%
Grandview’s Remington Place,    LLC	23,100,000		23,199,620		23,203,343		5/6/2022	18,480,000		Term SOFR + 1.965%
	$	68,100,000	$	69,163,440	$	69,211,505		$	51,050,000

The following tables present detailed information with respect to each borrowing under the Repurchase Agreement as of:

	March 31, 2023
	Collateral						Borrowings Under Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
330 Tryon DE LLC	$	22,800,000	$	22,903,981	$	22,743,319	2/18/2022	$	16,514,712	Term SOFR + 2.015% (0.01% floor)
1389 Peachtree St, LP; 1401 Peachtree St, LP; and    1409 Peachtree St, LP	57,221,615		57,496,677		57,133,997		2/18/2022	42,888,134		Term SOFR + 2.465%
AGRE DCP Palm Springs, LLC	43,222,382		43,793,356		43,265,735		2/18/2022	28,094,548		Term SOFR + 1.315% (1.8% floor)
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,042,414		17,873,381		2/18/2022	14,400,000		Term SOFR + 0.865% (1.5% floor)
	$	141,243,997	$	142,236,428	$	141,016,432		$	101,897,394

	December 31, 2022
	Collateral						Borrowings Under Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
330 Tryon DE LLC	$	22,800,000	$	22,902,215	$	22,687,235	2/18/2022	$	18,240,000	Term SOFR + 2.015% (0.01% floor)
1389 Peachtree St, LP; 1401 Peachtree St, LP; and    1409 Peachtree St, LP	57,184,178		57,453,482		56,844,322		2/18/2022	41,587,275		Term SOFR + 2.465%
AGRE DCP Palm Springs, LLC	43,222,382		43,758,804		43,062,933		2/18/2022	28,094,548		Term SOFR + 1.315% (1.8% floor)
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,041,782		17,824,300		2/18/2022	14,400,000		Term SOFR + 0.865% (1.5% floor)
University Park Berkeley, LLC	26,342,468		26,536,122		26,472,938		2/18/2022	17,504,783		Term SOFR + 1.365% ( 1.50% floor)
	$	167,549,028	$	168,692,405	$	166,891,728		$	119,826,606

The following table presents certain information about mortgage loans payable as of:

			March 31, 2023						December 31, 2022
Lender	Current Interest Rate	Maturity Date	Principal Amount		Carrying Value		Carrying Value of Collateral		Principal Amount		Carrying Value		Carrying Value of Collateral
Centennial    Bank (1)	Term SOFR + 3.85% (Term SOFR Floor of 2.23%)	May 31, 2023	$	29,252,308	$	29,506,608	$	39,967,385	$	29,252,308	$	29,488,326	$	40,581,847
TPG RE   Finance   24, LTD (2)	Term SOFR +3.5% (Term SOFR Floor of 3.75%	April 9, 2027	32,100,000		31,262,090		48,798,273		—		—		—
			$	61,352,308	$	60,768,698	$	88,765,658	$	29,252,308	$	29,488,326	$	40,581,847

___________________

(1) This loan is collateralized by a multi-tenant office building that the Company acquired through foreclosure.

(2) This loan is collateralized by three industrial buildings that the Company acquired in March 2023.

Schedule of Long-term Debt Instruments

Scheduled debt principal payments for each of the five calendar years following March 31, 2023 are as follows:

Years Ending December 31,	Total
2023 (April 1 through December 31)	$	54,252,308
2024	277,947,395
2025	—
2026	123,500,000
2027	32,100,000
Thereafter	—
	487,799,703
Unamortized deferred financing costs	(8,540,193)
Total	$	479,259,510

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Equity (Tables)

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table presents earnings per share:

	Three Months Ended March 31,
	2023		2022
Net income (loss)	$	547,479	$	(757,887)
Series A preferred stock dividend declared	(3,907)		(3,906)
Net income (loss) allocable to common stock	$	543,572	$	(761,793)
Weighted-average shares outstanding - basic and diluted	24,335,373		19,487,460
Income (loss) per share - basic and diluted	$	0.02	$	(0.04)

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Business (Details) - USD ($) $ in Millions	Mar. 31, 2023	Mar. 02, 2020
Financial Highlights
Common stock, shares, issued (in shares)		4,574,470.35
Participating mortgage loans, participation liabilities, amount		$ 49.8
Cash		$ 25.5
Partnership interest | Terra JV
Financial Highlights
Beneficial ownership interest	70.00%
Partnership interest | Terra BDC
Financial Highlights
Beneficial ownership interest	19.90%
Partnership interest | Terra Offshore REIT
Financial Highlights
Beneficial ownership interest	10.10%
Minimum
Financial Highlights
Loan origination amount	$ 10.0
Maximum
Financial Highlights
Loan origination amount	$ 50.0

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Summary of Significant Accounting Policies - Narratives (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Jan. 01, 2023	Dec. 31, 2022	Feb. 18, 2022
Accounting Policies [Line Items]
Increase to total reserve	$ 28,651,577		$ 25,471,890
Useful life	40 years
Term loan payable	$ 25,000,000		$ 25,000,000
Accounting Standards Update 2016-13
Accounting Policies [Line Items]
Allowance for loan losses		$ 4,600,000
Term Loan
Accounting Policies [Line Items]
Term loan payable				$ 25,000,000
Cumulative Effect, Period of Adoption, Adjustment | Credit Losses Reserve
Accounting Policies [Line Items]
Increase to total reserve		$ 4,600,000

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Summary of Significant Accounting Policies (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Accounting Policies [Abstract]
Cash and cash equivalents	$ 28,869,594	$ 28,567,825	$ 9,858,153
Restricted cash	4,611,794	4,633,204	8,058,767
Cash held in escrow by lender	3,571,083	3,268,563	7,651,900
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$ 37,052,471	$ 36,469,592	$ 25,568,820	$ 51,098,647

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BDC Merger - Narratives (Details) - USD ($)		12 Months Ended
	Oct. 01, 2022	Dec. 31, 2022	Mar. 31, 2023	Mar. 02, 2020
Business Acquisition
Common stock, shares, issued (in shares)				4,574,470.35
Obligation under participation agreement		$ 12,680,594	$ 13,209,982
Gain on extinguishment of debt		$ 3,400,000
Class B Common Stock
Business Acquisition
Common stock, par or stated value per share (in usd per share)		$ 0.01	$ 0.01
Number of securities called by warrants or rights (in shares)	0.595
Share price (in usd per share)	$ 14.38
Common stock, shares, issued (in shares)		24,335,370	24,335,404
Terra BDC | Class B Common Stock
Business Acquisition
Common stock, shares, issued (in shares)	4,847,910
Terra BDC
Business Acquisition
Common stock, par or stated value per share (in usd per share)	$ 0.001
Sale of stock, percentage of ownership after transaction	19.90%
Obligation under participation agreement	$ 37,000,000
Terra BDC | Class B Common Stock
Business Acquisition
Common stock, par or stated value per share (in usd per share)	$ 0.01
Share price (in usd per share)	$ 14.66
Common stock, shares, issued (in shares)	4,847,910

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BDC Merger - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) - Terra BDC	Oct. 01, 2022 USD ($)
Total Consideration
Fair value of Terra Property Trust shares of common stock issued	$ 71,054,620
Cash paid for fractional shares	12,920
Transaction costs	2,283,785
Total Consideration	73,351,325
Assets Acquired and Liabilities Assumed at Fair Value
Cash and cash equivalents	24,321,951
Restricted cash	260,614
Interest receivable	1,367,044
Other assets	55,465
Term loan payable	(25,000,000)
Unsecured notes payable	(33,770,000)
Obligations under participation agreements	(6,114,979)
Interest reserve and other deposits held on investments	(260,614)
Due to manager	(682,541)
Interest payable	(53,186)
Accounts payable and accrued expenses	(740,824)
Other liabilities	(387,446)
Net assets acquired	73,351,325
Loans Held For Investment
Assets Acquired and Liabilities Assumed at Fair Value
Loans held for investment	77,562,528
Loans Held For Investment Acquired Through Participation
Assets Acquired and Liabilities Assumed at Fair Value
Loans held for investment	$ 36,793,313

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Loans Held for Investment - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Loans Held for Investment
Loans and Financing Receivable
Accrued interest receivable	$ 4.8	$ 4.1

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Loans Held for Investment - Schedule of Portfolio Summary (Details)	3 Months Ended					12 Months Ended
	Mar. 31, 2023 USD ($)	Mar. 31, 2023 USD ($) Loans	Mar. 31, 2023 USD ($)	Mar. 31, 2023 USD ($) numberOfAgreements	Mar. 31, 2022 Loans	Dec. 31, 2022 USD ($) Loans
Loans and Financing Receivable
Number of loans		30		30	31	31
Principal balance	$ 632,832,672	$ 632,832,672	$ 632,832,672	$ 632,832,672		$ 645,795,459
Carrying value	609,948,789	609,948,789	609,948,789	609,948,789		626,490,767
Fair value	$ 612,325,188	612,325,188	$ 612,325,188	612,325,188		623,145,754
Weighted-average coupon rate			11.92%		11.59%
Weighted-average remaining term (years)	1 year 1 month 2 days				1 year 1 month 20 days
Debt instrument, face	$ 500,906,546	$ 500,906,546	$ 500,906,546	500,906,546		451,349,737
Fixed Rate
Loans and Financing Receivable
Number of loans | Loans		6			8
Principal balance	59,726,205	$ 59,726,205	59,726,205	59,726,205		90,990,183
Carrying value	60,121,950	60,121,950	60,121,950	60,121,950		92,274,998
Fair value	$ 59,314,040	$ 59,314,040	$ 59,314,040	59,314,040		90,729,098
Weighted-average coupon rate			13.17%		13.82%
Weighted-average remaining term (years)	1 year 8 months 15 days				1 year 4 months 6 days
Floating Rate
Loans and Financing Receivable
Number of loans | Loans		24			23
Principal balance	$ 573,106,467	$ 573,106,467	$ 573,106,467	573,106,467		554,805,276
Carrying value	549,826,839	549,826,839	549,826,839	549,826,839		534,215,769
Fair value	$ 553,011,148	553,011,148	$ 553,011,148	553,011,148		532,416,656
Weighted-average coupon rate			11.78%		11.23%
Weighted-average remaining term (years)	1 year 10 days				1 year 1 month 6 days
Floating Rate | Revolving line of credit | Collateral
Loans and Financing Receivable
Principal balance	$ 427,300,000	427,300,000	$ 427,300,000	427,300,000		413,100,000
Debt instrument, face	$ 277,900,000	$ 277,900,000	$ 277,900,000	$ 277,900,000		$ 261,000,000
Floating Rate | Term Loan
Loans and Financing Receivable
Number of loans | Loans		22				21
Floating Rate | Term Loan | LIBOR
Loans and Financing Receivable
Interest rate base (percent)	4.86%	4.86%	4.86%	4.86%		4.39%
Floating Rate | Term Loan | SOFR
Loans and Financing Receivable
Interest rate base (percent)	4.63%	4.63%	4.63%	4.63%		4.06%
Floating Rate | Term Loan | Term SOFR
Loans and Financing Receivable
Interest rate base (percent)	4.80%	4.80%	4.80%	4.80%		4.36%

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Loans Held for Investment - Lending activities (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Loans and Financing Receivable
Reversal of provision for credit losses	$ 850,051	$ (50,296)
Real Estate Loan
Loans and Financing Receivable
Beginning balance	626,490,767	469,673,314
New loans made	46,214,722	88,119,821
Principal repayments received	(59,177,506)	(750,000)
Net amortization of premiums on loans	(346,780)	(15,348)
Accrual, payment and accretion of investment-related fees and other, net	(52,727)	1,041,509
Reversal of provision for credit losses	1,070,365	(50,296)
Ending balance	609,948,789	558,019,000
Real Estate Loan | Cumulative Effect, Period of Adoption, Adjustment
Loans and Financing Receivable
Beginning balance	(4,250,052)
Real Estate Loan | Loans Held for Investment
Loans and Financing Receivable
Beginning balance	584,417,939	457,329,582
New loans made	46,214,722	87,538,133
Principal repayments received	(55,895,298)	(750,000)
Net amortization of premiums on loans	(346,780)	(15,348)
Accrual, payment and accretion of investment-related fees and other, net	(34,186)	1,029,625
Reversal of provision for credit losses	1,070,365	(50,296)
Ending balance	571,176,710	545,081,696
Real Estate Loan | Loans Held for Investment | Cumulative Effect, Period of Adoption, Adjustment
Loans and Financing Receivable
Beginning balance	(4,250,052)
Real Estate Loan | Loans Held for Investment through Participation Interests
Loans and Financing Receivable
Beginning balance	42,072,828	12,343,732
New loans made	0	581,688
Principal repayments received	(3,282,208)	0
Net amortization of premiums on loans	0	0
Accrual, payment and accretion of investment-related fees and other, net	(18,541)	11,884
Reversal of provision for credit losses	0	0
Ending balance	38,772,079	$ 12,937,304
Real Estate Loan | Loans Held for Investment through Participation Interests | Cumulative Effect, Period of Adoption, Adjustment
Loans and Financing Receivable
Beginning balance	$ 0

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Loans Held for Investment - Loan Structure (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Loans and Financing Receivable
Principal Balance	$ 632,832,672	$ 645,795,459
Allowance for credit losses	(28,651,577)	(25,471,890)
Total, net of allowance for credit losses	$ 609,948,789	$ 626,490,767
% of Total	100.00%	100.00%
Allowance for loan losses (as a percent)	(4.70%)	(4.10%)
Credit facility
Loans and Financing Receivable
Principal Balance	$ 0	$ 28,802,833
Carrying Value of Collateral	$ 0	$ 29,080,183
% of Total	0.00%	4.60%
Preferred equity investments
Loans and Financing Receivable
Principal Balance	$ 122,131,455	$ 121,231,434
Carrying Value of Collateral	$ 122,948,116	$ 122,132,177
% of Total	20.20%	19.50%
Mezzanine loans
Loans and Financing Receivable
Principal Balance	$ 36,842,486	$ 39,352,303
Carrying Value of Collateral	$ 36,938,638	$ 39,451,115
% of Total	6.10%	6.30%
First mortgages
Loans and Financing Receivable
Principal Balance	$ 473,858,731	$ 456,408,889
Carrying Value of Collateral	$ 478,713,612	$ 461,299,182
% of Total	78.40%	73.70%

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Loans Held for Investment - Property Type (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Loans and Financing Receivable
Principal Balance	$ 632,832,672	$ 645,795,459
Carrying Value	638,600,366	651,962,657
Allowance for credit losses	(28,651,577)	(25,471,890)
Total, net of allowance for credit losses	$ 609,948,789	$ 626,490,767
% of Total	100.00%	100.00%
Allowance for loan losses (as a percent)	(4.70%)	(4.10%)
Office
Loans and Financing Receivable
Principal Balance	$ 162,206,536	$ 184,196,708
Carrying Value	$ 162,659,401	$ 184,722,657
% of Total	26.60%	29.40%
Industrial
Loans and Financing Receivable
Principal Balance	$ 127,399,590	$ 147,796,164
Carrying Value	$ 128,361,229	$ 148,891,742
% of Total	21.00%	23.80%
Multifamily
Loans and Financing Receivable
Principal Balance	$ 112,973,073	$ 104,589,464
Carrying Value	$ 113,781,434	$ 105,570,432
% of Total	18.70%	16.90%
Mixed-use
Loans and Financing Receivable
Principal Balance	$ 85,128,218	$ 64,880,450
Carrying Value	$ 86,026,507	$ 65,838,965
% of Total	14.10%	10.50%
Infill land
Loans and Financing Receivable
Principal Balance	$ 49,652,873	$ 48,860,291
Carrying Value	$ 50,535,097	$ 49,565,437
% of Total	8.30%	7.90%
Hotel - full/select service
Loans and Financing Receivable
Principal Balance	$ 43,222,382	$ 43,222,382
Carrying Value	$ 43,793,356	$ 43,758,804
% of Total	7.20%	7.00%
Student housing
Loans and Financing Receivable
Principal Balance	$ 31,000,000	$ 31,000,000
Carrying Value	$ 31,744,890	$ 31,774,261
% of Total	5.20%	5.10%
Infrastructure
Loans and Financing Receivable
Principal Balance	$ 21,250,000	$ 21,250,000
Carrying Value	$ 21,698,452	$ 21,840,359
% of Total	3.60%	3.50%

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Loans Held for Investment - Geographic Locations (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Loans and Financing Receivable
Principal Balance	$ 632,832,672	$ 645,795,459
Carrying Value	638,600,366	651,962,657
Allowance for credit losses	(28,651,577)	(25,471,890)
Carrying Value	$ 609,948,789	$ 626,490,767
% of Total	100.00%	100.00%
Allowance for loan losses (as a percent)	(4.70%)	(4.10%)
California
Loans and Financing Receivable
Principal Balance	$ 137,890,644	$ 164,253,345
Carrying Value	$ 139,389,069	$ 165,839,561
% of Total	22.90%	26.50%
New York
Loans and Financing Receivable
Principal Balance	$ 88,108,375	$ 91,845,479
Carrying Value	$ 88,108,375	$ 91,877,084
% of Total	14.40%	14.70%
Georgia
Loans and Financing Receivable
Principal Balance	$ 72,983,863	$ 72,401,718
Carrying Value	$ 73,647,905	$ 73,101,964
% of Total	12.10%	11.70%
New Jersey
Loans and Financing Receivable
Principal Balance	$ 70,891,499	$ 62,228,622
Carrying Value	$ 71,920,880	$ 62,958,482
% of Total	11.80%	10.00%
Texas
Loans and Financing Receivable
Principal Balance	$ 68,160,964	$ 67,625,000
Carrying Value	$ 68,687,384	$ 68,142,046
% of Total	11.30%	10.90%
Washington
Loans and Financing Receivable
Principal Balance	$ 63,376,281	$ 56,671,267
Carrying Value	$ 63,434,458	$ 57,027,639
% of Total	10.40%	9.10%
Utah
Loans and Financing Receivable
Principal Balance	$ 49,250,000	$ 49,250,000
Carrying Value	$ 50,522,239	$ 50,698,251
% of Total	8.30%	8.10%
North Carolina
Loans and Financing Receivable
Principal Balance	$ 44,171,046	$ 43,520,028
Carrying Value	$ 44,601,994	$ 44,041,162
% of Total	7.30%	7.00%
Arizona
Loans and Financing Receivable
Principal Balance	$ 31,000,000	$ 31,000,000
Carrying Value	$ 31,288,062	$ 31,276,468
% of Total	5.10%	5.00%
Massachusetts
Loans and Financing Receivable
Principal Balance	$ 7,000,000	$ 7,000,000
Carrying Value	$ 7,000,000	$ 7,000,000
% of Total	1.10%	1.10%

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Loans Held for Investment - Current Expected Credit Losses Reserve (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for credit losses, beginning of period	$ 25,471,890
Allowance for credit losses, end of period	28,651,577
Credit Losses Reserve | Funded Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for credit losses, beginning of period	25,471,890	$ 13,658,481
(Reversal of) provision for credit losses	(1,070,365)	50,296
Charge-offs	0	0
Recoveries	0	0
Allowance for credit losses, end of period	28,651,577	13,708,777
Credit Losses Reserve | Funded Loans | Cumulative Effect, Period of Adoption, Adjustment
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for credit losses, beginning of period	4,250,052	$ 0
Credit Losses Reserve | Unfunded Loan Commitment
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for credit losses, beginning of period	0
(Reversal of) provision for credit losses	220,314
Allowance for credit losses, end of period	589,985
Credit Losses Reserve | Unfunded Loan Commitment | Cumulative Effect, Period of Adoption, Adjustment
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for credit losses, beginning of period	$ 369,671

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Loans Held for Investment - Narratives - Past-Due Loans and Loan Risk Rating (Details)	3 Months Ended					12 Months Ended
	Mar. 31, 2023 USD ($) loan	Mar. 31, 2023 USD ($) Loans loan	Mar. 31, 2023 USD ($) numberOfAgreements loan	Mar. 31, 2022 Loans	Mar. 31, 2021 USD ($)	Dec. 31, 2022 USD ($) loan Loans
Loans and Financing Receivable
Number of loans with a loan risk rating		30	30	31		31
Loans held for investment, net of allowance for credit losses	$ 28,651,577	$ 28,651,577	$ 28,651,577			$ 25,471,890
Nonperforming Loans
Loans and Financing Receivable
Number of loans with a loan risk rating			4			4
Nonperforming Loans | Suspended Interest Income Accrual
Loans and Financing Receivable
Number of loans in default | loan	3	3	3			2
Suspended interest income accrual	$ 3,400,000				$ 1,100,000
Accrued interest receivable	0	$ 0	$ 0			$ 0
4
Loans and Financing Receivable
Percent of carrying amounts of loans (percent)						1.50%
Number of loans with a loan risk rating			0			0
5
Loans and Financing Receivable
Percent of carrying amounts of loans (percent)						5.00%
Number of loans with a loan risk rating			0			0
Other | Nonperforming Loans
Loans and Financing Receivable
Number of loans with a loan risk rating | Loans		4				4
Carrying Value of Collateral	89,500,000	$ 89,500,000	$ 89,500,000			$ 89,900,000
Loans held for investment, net of allowance for credit losses	$ 25,500,000	$ 25,500,000	$ 25,500,000			$ 25,500,000

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Loans Held for Investment - Loan risk rating (Details)	3 Months Ended			12 Months Ended
	Mar. 31, 2023 USD ($) Loans	Mar. 31, 2023 USD ($) numberOfAgreements	Mar. 31, 2022 Loans	Dec. 31, 2022 USD ($) Loans
Loans and Financing Receivable
Number of Loans	30	30	31	31
Principal Balance	$ 632,832,672	$ 632,832,672		$ 645,795,459
Amortized Cost	638,600,366	638,600,366		651,962,657
Allowance for credit losses	(28,651,577)	(28,651,577)		(25,471,890)
Total, net of allowance for credit losses	$ 609,948,789	$ 609,948,789		$ 626,490,767
% of Total	100.00%	100.00%		100.00%
2023	$ 2,218,577	$ 2,218,577
2022	250,427,639	250,427,639
2021	116,762,096	116,762,096
2020	27,561,203	27,561,203
2019	143,601,373	143,601,373
Prior	98,029,478	$ 98,029,478
Nonperforming Loans
Loans and Financing Receivable
Number of Loans		4		4
Principal Balance				$ 89,928,215
Amortized Cost	$ 89,473,319	$ 89,473,319		$ 89,928,215
% of Total	14.00%	14.00%		13.80%
2023	$ 0	$ 0
2022	0	0
2021	0	0
2020	0	0
2019	1,364,944	1,364,944
Prior	88,108,375	$ 88,108,375
Nonperforming Loans | Specific Allowance
Loans and Financing Receivable
Allowance for credit losses				$ (25,500,000)
1
Loans and Financing Receivable
Number of Loans		0		0
Principal Balance				$ 0
Amortized Cost	$ 0	$ 0		$ 0
% of Total	0.00%	0.00%		0.00%
2023	$ 0	$ 0
2022	0	0
2021	0	0
2020	0	0
2019	0	0
Prior	0	$ 0
2
Loans and Financing Receivable
Number of Loans		2		2
Principal Balance				$ 25,000,000
Amortized Cost	$ 25,042,414	$ 25,042,414		$ 25,041,782
% of Total	3.90%	3.90%		3.80%
2023	$ 0	$ 0
2022	0	0
2021	0	0
2020	0	0
2019	18,042,414	18,042,414
Prior	7,000,000	$ 7,000,000
3
Loans and Financing Receivable
Number of Loans		24		25
Principal Balance				$ 530,867,244
Amortized Cost	$ 524,084,633	$ 524,084,633		$ 536,992,660
% of Total	82.10%	82.10%		82.40%
2023	$ 2,218,577	$ 2,218,577
2022	250,427,639	250,427,639
2021	116,762,096	116,762,096
2020	27,561,203	27,561,203
2019	124,194,015	124,194,015
Prior	2,921,103	$ 2,921,103
4
Loans and Financing Receivable
Number of Loans		0		0
Principal Balance				$ 0
Amortized Cost	$ 0	$ 0		$ 0
% of Total	0.00%	0.00%		0.00%
2023	$ 0	$ 0
2022	0	0
2021	0	0
2020	0	0
2019	0	0
Prior	0	$ 0
5
Loans and Financing Receivable
Number of Loans		0		0
Principal Balance				$ 0
Amortized Cost	$ 0	$ 0		$ 0
% of Total	0.00%	0.00%		0.00%
2023	$ 0	$ 0
2022	0	0
2021	0	0
2020	0	0
2019	0	0
Prior	$ 0	$ 0

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Loans Held for Investment - Narratives - TDR (Details) - USD ($)	1 Months Ended	3 Months Ended
	Dec. 31, 2022	Mar. 31, 2023	Mar. 31, 2022
Troubled Debt Restructuring
Debt instrument, face	$ 451,349,737	$ 500,906,546
Repayments of loan		0	$ 204,967
Converted to subordinated equity		1,400,000
Principal balance	645,795,459	$ 632,832,672
Senior Loans
Troubled Debt Restructuring
Debt instrument, face	40,100,000
Repayments of loan	38,700,000
Converted to subordinated equity	$ 1,400,000
Accrued dividends rate	8.00%
Principal Forgiveness
Troubled Debt Restructuring
Investment in troubled debt restructuring	$ 1

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Loans Held for Investment - Troubled Debt Restructuring (Details) - Principal Forgiveness	1 Months Ended	3 Months Ended
	Dec. 31, 2022 USD ($) Loans	Mar. 31, 2023 USD ($)
Troubled Debt Restructuring
Number of loans modified | Loans	1
Pre-modified recorded carrying value	$ 40,072,138
Post-modified recorded carrying value	$ 1,364,944	$ 1,400,000

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Equity Investment in Unconsolidated Investments - Narratives (Details)		1 Months Ended	3 Months Ended
	Aug. 03, 2020 USD ($)	Sep. 30, 2022 USD ($) joint_venture	Mar. 31, 2023 USD ($) joint_venture	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($) joint_venture
Schedule of Equity Method Investments
Unfunded commitment outstanding			$ 71,000,000		$ 47,300,000
Equity investment in unconsolidated investments			53,566,840		$ 62,498,340
Equity income from investment			$ (436,860)	$ 1,419,335
Number of join ventures | joint_venture			3		3
Number of joint interests with interests sold | joint_venture		2
Proceeds from sale of equity method investments		$ 33,700,000
Realized gain on disposal		$ 800,000
Debt instrument, face			$ 500,906,546		$ 451,349,737
Percentage of net cash flow (as a percent)					35.00%
Mezzanine Loan, Acquisition
Schedule of Equity Method Investments
Debt instrument, face					$ 10,000,000
Mavik RESOF
Schedule of Equity Method Investments
Committed capital	$ 50,000,000
Unfunded commitment outstanding			$ 30,300,000		$ 22,400,000
Equity method investment, ownership percentage			23.40%		27.90%
Equity investment in unconsolidated investments			$ 28,600,000		$ 36,800,000
Equity income from investment			300,000	1,300,000
Proceeds from equity method investment, distribution			3,800,000	0
Payments for origination of mortgage loans held-for-sale				500,000
Joint Venture
Schedule of Equity Method Investments
Equity method investment, ownership percentage		53.00%
Equity income from investment			(700,000)	100,000
Proceeds from equity method investment, distribution			300,000	$ 300,000
Acquisition costs, period cost			$ 500,000
Another Joint venture
Schedule of Equity Method Investments
Equity method investment, ownership percentage		59.00%

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Equity Investment in Unconsolidated Investments - Equity Investment in a Limited Partnership (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Schedule of Equity Method Investments
Other assets	$ 3,851,770		$ 2,928,327
Total assets	858,481,215		813,336,892
Revolving line of credit, net of financing costs	124,741,957		89,807,448
Obligations under participation agreement (proceeds of $38,444,357 and $41,726,565, respectively)	13,209,982		12,680,594
Other liabilities	739,507		1,159,885
Total liabilities	545,450,206		491,454,718
Obligations under participation agreement	521,886	$ 15,863,187
Mavik RESOF
Schedule of Equity Method Investments
Investments at fair value (cost of $164,364,984 and $176,035,290, respectively)	166,309,340		178,283,703
Other assets	36,931,099		23,918,841
Total assets	203,240,439		202,202,544
Revolving line of credit, net of financing costs	27,607,079		14,795,985
Obligations under participation agreement (proceeds of $38,444,357 and $41,726,565, respectively)	38,753,105		41,962,861
Other liabilities	19,189,912		17,120,804
Total liabilities	85,550,096		73,879,650
Partners’ capital	117,690,343		128,322,894
Total investment income	8,111,779	4,844,664
Total expenses	3,166,795	1,293,316
Net investment income	4,944,984	3,551,348
Unrealized (depreciation) appreciation on investments	(595,911)	69,051
Net increase in partners’ capital resulting from operations	4,349,073	$ 3,620,399
Carrying Value	164,364,984		176,035,290
Obligations under participation agreement	$ 38,444,357		$ 41,726,565

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Equity Investment in Unconsolidated Investments - Equity Investment in Joint Venture (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Schedule of Equity Method Investments
Carrying Value	$ 53,566,840	$ 62,498,340
Joint Venture
Schedule of Equity Method Investments
Carrying Value	$ 24,929,935	$ 25,703,666
Joint Venture | LEL Arlington JV LLC
Schedule of Equity Method Investments
Beneficial Ownership Interest	27.20%	27.20%
Carrying Value	$ 6,885,336	$ 7,271,603
Joint Venture | LEL NW 49th JV LLC
Schedule of Equity Method Investments
Beneficial Ownership Interest	27.20%	27.20%
Carrying Value	$ 1,607,801	$ 1,521,556
Joint Venture | TCG Corinthian FL Portfolio JV LLV
Schedule of Equity Method Investments
Beneficial Ownership Interest	30.60%	30.60%
Carrying Value	$ 6,370,863	$ 6,896,816
Joint Venture | SF-Dallas Industrial, LLC
Schedule of Equity Method Investments
Carrying Value	$ 10,065,935	$ 10,013,691

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Equity Investment in Unconsolidated Investments - Schedule of Equity Method Investments JV (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Schedule of Equity Method Investments
Other assets	$ 3,851,770		$ 2,928,327
Total assets	858,481,215		813,336,892
Mortgage loan payable	60,768,698		29,488,326
Other liabilities	739,507		1,159,885
Total liabilities	545,450,206		491,454,718
Revenues	17,002,171	$ 12,112,270
Depreciation and amortization expense	(681,813)	(1,718,516)
Joint Venture
Schedule of Equity Method Investments
Net investments in real estate	192,052,300		192,616,298
Other assets	10,956,841		12,817,388
Total assets	203,009,141		205,433,686
Mortgage loan payable	147,924,249		147,740,645
Other liabilities	3,221,660		3,104,624
Total liabilities	151,145,909		150,845,269
Members’ capital	51,863,232		$ 54,588,417
Revenues	3,924,579	2,450,438
Operating expenses	(2,143,267)	(816,681)
Depreciation and amortization expense	(1,965,037)	(690,831)
Interest expense	(2,559,954)	(1,085,561)
Unrealized (losses) gains	(826,501)	235,511
Net (loss) income	$ (3,570,180)	$ 92,876

XML

Real Estate Owned, Net - Narratives (Details)	1 Months Ended			3 Months Ended
	Jun. 30, 2022 USD ($) a	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Mar. 31, 2023 USD ($) building tenant	Dec. 31, 2022 tenant
Real Estate [Line Items]
Total Capitalized Costs				$ 48,798,273
Area of land | a	4.9
Proceeds from sale of property held-for-sale	$ 8,600,000
Loss on sale of investments	$ 100,000
Impairment of real estate		$ 1,600,000	$ 3,400,000
Ground Lease
Real Estate [Line Items]
Weighted average remaining lease term — operating lease (years)				63 years 7 months 6 days	63 years 9 months 18 days
Base rent renewal term				5 years
Percent of fair market value of land				9.00%
Industrial
Real Estate [Line Items]
Number of leased buildings | building				3
Number of tenants | tenant				3
Office
Real Estate [Line Items]
Number of tenants | tenant				3	3

XML

Real Estate Owned, Net - Total Capitalized Costs (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Real Estate [Line Items]
Land, building and improvements	$ 94,828,089	$ 46,660,226
Total Capitalized Costs	48,798,273
Land
Real Estate [Line Items]
Land, building and improvements	9,327,855
Building and building improvements
Real Estate [Line Items]
Land, building and improvements	39,248,352
In-place lease
Real Estate [Line Items]
Intangible asset	$ 4,315,333
Weighted-average expected life	2 years 7 months 17 days
Below-market rent
Real Estate [Line Items]
Intangible liability	$ (4,093,267)
Weighted-average expected life	2 years 8 months 8 days

XML

Real Estate Owned, Net - Real Estate Owned, Net (Details)	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Jun. 30, 2022 a
Real Estate [Line Items]
Real estate, Net	$ 94,828,089	$ 46,660,226
Lease intangible liabilities, Net	(12,668,367)	(8,646,840)
Area of land | a			4.9
Land
Real Estate [Line Items]
Real estate, Net	9,327,855
Building and building improvements
Real Estate [Line Items]
Real estate, Net	39,248,352
In-place lease
Real Estate [Line Items]
Lease intangible assets, Cost	4,315,333
Below-market rent
Real Estate [Line Items]
Lease intangible liabilities, Cost	(4,093,267)
Real Estate Investment
Real Estate [Line Items]
Real estate, Cost	106,102,770	57,304,497
Real estate, Accumulated Depreciation/Amortization	(17,337,112)	(16,722,650)
Real estate, Net	88,765,658	40,581,847
Lease intangible assets, Cost	19,454,413	15,139,080
Lease intangible assets, Accumulated Depreciation/Amortization	(12,848,477)	(12,570,619)
Lease intangible assets, Net	6,605,936	2,568,461
Lease intangible liabilities, Cost	(15,744,459)	(11,651,192)
Lease intangible liabilities, Accumulated Depreciation/Amortization	3,076,092	3,004,352
Lease intangible liabilities, Net	(12,668,367)	(8,646,840)
Real Estate Investment | Total real estate
Real Estate [Line Items]
Real estate, Cost	102,392,816	53,816,609
Real estate, Accumulated Depreciation/Amortization	(7,564,727)	(7,156,383)
Real estate, Net	94,828,089	46,660,226
Real Estate Investment | Land
Real Estate [Line Items]
Real estate, Cost	9,327,855	0
Real estate, Accumulated Depreciation/Amortization	0	0
Real estate, Net	9,327,855	0
Real Estate Investment | Building and building improvements
Real Estate [Line Items]
Real estate, Cost	90,974,321	51,725,969
Real estate, Accumulated Depreciation/Amortization	(6,034,760)	(5,711,468)
Real estate, Net	84,939,561	46,014,501
Real Estate Investment | Tenant improvements
Real Estate [Line Items]
Real estate, Cost	1,854,640	1,854,640
Real estate, Accumulated Depreciation/Amortization	(1,293,967)	(1,224,648)
Real estate, Net	560,673	629,992
Real Estate Investment | Furniture and fixtures
Real Estate [Line Items]
Real estate, Cost	236,000	236,000
Real estate, Accumulated Depreciation/Amortization	(236,000)	(220,267)
Real estate, Net	0	15,733
Real Estate Investment | In-place lease
Real Estate [Line Items]
Lease intangible assets, Cost	19,297,871	14,982,538
Lease intangible assets, Accumulated Depreciation/Amortization	(12,766,548)	(12,493,079)
Lease intangible assets, Net	6,531,323	2,489,459
Real Estate Investment | Above-market rent
Real Estate [Line Items]
Lease intangible assets, Cost	156,542	156,542
Lease intangible assets, Accumulated Depreciation/Amortization	(81,929)	(77,540)
Lease intangible assets, Net	74,613	79,002
Real Estate Investment | Below-market rent
Real Estate [Line Items]
Lease intangible liabilities, Cost	(6,848,189)	(2,754,922)
Lease intangible liabilities, Accumulated Depreciation/Amortization	2,467,800	2,428,647
Lease intangible liabilities, Net	(4,380,389)	(326,275)
Real Estate Investment | Above-market ground lease
Real Estate [Line Items]
Lease intangible liabilities, Cost	(8,896,270)	(8,896,270)
Lease intangible liabilities, Accumulated Depreciation/Amortization	608,292	575,705
Lease intangible liabilities, Net	$ (8,287,978)	$ (8,320,565)

XML

Real Estate Owned, Net - Real Estate Operating Revenues and Expenses (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Real estate operating revenues:
Total	$ 1,332,969	$ 2,979,454
Real estate operating expenses:
Management fees	1,997,427	1,488,095
Total	1,209,912	1,217,963
Real Estate Investment
Real estate operating revenues:
Lease revenue	1,085,459	1,754,561
Other operating income	247,510	1,224,893
Total	1,332,969	2,979,454
Real estate operating expenses:
Utilities	36,414	45,334
Real estate taxes	354,680	346,432
Repairs and maintenances	207,365	157,416
Management fees	39,418	67,868
Lease expense, including amortization of above-market ground lease	487,163	487,163
Other operating expenses	84,872	113,750
Total	$ 1,209,912	$ 1,217,963

XML

Real Estate Owned, Net - Future Minimum Rent Income (Details)	Mar. 31, 2023 USD ($)
Real Estate [Abstract]
2023 (April 1 through December 31)	$ 4,265,856
2024	5,845,112
2025	1,810,128
2026	1,443,553
2027	848,014
Thereafter	1,815,497
Total	$ 16,028,160

XML

Real Estate Owned, Net - Annual Net Amortization of Intangibles (Details)	Mar. 31, 2023 USD ($)
Real Estate [Line Items]
2023 (April 1 through December 31)	$ 718,690
2024	1,029,101
2025	(39,461)
2026	(24,834)
2027	(77,102)
Thereafter	(7,668,825)
Total	(6,062,431)
Net Decrease in Real Estate Operating Revenue
Real Estate [Line Items]
2023 (April 1 through December 31)	(1,403,903)
2024	(1,884,920)
2025	(646,536)
2026	(272,505)
2027	(97,912)
Thereafter	0
Total	(4,305,776)
Increase in Depreciation and Amortization
Real Estate [Line Items]
2023 (April 1 through December 31)	2,220,354
2024	3,044,369
2025	737,423
2026	378,019
2027	151,158
Thereafter	0
Total	6,531,323
Decrease in Rent Expense
Real Estate [Line Items]
2023 (April 1 through December 31)	(97,761)
2024	(130,348)
2025	(130,348)
2026	(130,348)
2027	(130,348)
Thereafter	(7,668,825)
Total	$ (8,287,978)

XML

Real Estate Owned, Net - Ground Lease Disclosures (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Real Estate [Line Items]
Operating lease right-of-use asset	$ 27,374,554	$ 27,378,786
Operating lease liability	27,374,554	27,378,786
Ground Lease
Real Estate [Line Items]
Operating lease right-of-use asset	27,374,554	27,378,786
Operating lease liability	$ 27,374,554	$ 27,378,786
Weighted average remaining lease term — operating lease (years)	63 years 7 months 6 days	63 years 9 months 18 days
Weighted average discount rate — operating lease	7.60%	7.60%

XML

Real Estate Owned, Net - Schedule of Lease Expense (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Ground Lease
Real Estate [Line Items]
Operating lease cost	$ 519,750	$ 519,750

XML

Real Estate Owned, Net - Schedule of Non-cash Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Real Estate [Abstract]
Amounts included in the measurement of lease liability, Operating lease	$ 519,750	$ 519,750
Right-of-use assets obtained in exchange for lease obligations, Operating lease	$ 519,750	$ 519,750

XML

Real Estate Owned, Net - Maturities of Operating Lease Liabilities (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Real Estate [Abstract]
2023 (April 1 through December 31)	$ 1,559,250
2024	2,079,000
2025	2,079,000
2026	2,079,000
2027	2,079,000
Thereafter	122,227,875
Total lease payments	132,103,125
Less: Imputed interest	(104,728,571)
Total	$ 27,374,554	$ 27,378,786

XML

Fair Value Measurements - Narrative (Details) - USD ($)	1 Months Ended	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Purchases		$ 258,500
Corporate bonds purchased		$ 20,000,000
Coupon rate on purchased bonds (percent)	6.125%	6.125%
Held-to-maturity debt securities	$ 20,025,024	$ 20,025,024	$ 0
Level 3 | Interest rate cap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Purchases	$ 258,500
Derivative, cap interest rate	5.00%	5.00%

XML

Fair Value Measurements - Fair Value Measurements of Marketable Securities, by Major Class (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	$ 154,544	$ 147,960	$ 510,151	$ 1,310,000
Ending balance	258,500	0
Total	413,044	147,960
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Total	154,544	147,960
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Total	0	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Total	258,500	0
Interest rate cap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Ending balance	258,500
Interest rate cap | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Ending balance	0
Interest rate cap | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Ending balance	0
Interest rate cap | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Ending balance	258,500
Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	154,544	147,960
Debt securities | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	154,544	147,960
Debt securities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	0	0
Debt securities | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	$ 0	$ 0

XML

Fair Value Measurements - Activities of the Marketable Securities (Details)	3 Months Ended
	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)
Marketable Securities
Beginning balance	$ 147,960	$ 1,310,000
Purchases	0	0
Proceeds from sale	0	(628,715)
Unsettled sale	0	(123,223)
Reclassification of net realized gains on marketable securities into earnings	0	51,133
Unrealized (losses) gains on marketable securities	6,584	(99,044)
Ending balance	154,544	$ 510,151
Derivatives
Beginning balance	0
Purchases	258,500
Proceeds from sale	0
Unsettled sale	0
Reclassification of net realized gains on marketable securities into earnings	0
Unrealized (losses) gains on marketable securities	0
Ending balance	$ 258,500

XML

Fair Value Measurements - Fair Value Measurements, Nonrecurring (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Loans:
Principal Amount	$ 632,832,672	$ 645,795,459
Carrying Value	638,600,366	651,962,657
Allowance for loan losses	(28,651,577)	(25,471,890)
Total, net of allowance for credit losses	609,948,789	626,490,767
Fair Value	612,325,188	623,145,754
Other investment:
Carrying Value	20,025,024	0
Liabilities:
Principal Amount	500,906,546	451,349,737
Carrying Value	492,469,492	442,811,751
Fair Value	485,734,432	431,569,684
Loans Held For Investment
Loans:
Allowance for loan losses	(28,504,829)	(25,471,890)
Loans held for investment acquired through participation
Loans:
Principal Amount	38,444,357	41,726,565
Allowance for loan losses	(146,748)	0
Total, net of allowance for credit losses	38,772,079	42,072,828
Unsecured notes payable
Liabilities:
Principal Amount	123,500,000	123,500,000
Carrying Value	116,976,542	116,530,673
Fair Value	107,970,447	103,481,748
Level 3
Loans:
Allowance for loan losses	(28,651,577)	(25,471,890)
Fair Value	612,325,188	623,145,754
Liabilities:
Fair Value	377,763,985	328,087,936
Level 3 | Revolving line of credit
Liabilities:
Principal Amount	125,000,000	90,135,865
Carrying Value	124,741,957	89,807,448
Fair Value	125,000,000	90,135,865
Level 3 | Loans Held For Investment
Loans:
Principal Amount	594,388,315	604,068,894
Carrying Value	599,828,287	609,889,829
Fair Value	573,572,071	581,182,892
Level 3 | Loans held for investment acquired through participation
Loans:
Principal Amount	38,444,357	41,726,565
Carrying Value	38,772,079	42,072,828
Fair Value	38,753,117	41,962,862
Level 3 | Term loan payable
Liabilities:
Principal Amount	25,000,000	25,000,000
Carrying Value	25,000,000	25,000,000
Fair Value	25,000,000	25,000,000
Level 3 | Repurchase agreement payable
Liabilities:
Principal Amount	152,947,394	170,876,606
Carrying Value	151,772,313	169,304,710
Fair Value	152,947,394	170,876,606
Level 3 | Obligations under participation agreements
Liabilities:
Principal Amount	13,106,844	12,584,958
Carrying Value	13,209,982	12,680,594
Fair Value	13,209,983	12,680,595
Level 3 | Mortgage loan payable
Liabilities:
Principal Amount	61,352,308	29,252,308
Carrying Value	60,768,698	29,488,326
Fair Value	61,606,608	29,394,870
Level 1
Other investment:
Principal Amount	20,000,000	0
Carrying Value	20,025,024	0
Fair Value	19,800,000	0
Level 1 | Unsecured notes payable
Liabilities:
Principal Amount	123,500,000	123,500,000
Carrying Value	116,976,542	116,530,673
Fair Value	$ 107,970,447	$ 103,481,748

XML

Fair Value Measurements - Valuation Techniques (Details)	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Fair Value Measurement Inputs and Valuation Techniques
Assets, Fair Value	$ 612,325,188	$ 623,145,754
Liabilities, Fair Value	485,734,432	431,569,684
Level 3
Fair Value Measurement Inputs and Valuation Techniques
Assets, Fair Value	612,325,188	623,145,754
Liabilities, Fair Value	377,763,985	328,087,936
Level 3 | Revolving line of credit
Fair Value Measurement Inputs and Valuation Techniques
Liabilities, Fair Value	125,000,000	90,135,865
Level 3 | Loans Held For Investment
Fair Value Measurement Inputs and Valuation Techniques
Assets, Fair Value	573,572,071	581,182,892
Level 3 | Loans Held For Investment Acquired Through Participation
Fair Value Measurement Inputs and Valuation Techniques
Assets, Fair Value	38,753,117	41,962,862
Level 3 | Repurchase agreement payable
Fair Value Measurement Inputs and Valuation Techniques
Liabilities, Fair Value	152,947,394	170,876,606
Level 3 | Obligations under participation agreements
Fair Value Measurement Inputs and Valuation Techniques
Liabilities, Fair Value	13,209,983	12,680,595
Level 3 | Mortgage loan payable
Fair Value Measurement Inputs and Valuation Techniques
Liabilities, Fair Value	61,606,608	29,394,870
Level 3 | Term loan payable
Fair Value Measurement Inputs and Valuation Techniques
Liabilities, Fair Value	$ 25,000,000	$ 25,000,000
Level 3 | Discounted Cash Flow | Discount Rate | Revolving line of credit | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0815	0.0764
Level 3 | Discounted Cash Flow | Discount Rate | Revolving line of credit | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0815	0.0764
Level 3 | Discounted Cash Flow | Discount Rate | Revolving line of credit | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0815	0.0764
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0900	0.0871
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.1680	0.1936
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.1129	0.1146
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment Acquired Through Participation | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.1530	0.1525
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment Acquired Through Participation | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.1750	0.1706
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment Acquired Through Participation | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.1708	0.1667
Level 3 | Discounted Cash Flow | Discount Rate | Repurchase agreement payable | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0556	0.0522
Level 3 | Discounted Cash Flow | Discount Rate | Repurchase agreement payable | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0727	0.0617
Level 3 | Discounted Cash Flow | Discount Rate | Repurchase agreement payable | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0667	0.0682
Level 3 | Discounted Cash Flow | Discount Rate | Obligations under participation agreements | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.1680	0.1636
Level 3 | Discounted Cash Flow | Discount Rate | Obligations under participation agreements | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.1680	0.1636
Level 3 | Discounted Cash Flow | Discount Rate | Obligations under participation agreements | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.1680	0.1636
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage loan payable | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0830	0.0824
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage loan payable | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0865	0.0824
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage loan payable | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0847	0.0824
Level 3 | Discounted Cash Flow | Discount Rate | Term loan payable | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0563	0.0563
Level 3 | Discounted Cash Flow | Discount Rate | Term loan payable | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0563	0.0563
Level 3 | Discounted Cash Flow | Discount Rate | Term loan payable | Weighted Average
Fair Value Measurement Inputs and Valuation Techniques
Measurement input	0.0563	0.0563

XML

Related Party Transactions - Schedule of Fees Paid and Costs Reimbursed to the Manager (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Related Party Transaction [Line Items]
Origination and extension fee expense	$ 471,448	$ 686,365
Asset management fee	1,997,427	1,488,095
Asset servicing fee	470,525	349,329
Operating expenses reimbursed to Manager	2,177,004	1,928,563
Disposition fee	290,813	0
Total	5,407,217	4,452,352
Mavik RESOF
Related Party Transaction [Line Items]
Acquisition costs, period cost	$ 500,000	$ 200,000

XML

Related Party Transactions - Narratives (Details)			3 Months Ended
	Aug. 03, 2020 USD ($)	Aug. 03, 2020 USD ($)	Mar. 31, 2023 USD ($) building	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Related Party Transaction [Line Items]
Manager's entitled transaction break-up fee			0.5
Termination fee			$ 0		$ 0
Distribution to investors			4,650,492	$ 3,893,595
Investment company, return of capital distribution			4,200,000	$ 2,900,000
Due to manager			$ 3,871,022		$ 3,935,997
Mavik RESOF
Related Party Transaction [Line Items]
Building acquired | building			3
Committed capital		$ 50,000,000
Manager or its affiliates
Related Party Transaction [Line Items]
Percent of origination fees payable			1.00%
Percent of principal amount of loan extended			1.00%
Management fee, annual rate			1.00%
Asset servicing fee annual rate			0.25%
Disposition fee due to manager percent			1.00%
Mavik Real Estate Special Opportunities Fund, LP
Related Party Transaction [Line Items]
Committed capital	$ 50,000,000

XML

Related Party Transactions - Participation Interests Purchased (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Related Party Transaction [Line Items]
Principal Balance	$ 632,832,672	$ 645,795,459
Carrying Value	609,948,789	626,490,767
Loans Held For Investment Acquired Through Participation
Related Party Transaction [Line Items]
Principal Balance	38,444,357	41,726,565
Carrying Value	$ 38,772,079	$ 42,072,828
Loans Held For Investment Acquired Through Participation | Havemeyer TSM LLC
Related Party Transaction [Line Items]
Participating Interests		23.00%
Principal Balance		$ 3,282,208
Carrying Value		$ 3,313,813
Loans Held For Investment Acquired Through Participation | Mesa AZ Industrial Owner, LLC
Related Party Transaction [Line Items]
Participating Interests	38.27%	38.27%
Principal Balance	$ 31,000,000	$ 31,000,000
Carrying Value	$ 31,288,062	$ 31,276,468
Loans Held For Investment Acquired Through Participation | UNIJ Sole Member LLC
Related Party Transaction [Line Items]
Participating Interests	40.80%	40.80%
Principal Balance	$ 7,444,357	$ 7,444,357
Carrying Value	$ 7,484,017	$ 7,482,547

XML

Related Party Transactions - Transfers of Participation Interest (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Related Party Transaction [Line Items]
Principal Balance	$ 632,832,672	$ 645,795,459
Carrying Value	609,948,789	626,490,767
Debt instrument, face	500,906,546	451,349,737
Carrying Value	25,000,000	25,000,000
Participating Mortgage Loan
Related Party Transaction [Line Items]
Principal Balance	19,398,129	18,625,738
Debt instrument, face	13,106,844	12,584,958
Carrying Value	13,209,982	12,680,594
Participating Mortgage Loan | 610 Walnut Investors LLC
Related Party Transaction [Line Items]
Principal Balance	$ 19,398,129	$ 18,625,738
% Transferred	67.57%	67.57%
Debt instrument, face	$ 13,106,844	$ 12,584,958
Carrying Value	$ 13,209,982	$ 12,680,594

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Related Party Transactions - Transferred to Third-Party (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Related Party Transaction [Line Items]
Principal Balance	$ 632,832,672	$ 645,795,459
Debt instrument, face	500,906,546	451,349,737
Carrying Value	25,000,000	25,000,000
Participating Mortgage Loan
Related Party Transaction [Line Items]
Principal Balance	19,398,129	18,625,738
Carrying Value	19,533,518	18,738,386
Debt instrument, face	13,106,844	12,584,958
Carrying Value	13,209,982	12,680,594
610 Walnut Investors LLC | Participating Mortgage Loan
Related Party Transaction [Line Items]
Principal Balance	19,398,129	18,625,738
Carrying Value	$ 19,533,518	$ 18,738,386
% Transferred	67.57%	67.57%
Debt instrument, face	$ 13,106,844	$ 12,584,958
Carrying Value	$ 13,209,982	$ 12,680,594

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Debt - Narratives - Unsecured Notes Payable (Details) - USD ($)	Jun. 25, 2021	Jun. 10, 2021	Feb. 26, 2021	Feb. 10, 2021	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument
Principal Amount					$ 500,906,546	$ 451,349,737
Unsecured notes payable
Debt Instrument
Principal Amount					123,500,000	123,500,000
Unsecured notes payable | 6.00% Senior Notes Due 2026
Debt Instrument
Fixed rate	6.00%	6.00%
Principal Amount	$ 6,600,000	$ 78,500,000			$ 85,125,000	85,125,000
Proceeds from Issuance of Debt	6,400,000	76,000,000
Debt issuance costs, gross	$ 200,000	$ 2,500,000
Asset coverage ratio					150.00%
Unsecured notes payable | 7.00% Senior Notes Due 2026
Debt Instrument
Fixed rate			7.00%	7.00%
Principal Amount			$ 3,600,000	$ 34,800,000	$ 38,375,000	$ 38,375,000
Proceeds from Issuance of Debt			3,500,000	33,700,000
Debt issuance costs, gross			$ 100,000	$ 1,100,000
Debt instrument, redemption price, percentage				100.00%

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Debt - Unsecured Notes Payable (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Jun. 25, 2021	Jun. 10, 2021	Feb. 26, 2021	Feb. 10, 2021
Debt Instrument
Debt instrument, face	$ 500,906,546	$ 451,349,737
Carrying Value	492,469,492	442,811,751
Fair Value	485,734,432	431,569,684
Unsecured notes payable
Debt Instrument
Debt instrument, face	123,500,000	123,500,000
Carrying Value	116,976,542	116,530,673
Fair Value	107,970,447	103,481,748
Unsecured notes payable | 6.00% Senior Notes Due 2026
Debt Instrument
Debt instrument, face	85,125,000	85,125,000		$ 6,600,000	$ 78,500,000
Carrying Value	82,653,051	82,487,769
Fair Value	71,130,447	68,100,000
Unamortized discount	1,800,000		$ 1,900,000
Unamortized deferred financing costs	600,000		$ 700,000
Unsecured notes payable | 7.00% Senior Notes Due 2026
Debt Instrument
Debt instrument, face	38,375,000	38,375,000				$ 3,600,000	$ 34,800,000
Carrying Value	34,323,491	34,042,904
Fair Value	36,840,000	35,381,748
Unamortized discount	$ 4,100,000	$ 4,300,000

XML

Debt - Narratives - Revolving Line of Credit (Details)			3 Months Ended
	Mar. 12, 2023	Mar. 12, 2021 USD ($)	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Jan. 04, 2022 USD ($)	Nov. 08, 2021 USD ($)
Debt Instrument
Maximum borrowing capacity			$ 125,000,000		$ 90,100,000
Payment of financing costs			844,415	$ 895,247
Line of credit facility collateral assets			217,900,000		$ 177,400,000
Proceeds from borrowings under revolving line of credit			34,864,135	$ 26,377,654
UBS Master Repurchase Agreement | Terra Mortgage Capital LLC
Debt Instrument
Maximum borrowing capacity							$ 195,000,000
Payment guarantee maximum percent							25.00%
Minimum net worth required for compliance							$ 215,700,000
Ratio of indebtedness to net capital							3.50
Revolving line of credit
Debt Instrument
Maximum borrowing capacity		$ 75,000,000				$ 125,000,000
Minimum net worth required for compliance			250,000,000
Quarterly operating profit for compliance			$ 3,500,000
Ratio of indebtedness to net capital			2.50
Payment of financing costs			$ 600,000
Revolving line of credit | Floor rate
Debt Instrument
Debt instrument, basis spread on variable rate	6.00%	4.00%
Revolving line of credit | LIBOR
Debt Instrument
Debt instrument, basis spread on variable rate		3.25%
Revolving line of credit | Term SOFR
Debt Instrument
Debt instrument, basis spread on variable rate	3.35%

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Debt - Narratives - Repurchase agreement (Details)				3 Months Ended		12 Months Ended
	Feb. 18, 2022 USD ($)	Nov. 08, 2021 USD ($)	Nov. 08, 2021 USD ($)	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Debt Instrument
Maximum borrowing capacity				$ 125,000,000		$ 90,100,000
Cash and cash equivalents				28,869,594	$ 9,858,153	28,567,825
Proceeds from borrowings under repurchase agreements				1,300,858	131,949,549
Repayments of borrowings under repurchase agreements				(19,230,071)	0
UBS Master Repurchase Agreement
Debt Instrument
Repurchase agreements payable, net of deferred financing fees				$ 51,050,000		$ 51,050,000
UBS Master Repurchase Agreement | Terra Mortgage Capital LLC
Debt Instrument
Maximum borrowing capacity		$ 195,000,000	$ 195,000,000
Deferred financing costs		$ 600,000	$ 600,000
Payment guarantee maximum percent		25.00%	25.00%
Cash liquidity		$ 5,000,000	$ 5,000,000
Debt instrument covenant minimum percentage of cash liquidity		5.00%	5.00%
Cash and cash equivalents		$ 15,000,000	$ 15,000,000
Minimum percentage of total liquidity		10.00%	10.00%
Minimum net worth required for compliance		$ 215,700,000	$ 215,700,000
Debt instrument covenant requirement on consolidated tangible net worth minimum percent		75.00%	75.00%
EBITDA To interest expense ratio			1.50	1.25		1.25
Ratio of indebtedness to net capital		3.50	3.50
Proceeds from borrowings under repurchase agreements					13,600,000
Repayments of borrowings under repurchase agreements					0
UBS Master Repurchase Agreement | Minimum | Terra Mortgage Capital LLC
Debt Instrument
Value-added assets with loan-to-value ratio		65.00%	65.00%
Value added assets yield ratio		2.50%	2.50%
UBS Master Repurchase Agreement | Minimum | Terra Mortgage Capital LLC | Term SOFR
Debt Instrument
Debt instrument, basis spread on variable rate		1.60%
UBS Master Repurchase Agreement | Maximum | Terra Mortgage Capital LLC
Debt Instrument
Value-added assets with loan-to-value ratio		80.00%	80.00%
Value added assets yield ratio		5.00%	5.00%
UBS Master Repurchase Agreement | Maximum | Terra Mortgage Capital LLC | Term SOFR
Debt Instrument
Debt instrument, basis spread on variable rate		2.25%
Uncommitted Master Repurchase Agreement
Debt Instrument
Repurchase agreements payable, net of deferred financing fees				$ 101,897,394		$ 119,826,606
Uncommitted Master Repurchase Agreement | Terra Mortgage Capital LLC
Debt Instrument
Maximum borrowing capacity	$ 200,000,000
Deferred financing costs				600,000
Cash liquidity				$ 5,000,000
Debt instrument covenant minimum percentage of cash liquidity				5.00%
Cash and cash equivalents				$ 15,000,000
Minimum percentage of total liquidity				10.00%
Debt instrument covenant requirement on consolidated tangible net worth minimum percent				75.00%
EBITDA To interest expense ratio				1.50
Ratio of indebtedness to net capital				3.00
Proceeds from borrowings under repurchase agreements	$ 103,000,000			$ 1,300,000	118,300,000
Repayments of borrowings under repurchase agreements				(19,200,000)	$ 0
Unamortized deferred financing costs				$ 1,700,000
Uncommitted Master Repurchase Agreement | Terra Mortgage Capital LLC | Nonperforming Loans
Debt Instrument
Payment guarantee maximum percent				50.00%
Uncommitted Master Repurchase Agreement | Terra Mortgage Capital LLC | Performing Loans
Debt Instrument
Payment guarantee maximum percent				25.00%
Uncommitted Master Repurchase Agreement | Minimum | Terra Mortgage Capital LLC | Term SOFR
Debt Instrument
Debt instrument, basis spread on variable rate				1.75%
Uncommitted Master Repurchase Agreement | Maximum | Terra Mortgage Capital LLC | Term SOFR
Debt Instrument
Debt instrument, basis spread on variable rate				3.00%

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Debt - Schedule of Repurchase Agreements (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument
Principal Amount	$ 632,832,672	$ 645,795,459
UBS Master Repurchase Agreement
Debt Instrument
Principal Amount	68,100,000	68,100,000
Collateral, Carrying Value	69,133,070	69,163,440
Collateral, Fair Value	69,244,060	69,211,505
Borrowings Under Master Repurchase Agreement, Principal Amount	51,050,000	51,050,000
UBS Master Repurchase Agreement | NB Factory TIC 1, LLC
Debt Instrument
Principal Amount	28,000,000	28,000,000
Collateral, Carrying Value	28,823,787	28,857,892
Collateral, Fair Value	28,908,756	28,902,234
Borrowings Under Master Repurchase Agreement, Principal Amount	18,970,000	$ 18,970,000
UBS Master Repurchase Agreement | NB Factory TIC 1, LLC | LIBOR
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		1.74%
UBS Master Repurchase Agreement | NB Factory TIC 1, LLC | LIBOR | Floor rate
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		0.10%
UBS Master Repurchase Agreement | Grandview's Madison Place, LLC
Debt Instrument
Principal Amount	17,000,000	$ 17,000,000
Collateral, Carrying Value	17,107,426	17,105,928
Collateral, Fair Value	17,130,108	17,105,928
Borrowings Under Master Repurchase Agreement, Principal Amount	13,600,000	$ 13,600,000
UBS Master Repurchase Agreement | Grandview's Madison Place, LLC | SOFR
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		1.965%
UBS Master Repurchase Agreement | Grandview's Remington Place, LLC
Debt Instrument
Principal Amount	23,100,000	$ 23,100,000
Collateral, Carrying Value	23,201,857	23,199,620
Collateral, Fair Value	23,205,196	23,203,343
Borrowings Under Master Repurchase Agreement, Principal Amount	18,480,000	$ 18,480,000
UBS Master Repurchase Agreement | Grandview's Remington Place, LLC | SOFR
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		1.965%
Uncommitted Master Repurchase Agreement
Debt Instrument
Principal Amount	141,243,997	$ 167,549,028
Collateral, Carrying Value	142,236,428	168,692,405
Collateral, Fair Value	141,016,432	166,891,728
Borrowings Under Master Repurchase Agreement, Principal Amount	101,897,394	119,826,606
Uncommitted Master Repurchase Agreement | 330 Tryon DE LLC
Debt Instrument
Principal Amount	22,800,000	22,800,000
Collateral, Carrying Value	22,903,981	22,902,215
Collateral, Fair Value	22,743,319	22,687,235
Borrowings Under Master Repurchase Agreement, Principal Amount	16,514,712	$ 18,240,000
Uncommitted Master Repurchase Agreement | 330 Tryon DE LLC | SOFR
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		2.015%
Uncommitted Master Repurchase Agreement | 330 Tryon DE LLC | SOFR | Floor rate
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		0.01%
Uncommitted Master Repurchase Agreement | 1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP
Debt Instrument
Principal Amount	57,221,615	$ 57,184,178
Collateral, Carrying Value	57,496,677	57,453,482
Collateral, Fair Value	57,133,997	56,844,322
Borrowings Under Master Repurchase Agreement, Principal Amount	42,888,134	$ 41,587,275
Uncommitted Master Repurchase Agreement | 1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP | SOFR
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		2.465%
Uncommitted Master Repurchase Agreement | AGRE DCP Palm Springs, LLC
Debt Instrument
Principal Amount	43,222,382	$ 43,222,382
Collateral, Carrying Value	43,793,356	43,758,804
Collateral, Fair Value	43,265,735	43,062,933
Borrowings Under Master Repurchase Agreement, Principal Amount	28,094,548	$ 28,094,548
Uncommitted Master Repurchase Agreement | AGRE DCP Palm Springs, LLC | SOFR
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		1.315%
Uncommitted Master Repurchase Agreement | AGRE DCP Palm Springs, LLC | SOFR | Floor rate
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		1.80%
Uncommitted Master Repurchase Agreement | Patrick Henry Recovery Acquisition, LLC
Debt Instrument
Principal Amount	18,000,000	$ 18,000,000
Collateral, Carrying Value	18,042,414	18,041,782
Collateral, Fair Value	17,873,381	17,824,300
Borrowings Under Master Repurchase Agreement, Principal Amount	$ 14,400,000	$ 14,400,000
Uncommitted Master Repurchase Agreement | Patrick Henry Recovery Acquisition, LLC | SOFR
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		0.865%
Uncommitted Master Repurchase Agreement | Patrick Henry Recovery Acquisition, LLC | SOFR | Floor rate
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		1.50%
Uncommitted Master Repurchase Agreement | University Park Berkeley, LLC
Debt Instrument
Principal Amount		$ 26,342,468
Collateral, Carrying Value		26,536,122
Collateral, Fair Value		26,472,938
Borrowings Under Master Repurchase Agreement, Principal Amount		$ 17,504,783
Uncommitted Master Repurchase Agreement | University Park Berkeley, LLC | SOFR
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		1.365%
Uncommitted Master Repurchase Agreement | University Park Berkeley, LLC | SOFR | Floor rate
Debt Instrument
Borrowings Under Master Repurchase Agreement, Interest Rate		1.50%

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Debt - Term Loan (Details) - USD ($)	Apr. 09, 2021	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument
Term loan payable		$ 25,000,000	$ 25,000,000
Credit Agreement
Debt Instrument
Term loan payable	$ 25,000,000
Minimum incremental loans	1,000,000
Loans in excess	$ 500,000
Fixed rate	5.625%
Interest rate, increase	6.625%
Commitment fee percentage	2.50%
Unused capacity, commitment fee percentage	0.75%

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Debt - Mortgage Loan Payable (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument
Debt instrument, face	$ 500,906,546	$ 451,349,737
Principal Amount	61,352,308	29,252,308
Carrying Value	60,768,698	29,488,326
Carrying Value of Collateral	88,765,658	40,581,847
Real Estate Investment | Mortgage Loan Payable | Acquisition Financing Loan Agreement
Debt Instrument
Debt instrument, face	37,000,000
Centennial Bank
Debt Instrument
Principal Amount	29,252,308	29,252,308
Carrying Value	29,506,608	29,488,326
Carrying Value of Collateral	$ 39,967,385	40,581,847
Centennial Bank | Term SOFR
Debt Instrument
Current Interest Rate	3.85%
Centennial Bank | Term SOFR | Minimum
Debt Instrument
Interest rate	2.23%
TPG RE Finance 24, LTD | Mortgage Loan Payable | Acquisition Financing Loan Agreement
Debt Instrument
Current Interest Rate	3.50%
Interest rate	3.75%
Principal Amount	$ 32,100,000	0
Carrying Value	31,262,090	0
Carrying Value of Collateral	$ 48,798,273	$ 0
TPG RE Finance 24, LTD | Term SOFR | Mortgage Loan Payable | Acquisition Financing Loan Agreement
Debt Instrument
Current Interest Rate	3.50%
Interest rate	3.75%

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Debt - Scheduled Debt Principal Payments (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Debt Disclosure [Abstract]
2023 (April 1 through December 31)	$ 54,252,308
2024	277,947,395
2025	0
2026	123,500,000
2027	32,100,000
Thereafter	0
Long term debt	487,799,703
Unamortized deferred financing costs	8,540,193	$ 8,600,000
Total	$ 479,259,510

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Debt - Narratives - Obligations Under Participation Agreements and Secured Borrowing (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument
Participation mortgage loan	$ 25,000,000	$ 25,000,000
Participating Mortgage Loan
Debt Instrument
Participation mortgage loan	13,209,982	12,680,594
Loans held for investment	$ 19,533,518	$ 18,738,386
Participating Mortgage Loan | Weighted Average
Debt Instrument
Weighted-average interest rate	16.80%	16.40%

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Commitments and Contingencies (Details) - USD ($) $ in Millions		3 Months Ended
	Aug. 03, 2020	Mar. 31, 2023	Dec. 31, 2022
Other Commitments
Unfunded commitment outstanding		$ 71.0	$ 47.3
Ground Lease
Other Commitments
Base rent renewal term		5 years
Percent of fair market value of land		9.00%
Mavik RESOF
Other Commitments
Unfunded commitment outstanding		$ 30.3	22.4
Committed capital	$ 50.0
Mavik RESOF
Other Commitments
Unfunded commitment outstanding			$ 22.4
Committed capital	$ 50.0

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Equity - Earnings Per Share (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Equity [Abstract]
Net income (loss)	$ 547,479	$ (757,887)
Series A preferred stock dividend declared	(3,907)	(3,906)
Net income (loss) allocable to common stock	$ 543,572	$ (761,793)
Weighted-average shares outstanding — basic (in shares)	24,335,373	19,487,460
Weighted-average shares outstanding — diluted (in shares)	24,335,373	19,487,460
Loss per share — basic (in usd per share)	$ 0.02	$ (0.04)
Loss per share — diluted (in usd per share)	$ 0.02	$ (0.04)

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Equity - Preferred Stock Classes (Details) - USD ($)		12 Months Ended
	Nov. 30, 2016	Dec. 31, 2016	Mar. 31, 2023	Dec. 31, 2022
Class of Stock
Preferred stock, authorized (in shares)			50,000,000	50,000,000
Preferred stock, par value (in usd per share)			$ 0.01	$ 0.01
Series A Preferred Stock
Class of Stock
Preferred stock, authorized (in shares)	125
Preferred stock, issued (in shares)			0	125
Preferred stock outstanding (in shares)			0	125
Preferred stock, dividend rate, percentage	12.50%	12.50%
Preferred stock, liquidation preference (in usd per share)	$ 1,000
Preferred stock sold (in shares)		125
Preferred stock value sold		$ 125,000
Preferred stock, redemption price (in usd per share)			$ 1,000
Preferred stock redemption premium (in usd per share)			$ 50
Preferred Stock redeemed			$ 125,000

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Equity - Common Stock (Details) - $ / shares	Mar. 31, 2023	Dec. 31, 2022	Oct. 01, 2022	Sep. 30, 2022	Mar. 02, 2020
Equity disclosure
Common stock, shares authorized (in shares)			950,000,000
Common stock, shares, issued (in shares)					4,574,470.35
Common And Preferred
Equity disclosure
Common stock, shares authorized (in shares)				500,000,000
Class A Common Stock
Equity disclosure
Common stock, shares authorized (in shares)	450,000,000	450,000,000	450,000,000
Common stock, par or stated value per share (in usd per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares, issued (in shares)	0	0
Class B Common Stock
Equity disclosure
Common stock, shares authorized (in shares)	450,000,000	450,000,000	450,000,000
Common stock, par or stated value per share (in usd per share)	$ 0.01	$ 0.01
Common stock, shares, issued (in shares)	24,335,404	24,335,370
Preferred Stock
Equity disclosure
Common stock, shares authorized (in shares)			50,000,000
Terra BDC | Class B Common Stock
Equity disclosure
Common stock, shares, issued (in shares)			4,847,910
Terra JV | Class B Common Stock
Equity disclosure
Equity method investment, ownership percentage	70.00%
Terra BDC | Class B Common Stock
Equity disclosure
Equity method investment, ownership percentage	19.90%
Terra Offshore REIT | Class B Common Stock
Equity disclosure
Equity method investment, ownership percentage	10.10%

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Equity - Distributions (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Equity [Abstract]
Distribution to investors	$ 4,650,492	$ 3,893,595
Investment company, return of capital distribution	4,200,000	2,900,000
Preferred stock dividend declared	$ 3,907	$ 3,906

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Equity - Dividend Reinvestment Plan (Details)	3 Months Ended
	Mar. 31, 2023 USD ($) shares
Class of Stock
Shares issued from reinvestment of shareholder distributions (in shares) | shares	34
Shares issued from reinvestment of shareholder distributions	$ 478
Additional Paid-in Capital
Class of Stock
Shares issued from reinvestment of shareholder distributions	$ 478