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What changed in Terra Property Trust, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Terra Property Trust, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+310 added−284 removedSource: 10-K (2026-03-19) vs 10-K (2025-03-14)

Top changes in Terra Property Trust, Inc.'s 2025 10-K

310 paragraphs added · 284 removed · 238 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

51 edited+6 added−17 removed92 unchanged
Biggest changeAt 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 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. 1 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.
Biggest changePursuant to the terms of the transactions described in the Merger Agreement, 4,847,910 shares of our Class B Common Stock, $0.01 par value per share (“Class B Common Stock”), were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of October 1, 2022.
Governmental Regulations As an owner of real estate, our operations are subject, in certain instances, to supervision and regulation by U.S. and other governmental authorities, and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, which, include among other things: (i) federal and state securities laws and regulations; (ii) federal, state and local tax laws and regulations, (ii) state and local laws relating to real property; (iv) federal, state and local environmental laws, ordinances, and regulations, and (v) various laws relating to housing, including permanent and temporary rent control and stabilization laws, the Americans with Disabilities Act of 1990 and the Fair Housing Amendment Act of 1988, among others.
Governmental Regulations As an owner of real estate, our operations are subject, in certain instances, to supervision and regulation by U.S. and other governmental authorities, and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, which, include among other things: (i) federal and state securities laws and regulations; (ii) federal, state and local tax laws and regulations, (iii) state and local laws relating to real property; (iv) federal, state and local environmental laws, ordinances, and regulations, and (v) various laws relating to housing, including permanent and temporary rent control and stabilization laws, the Americans with Disabilities Act of 1990 and the Fair Housing Amendment Act of 1988, among others.
Our Board adopted the following investment guidelines: • no origination or acquisition shall be made that would cause us to fail to qualify as a REIT; • no origination or acquisition shall be made that would cause us or any of our subsidiaries to be required to register as an investment company under the 1940 Act; and • until appropriate investments can be identified, we may invest the proceeds of our equity or debt offerings in interest-bearing, short-term investments, including money market accounts and/or funds, that are consistent with our intention to qualify as a REIT.
Our Board adopted the following investment guidelines: • no origination or acquisition shall be made that would cause us to fail to qualify as a REIT; • no origination or acquisition shall be made that would cause us or any of our subsidiaries to be required to register as an investment company under the 1940 Act; and 5 • until appropriate investments can be identified, we may invest the proceeds of our equity or debt offerings in interest-bearing, short-term investments, including money market accounts and/or funds, that are consistent with our intention to qualify as a REIT.
Examples of the alternative liquidity transactions that, depending on market conditions, may be available to us include a listing of our shares of common stock on a national securities exchange, adoption of a share repurchase plan, a liquidation of our assets, a sale of our company or a strategic business combination, in each case, which may include the further in-kind distribution of our shares of common stock indirectly owned by certain of our affiliate funds to the ultimate investors in such affiliate funds.
Examples of the alternative liquidity transactions that, depending on market conditions, may be available to us include a listing of our shares of common stock on a national securities exchange, adoption of a share repurchase plan, a liquidation of our assets, a sale of our company or a strategic business combination, in each case, which may include the further 1 in-kind distribution of our shares of common stock indirectly owned by certain of our affiliate funds to the ultimate investors in such affiliate funds.
Section 3(a)(1)(C) of the 1940 Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
Section 3(a)(1)(C) of the 1940 Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the 6 value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
These investment guidelines may be changed from time to time by a majority of our Board without the approval of our stockholders. 6 Disposition Policies The period we hold our investments in real estate-related loans varies depending on the type of asset, interest rates and other factors. Our Manager has developed a well-defined exit strategy for each of our investments.
These investment guidelines may be changed from time to time by a majority of our Board without the approval of our stockholders. Disposition Policies The period we hold our investments in real estate-related loans varies depending on the type of asset, interest rates and other factors. Our Manager has developed a well-defined exit strategy for each of our investments.
In addition, we conduct our operations so that neither we nor our subsidiaries will be considered an investment company under Section 3(a)(1)(A) of the 1940 Act, as neither we nor our 7 subsidiaries are engaged primarily nor do we hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities.
In addition, we conduct our operations so that neither we nor our subsidiaries will be considered an investment company under Section 3(a)(1)(A) of the 1940 Act, as neither we nor our subsidiaries are engaged primarily nor do we hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities.
Prior to joining The Greenwich Group, Mr. Cooperman worked in Chase Manhattan Bank’s Global Properties Group, where he was responsible for financial analysis and due diligence for the bank’s strategic real estate acquisitions and divestitures. Prior to that time, he was responsible for acquisitions and asset management for JGS, a Japanese conglomerate with global real estate holdings. Mr.
Prior to joining The Greenwich Group, Mr. Cooperman worked in Chase Manhattan Bank’s Global Properties Group, where he was responsible for financial analysis and due diligence for the bank’s strategic real estate acquisitions and divestitures. Prior to that time, he was responsible for acquisitions and asset 9 management for JGS, a Japanese conglomerate with global real estate holdings. Mr.
We may also acquire real estate properties encumbering the first mortgage loans through foreclosure or deed-in-lieu of foreclosure, may invest in joint ventures that own real estate properties and may directly acquire real estate properties. 4 We originate, structure and underwrite most, if not all, of our loans.
We may also acquire real estate properties encumbering the first mortgage loans through foreclosure or deed-in-lieu of foreclosure, may invest in joint ventures that own real estate properties and may directly acquire real estate properties. We originate, structure and underwrite most, if not all, of our loans.
We may, to the extent consistent with our qualification as a REIT, invest in our targeted assets directly or through joint ventures and acquire equity participations in the underlying collateral of some of such loans.
We may, to the extent consistent with our qualification as a REIT, invest in our targeted assets directly or through joint 3 ventures and acquire equity participations in the underlying collateral of some of such loans.
Cooperman holds a B.S. in Finance from the University of Colorado at Boulder. 10 Available Information We are subject to the information requirements of the Exchange Act. Therefore, we file periodic reports and other information with the SEC.
Cooperman holds a B.S. in Finance from the University of Colorado at Boulder. Available Information We are subject to the information requirements of the Exchange Act. Therefore, we file periodic reports and other information with the SEC.
Uppal served as the Chief Executive Officer of Terra Income Advisors and Terra BDC from April 2019 to October 2022 and as the Chairman of 9 the board of directors and President of Terra BDC from November 2019 to October 2022. Prior to joining Terra Capital Partners, Mr.
Uppal served as the Chief Executive Officer of Terra Income Advisors and Terra BDC from April 2019 to October 2022 and as the Chairman of the board of directors and President of Terra BDC from November 2019 to October 2022. Prior to joining Terra Capital Partners, Mr.
As part of our investment strategy, we: • target middle market loans of approximately $10 million to $50 million; • focus on the origination of new loans; 3 • focus on loans backed by properties in the United States; • invest primarily in floating rate rather than fixed rate loans, but our Manager reserves the right to make debt investments that bear interest at a fixed rate; • originate loans expected to be repaid within one to five years; • maximize current income; • lend to creditworthy borrowers; • construct a portfolio that is diversified by property type, geographic location, tenancy and borrower; • source off-market transactions; • hold loans until maturity unless, in our Manager’s judgment, market conditions warrant earlier disposition; and • invest in strategic non-real estate-related investments that align with our investment objectives and criteria.
We also elect to make strategic non-real estate-related investments that align with our investment objectives and criteria. 2 As part of our investment strategy, we: • target middle market loans of approximately $10 million to $50 million; • focus on the origination of new loans; • focus on loans backed by properties in the United States; • invest primarily in floating rate rather than fixed rate loans, but our Manager reserves the right to make debt investments that bear interest at a fixed rate; • originate loans expected to be repaid within one to five years; • maximize current income; • lend to creditworthy borrowers; • construct a portfolio that is diversified by property type, geographic location, tenancy and borrower; • source off-market transactions; • hold loans until maturity unless, in our Manager’s judgment, market conditions warrant earlier disposition; and • invest in strategic non-real estate-related investments that align with our investment objectives and criteria.
Mr. Cooperman has 18 years’ experience in the acquisition, financing, leasing and asset management of commercial real estate with an aggregate value of over $5 billion. Prior to the formation of Terra Capital Partners in 2001 and its commencement of operations in 2002, Mr. Cooperman handled mortgage and mezzanine placement activities for The Greenwich Group International, LLC.
Mr. Cooperman has over 25 years’ experience in the acquisition, financing, leasing and asset management of commercial real estate with an aggregate value of over $5 billion. Prior to the formation of Terra Capital Partners in 2001 and its commencement of operations in 2002, Mr. Cooperman handled mortgage and mezzanine placement activities for The Greenwich Group International, LLC.
As our access to capital and financial flexibility has grown, our use of participation agreements has diminished. As of December 31, 2024, we had obligations under one participation agreement with an aggregate outstanding principal amount of $18.0 million. For additional information concerning our indebtedness, see “ Item 7.
As our access to capital and financial flexibility has grown, our use of participation agreements has diminished. As of December 31, 2025, we had obligations under one participation agreement with an aggregate outstanding principal amount of $18.0 million. For additional information concerning our indebtedness, see “ Item 7.
As of December 31, 2024, we had one TRS, but the TRS had no activity and no current or deferred taxes. We will continue to file a return for the TRS until it is dissolved. 1940 Act Exclusion We are not registered as an investment company under the 1940 Act.
As of December 31, 2025, we had one TRS, but the TRS had no activity and no current or deferred taxes. We will continue to file a return for the TRS until it is dissolved. 1940 Act Exclusion We are not registered as an investment company under the 1940 Act.
Uppal has served as the Chairman of the Board of Directors since November 2021, one of our directors from February 2018 to November 2021 and as Chief Executive Officer for our company, our Manager, Terra Fund Advisors and Terra Capital Partners since December 2018 and as a director of RESOF since October 2020. Mr.
Uppal has served as the Chairman of the Board of Directors since November 2021, one of our directors from February 2018 to November 2021 and as Chief Executive Officer for our company, our Manager, Terra Fund Advisors and Terra Capital Partners since December 2018, a director of RESOF since October 2020 and a director of VS2 since December 2024. Mr.
As of December 31, 2024, we did not own any B-notes. Mezzanine Loans . These are loans secured by ownership interests in an entity that owns commercial real estate and that generally finance the acquisition, refinancing, rehabilitation or construction of commercial real estate.
As of December 31, 2025, we did not own any B-notes. Mezzanine Loans . These are loans secured by ownership interests in an entity that owns commercial real estate and that generally finance the acquisition, refinancing, rehabilitation or construction of commercial real estate.
We can generate additional revenues from these equity participations as a result of excess cash flows being distributed or as appreciated properties are sold or refinanced. As of December 31, 2024, we did not own any equity participations. Operating Real Estate and Real Estate Owned .
We can generate additional revenues from these equity participations as a result of excess cash flows being distributed or as appreciated properties are sold or refinanced. As of December 31, 2025, we did not own any equity participations. Operating Real Estate and Real Estate Owned .
Employees; Staffing; Human Capital We are supervised by our Board consisting of six directors. We have entered into a management agreement (“Management Agreement”) with our Manager pursuant to which certain services are provided by our Manager and paid for by us.
Employees; Staffing; Human Capital We are supervised by our Board consisting of five directors. We have entered into a management agreement (“Management Agreement”) with our Manager pursuant to which certain services are provided by our Manager and paid for by us.
These no-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of these no-action letters were issued more than twenty years ago.
These no-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of these no-action letters were issued more than 25 years ago.
He also served as (i) the Chief Financial Officer of Terra Capital Advisors, LLC, Terra Capital Advisors 2, LLC and Terra Income Advisors 2 since May 2012, September 2012 and October 2016; (ii) the Chief Operating Officer of Terra Capital Advisors, LLC, Terra Capital Advisors 2, LLC and Terra Capital Partners since July 2014; (iii) the Chief Operating Officer of Terra Income Advisors 2 since October 2016; (iv) the Chief Financial Officer of Fund 5 International, Terra International and Terra Fund 7 since June 2014, October 2016 and October 2016, respectively; (v) a director of RESOF since October 2020; and (vi) the Chief Financial Officer and Chief Operating Officer of Terra Income Advisors and the Chief Financial Officer, Treasurer and Secretary of Terra BDC from May 2013 to October 2022 and the Chief Operating Officer of Terra BDC from July 2014 to October 2022.
He also served as (i) the Chief Financial Officer of Terra Capital Advisors, LLC, Terra Capital Advisors 2, LLC and Terra Income Advisors 2 since May 2012, September 2012 and October 2016; (ii) the Chief Operating Officer of Terra Capital Advisors, LLC, Terra Capital Advisors 2, LLC and Terra Capital Partners since July 2014; (iii) the Chief Operating Officer of Terra Income Advisors 2 since October 2016; (iv) the Chief Financial Officer of Fund 5 International, Terra International and Terra Fund 7 since June 2014, October 2016 and October 2016, respectively; (v) a director of RESOF since October 2020; (vi) a director of VS2 since December 2024, and (vii) the Chief Financial Officer and Chief Operating Officer of Terra Income Advisors and the Chief Financial Officer, Treasurer and Secretary of Terra BDC from May 2013 to October 2022 and the Chief Operating Officer of Terra BDC from July 2014 to October 2022.
We cannot provide any assurance that any alternative liquidity transaction will be available to us or, if available, that we will pursue or be successful in completing any such alternative liquidity transaction.
We cannot provide any assurance that any alternative liquidity transaction will be available or, if available, that we will pursue or be successful in completing any such alternative liquidity transaction.
From time to time, we may acquire operating real estate properties that meet our investment criteria. As well, we may assume control of properties acquired in connection with foreclosures or deed in lieu of foreclosure. As of December 31, 2024, we owned eight industrial buildings purchased in 2023.
From time to time, we may acquire operating real estate properties that meet our investment criteria. As well, we may assume control of properties acquired in connection with foreclosures or deed in lieu of foreclosure. As of December 31, 2025, we owned four industrial buildings purchased in 2023.
As of December 31, 2024, our portfolio included underlying properties located in 13 markets, across nine states and includes property types such as multifamily housing, student housing, commercial offices, medical offices, mixed-use and infill properties. The profile of these properties ranges from stabilized and value-added properties to pre-development and construction.
As of December 31, 2025, our portfolio included underlying properties located in nine markets, across seven states and includes property types such as multifamily housing, student housing, commercial offices, retail, mixed-use and infill properties. The profile of these properties ranges from stabilized and value-added properties to pre-development and construction.
Stern School of Business at New York University. Daniel J. Cooperman has served as Chief Originations Officer of our company, our Manager, and Terra Fund Advisors since January 2016, September 2017 and September 2017, respectively. Mr.
Stern School of Business at New York University. Daniel J. Cooperman has served as Chief Originations Officer of our company, our Manager, and Terra Fund Advisors since January 2016, September 2017 and September 2017, respectively, and as a director of VS2 since December 2024. Mr.
As of December 31, 2024, we owned $30.6 million in non-real estate-related investments, which include equity interests in non-real estate operating companies across various industries, including life insurance and equipment financing. Non-real estate-related investments may take various forms, including preferred and common equity interests in private companies and other financial assets.
As of December 31, 2025, we owned $26.2 million in non-real estate-related investments, which include equity interests in non-real estate operating companies across various industries, including life insurance and equipment financing. Non-real estate-related investments may take various forms, including preferred and common equity interests in private companies and other financial assets.
The real estate and related lease intangible assets and liabilities had a net carrying value of $125.3 million, and the mortgage loans payable encumbering the industrial buildings had an outstanding principal amount of $74.4 million. Equity Interest in Unconsolidated Investments and Joint Ventures.
The real estate and related lease intangible assets and liabilities had a net carrying value of $47.4 million, and the mortgage loans payable encumbering the industrial buildings had an outstanding principal amount of $20.7 million. Equity Interest in Unconsolidated Investments and Joint Ventures.
We also owned beneficial equity interests in five joint ventures that invest in real estate properties and opportunistic debt and equity securities, and a preferred equity investment with residual profit sharing from sale of the underlying property. The equity interests had a total carrying value o f $78.3 million as of December 31, 2024 . Other Real Estate-Related Securities .
We also owned beneficial equity interests in five joint ventures that invest in real estate properties and opportunistic debt and equity securities, and a preferred equity investment with residual profit sharing from sale of the underlying property. The equity interests had a total carrying value of $70.0 million as of December 31, 2025. Other Real Estate-Related Securities .
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.
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. merged with and into Terra Income Fund 6, 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 value of the properties underlying this capital was approximately $12.8 billion based on appraised values as of the closing dates of each financing.
The value of the properties underlying this capital was approximately $14.9 billion based on appraised values as of the closing dates of each financing.
We deploy moderate amounts of leverage as part of our operating strategy, which currently consists of unsecured notes payable, borrowings under first mortgage financings, a revolving line of credit, repurchase agreements and a term loan.
We deploy moderate amounts of leverage as part of our operating strategy, which currently consists of secured and unsecured notes payable, borrowings under first mortgage financings, a term loan, and secured borrowings.
Generally, we invest in mezzanine loans with last dollar loan-to-value ratios ranging from 60% to 85%. As of December 31, 2024, we owned two mezzanine loans with a total net principal amount of $15.0 million, which constituted 5.0% of our net loan investment portfolio. Preferred Equity Investments .
Generally, we invest in mezzanine loans with last dollar loan-to-value ratios ranging from 60% to 85%. As of December 31, 2025, we owned two mezzanine loans with a total net principal amount of $24.7 million, which constituted 12.8% of our net loan investment portfolio. Preferred Equity Investments .
However, such loans typically generate lower returns than subordinate debt such as mezzanine loans, B-notes, or preferred equity investments. As of December 31, 2024, we owned 8 first mortgage loans with a total net principal amount of $208.0 million, which constituted 69.5% of our net loan investment portfolio.
However, such loans typically generate lower returns than subordinate debt such as mezzanine loans, B-notes, or preferred equity investments. As of December 31, 2025, we owned three first mortgage loans with a total net principal amount of $86.5 million, which constituted 44.9% of our net loan investment portfolio.
One of the potential future liquidity transactions that we continue to evaluate is a “direct listing” of the Class A Common Stock on a national securities exchange (i.e., a listing not involving a concurrent public offering of newly issued shares).
One of the potential future liquidity transactions that we continue to evaluate is a “direct listing” of our Class A Common stock, $0.01 par value per share (“Class A Common Stock”), on a national securities exchange (i.e., a listing not involving a concurrent public offering of newly issued shares).
We may, to the extent consistent with our qualification as a REIT, invest in our targeted assets directly or through joint ventures. As of December 31, 2024, we owned equity interest in a limited partnership that invests in performing and non-performing mortgages, loans, mezzanines, B-notes and other credit instru ments supported by underlying com mercial real estate assets.
We may, to the extent consistent with our qualification as a REIT, invest in our targeted assets directly or through joint ventures. As of December 31, 2025, we owned equity interest in two limited partnerships that invest in performing and non-performing mortgages, loans, mezzanines, B-notes and other credit instruments supported by underlying commercial real estate assets.
Equity participation can also take the form of a conversion feature, permitting the lender to convert a loan or preferred equity investment into equity in the borrower at a negotiated premium to the current net asset value of the borrower.
Equity participations can be paid in the form of additional interest, exit fees or warrants in the borrower. Equity participation can also take the form of a conversion feature, permitting the lender to convert a loan or preferred equity investment into equity in the borrower at a negotiated premium to the current net asset value of the borrower.
As of December 31, 2024, we used $208.0 million of senior mortgage loans as collateral for $123.2 million of borrowings under secured financing agreements. Subordinated Mortgage Loans (B-notes) . B-notes include structurally subordinated mortgage loans and junior participations in first mortgage loans or participations in these types of assets.
As of December 31, 2025, we used $63.6 million of senior mortgage loans as collateral for $31.3 million of borrowings under secured financing agreements. Subordinated Mortgage Loans (B-notes) . B-notes include structurally subordinated mortgage loans and junior participations in first mortgage loans or participations in these types of assets.
In connection with our loan investments, we may pursue equity participation opportunities, or interests in the projects being financed, in instances when we believe that the risk-reward characteristics of the loan merit additional upside participation because of the possibility of appreciation in value of the underlying properties securing the loan. 5 Equity participations can be paid in the form of additional interest, exit fees or warrants in the borrower.
In connection with our loan investments, we may pursue equity participation opportunities, or interests in the projects being financed, in instances when we believe that the risk-reward characteristics of the loan merit additional upside participation because of the possibility of appreciation in value of the underlying properties securing the loan.
We may invest in other real estate-related securities, which may include marketable securities and securitizations, so long as such securities do not constitute more than 15% of our assets. As of December 31, 2024, we owned $1.0 million in other real estate-related securities.
We may invest in other real estate-related securities, which may include marketable securities and securitizations, so long as such securities do not constitute more than 15% of our assets. As of December 31, 2025, we did not own any other real estate-related securities.
The financings provided by all vehicles managed by Terra Capital Partners from January 2004 through December 31, 2024 have been secured by approximately 13.9 million square feet of office properties, 3.7 million square feet of retail properties, 7.2 million square feet of industrial properties, 5,215 hotel rooms and 31,898 apartment units.
The financings provided by all vehicles managed by Terra Capital Partners from January 2004 through December 31, 2025 have been secured by approximately 13.9 million square feet of office properties, 3.8 million square feet of retail properties, 11.1 million square feet of industrial properties, 5,559 hotel rooms and 33,796 apartment units.
Uppal 41 Chairman of the Board of Directors, Chief Executive Officer and Chief Investment Officer Sarah Schwarzschild 44 Chief Operating Officer Gregory M. Pinkus 60 Chief Financial Officer, Treasurer and Secretary Daniel J. Cooperman 50 Chief Originations Officer Vikram S.
Uppal 42 Chairman of the Board of Directors, Chief Executive Officer and Chief Investment Officer Sarah Schwarzschild 45 Chief Operating Officer Gregory M. Pinkus 61 Chief Financial Officer, Treasurer and Secretary Daniel J. Cooperman 51 Chief Originations Officer 8 Vikram S.
In addition, we intend to match our use of floating rate leverage with floating rate investments. As of December 31, 2024, we had outstanding indebtedness, consisting of unsecured notes payable of $123.5 million and secured financing of $207.6 million.
In addition, we intend to match our use of floating rate leverage with floating rate investments. As of December 31, 2025, we had outstanding indebtedness, consisting of unsecured notes payable of $118.8 million and secured financing of $62.0 million.
As of December 31, 2024, we owned three preferred equity investments with a total net principal amount of $76.2 million, which constituted 25.5% of our net loan investment portfolio. Equity Participations .
As of December 31, 2025, we owned 4 four preferred equity investments with a total net principal amount of $81.3 million, which constituted 42.2% of our net loan investment portfolio. Equity Participations .
We intend to make any such dispositions in a manner consistent with our qualification as a REIT and our desire to avoid being subject to the “prohibited transaction” penalty tax. Operating and Regulatory Structure REIT Qualification We elected to be taxed as a REIT under the Code commencing with our taxable year ended December 31, 2016.
We intend to make any such dispositions in a manner consistent with our qualification as a REIT and our desire to avoid being subject to the “prohibited transaction” penalty tax.
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. We also elect to make strategic non-real estate-related investments that align with our investment objectives and criteria.
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.
Following the REIT Formation Transaction, Terra Fund 5 contributed the consolidated portfolio of net assets of the Terra Funds to us in exchange for all of the shares of common stock of our company. On March 1, 2020, Terra Property Trust 2 merged with and into our company, and we continued as the surviving corporation (the “Merger”).
Following the REIT Formation Transaction, Terra Fund 5 contributed the consolidated portfolio of net assets of the Terra Funds to us in exchange for all of the shares of common stock of our company.
We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date on which we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period, and (iv) the end of the year in which the five year anniversary of our initial public offering of our common stock occurs. 8 Competition We compete with other REITs, numerous regional and community banks, specialty finance companies, savings and loan associations and other entities, and we expect that others may be organized in the future.
We have irrevocably elected not to take advantage of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. 7 We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (ii) the date on which we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period, and (iv) the end of the year in which the five year anniversary of our initial public offering of our common stock occurs.
These non-traded REIT provisions will spring into effect and become operative if we ultimately decide to register and sell shares in a non-traded REIT format. 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.
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.
In addition, on March 2, 2020, we issued 2,457,684.59 shares of our common stock to Terra Offshore REIT in exchange for the settlement of $32.1 million of participation interests in loans also held by us, $8.6 million in cash and other net working capital.
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.
Potential Liquidity Transactions As previously disclosed, we continue to explore alternative liquidity transactions on an opportunistic basis to maximize stockholder value.
For additional information regarding the exchange offers and consent solicitation, including the terms and conditions thereof, please refer to the Registration Statement, including the prospectus contained therein. As previously disclosed, we continue to explore alternative liquidity transactions on an opportunistic basis to maximize stockholder value.
Removed
In connection with the Merger, we issued 2,116,785.76 shares of our common stock to Terra Fund 7, the sole stockholder of Terra Property Trust 2, in exchange for the settlement of $17.7 million of participation interests in loans held by us, cash of $16.9 million and other working capital.
Added
On February 13, 2026, we filed a registration statement on Form S-4 (as amended on March 12, 2026 and as may be amended from time to time, the “Registration Statement”) with the Securities and Exchange Commission in connection with registered exchange offers to exchange any and all of our outstanding 6.00% unsecured senior notes due 2026 (the “6.00% Senior Notes Due 2026”) and Terra LLC’s 7.00% unsecured senior notes due 2026 for newly issued Senior Secured Notes due 2029 by the Company.
Removed
Subsequent to the Merger, Terra Fund 5 and Terra Fund 7 contributed their shares of our common stock to Terra JV in exchange for ownership interest in Terra JV.
Added
In connection with the exchange offer relating to our 6.00% Senior Notes Due 2026, we are also soliciting consents to amend the indenture governing such notes to, among other things, eliminate substantially all of the restrictive covenants therein, eliminate certain events of default terms and conditions and eliminate provisions related to our reporting obligations thereunder.
Removed
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”).
Added
The exchange offers and consent solicitation were scheduled to expire on March 16, 2026, unless extended.
Removed
On the Closing Date, we filed with the SDAT our Articles of Amendment to the Articles of Amendment and Restatement (the “Charter Amendment”).
Added
On March 12, 2026, we amended the Registration Statement to reduce the interest rate on the newly issued senior secured notes offered in the exchange offer from 9.75% to 7.00% and to extend the expiration date of the exchange offers and consent solicitation to March 26, 2026.
Removed
Pursuant to the Charter Amendment, (i) the authorized shares of our stock which we have authority to issue were increased 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, $0.01 par value per share (“Preferred Stock”), and (ii) each share of our common stock issued and outstanding immediately prior to the Effective Time was automatically changed into one issued and outstanding share of Class B Common Stock.
Added
Operating and Regulatory Structure REIT Qualification We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”) commencing with our taxable year ended December 31, 2016.
Removed
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 our common stock, except with respect to conversion.
Added
Competition We compete with other REITs, numerous regional and community banks, specialty finance companies, savings and loan associations and other entities, and we expect that others may be organized in the future.
Removed
For additional information on our Class A Common Stock, please see the “ Potential Liquidity Transactions ” section below.
Removed
Distribution of Class B Common Stock by Terra Fund 5 Prior to undertaking the REIT Formation Transaction, the Terra Funds distributed a consent solicitation memorandum disclosing the details of the proposed transactions and received the requisite consent of investors in each of the Terra Funds to engage in the REIT Formation Transaction.
Removed
The consent solicitation memorandum disclosed that Terra Fund 5 could in the future make a distribution-in-kind to its members of shares of our company, rather than a cash distribution. The limited liability company agreement of Terra Fund 5 provides that the term of Terra Fund 5 expired on December 31, 2023.
Removed
On December 20, 2023, Terra Fund 5 announced that effective December 29, 2023 (the “Distribution Date”), Terra Fund 5 would distribute all of its shares of Class B Common Stock to its members as part of the winding up of Terra Fund 5.
Removed
On the Distribution Date, each member of Terra Fund 5 received 2,252.02 shares of Class B Common Stock for each unit of membership interest in Terra Fund 5 held by such member.
Removed
Because Terra Fund 5 previously owned its interests in the shares of Class B Common Stock indirectly through its ownership of interests in Terra JV, prior to the Distribution Date, Terra JV first distributed the shares of Class B Common Stock to Terra Fund 5, and Terra Fund 5 then distributed those shares to its members on the Distribution Date.
Removed
On February 8, 2024, each of Terra Fund 5 and Terra JV were dissolved. As of December 31, 2024, Terra Fund 7 and Terra Offshore REIT held approximately 8.7% and 10.1%, respectively, of our issued and outstanding Class B Common Stock.
Removed
To this end, as previously disclosed, we amended our articles of amendment and restatement on December 1, 2023 (the “A&R Articles”), to provide our board of directors (our “Board”) with greater flexibility to pursue a direct listing.
Removed
In connection with a listing of shares of Class A Common Stock on a national securities exchange, the outstanding shares of Class B Common Stock will be convertible on a one-for-one basis into listed shares of Class A Common Stock, subject to certain conversion terms and holding periods.
Removed
Currently, there are no outstanding shares of Class A Common Stock. 2 The A&R Articles also incorporate the provisions generally required by state regulators in order to become a non-traded REIT and publicly sell shares of our stock not listed on an exchange.
Removed
We have irrevocably elected not to take advantage of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

95 edited+35 added−16 removed338 unchanged
Biggest changeThe inability to consummate securitizations of our portfolio to finance our real estate-related loans on a long-term basis could require us to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or price, which could have a material adverse effect on our results of operations, financial condition and cash flows.
Biggest changeWe are also subject to the risk that we are not able to obtain short-term financing arrangements or are not able to renew any short-term financing arrangements after they expire should we find it necessary to extend such short-term financing arrangements to allow more time to obtain the necessary eligible assets for a long-term financing. 27 The inability to consummate securitizations of our portfolio to finance our real estate-related loans on a long-term basis could require us to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or price, which could have a material adverse effect on our results of operations, financial condition and cash flows.
In California, pursuant to an existing state law commonly referred to as Proposition 13, properties are reassessed to market value only at the time of change in ownership or completion of construction, and thereafter, annual property reassessments are limited to 2% of previously assessed values. As a result, Proposition 13 generally results in significant below-market assessed values over time.
In California, pursuant to an existing state law commonly referred to as Proposition 13, properties are reassessed to market value only at the time of change in ownership or completion of construction, and thereafter, annual property reassessments are generally limited to 2% of previously assessed values. As a result, Proposition 13 generally results in significant below-market assessed values over time.
Thus, compliance with the REIT requirements may hinder our 32 ability to make, and, in certain cases, maintain ownership of certain attractive investments. These actions could have the effect of reducing our income, which could have a material adverse effect on our results of operations, financial condition and cash flows.
Thus, compliance with the REIT requirements may hinder our ability to make, and, in certain cases, maintain ownership of certain attractive investments. These actions could have the effect 32 of reducing our income, which could have a material adverse effect on our results of operations, financial condition and cash flows.
Net operating income of an income-producing property can be adversely affected by, among other things: • tenant mix; • success of tenant businesses; • property management decisions; • property location, condition and design; • competition from comparable types of properties; • changes in national, regional or local economic conditions and/or specific industry segments; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates and other operating expenses; • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; • pandemics or other calamities that may affect tenants’ ability to pay their rent; and • acts of God, terrorism, social and political unrest, armed conflict, geopolitical events and civil disturbances.
Net operating income of an income-producing property can be adversely affected by, among other things: • tenant mix; • success of tenant businesses; • property management decisions; • property location, condition and design; • competition from comparable types of properties; • changes in national, regional or local economic conditions and/or specific industry segments; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates and other operating expenses; • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; 16 • pandemics or other calamities that may affect tenants’ ability to pay their rent; and • acts of God, terrorism, social and political unrest, armed conflict, geopolitical events and civil disturbances.
Some of the factors that could negatively affect the fair value of our common stock include: • our expected operating results and our ability to make distributions to our stockholders in the future; • volatility in our industry, the performance of the real estate-related loans we target, interest rates and spreads, the debt or equity markets, the general economy or the real estate market specifically, whether the result of market events or otherwise; • the availability of financing on acceptable terms or at all; • events or circumstances which undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters or threatened or actual armed conflicts; • the availability of attractive risk-adjusted investment opportunities in real estate-related loans that satisfy our objectives and strategies; • the degree and nature of our competition; • changes in personnel of our Manager and lack of availability of qualified personnel; • unanticipated costs, delays and other difficulties in executing our long-term growth strategy; • the timing of cash flows, if any, from our investments due to the lack of liquidity of loans relative to more commonly traded securities; • an increase in interest rates; • the performance, financial condition and liquidity of our borrowers; and 11 • legislative and regulatory changes (including changes to laws governing the taxation of REITs or the exclusion or exemption from registration as an investment company under the 1940 Act).
Some of the factors that could negatively affect the fair value of our common stock include: • our expected operating results and our ability to make distributions to our stockholders in the future; • volatility in our industry, the performance of the real estate-related loans we target, interest rates and spreads, the debt or equity markets, the general economy or the real estate market specifically, whether the result of market events or otherwise; • the availability of financing on acceptable terms or at all; • events or circumstances which undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters or threatened or actual armed conflicts; • the availability of attractive risk-adjusted investment opportunities in real estate-related loans that satisfy our objectives and strategies; • the degree and nature of our competition; • changes in personnel of our Manager and lack of availability of qualified personnel; • unanticipated costs, delays and other difficulties in executing our long-term growth strategy; • the timing of cash flows, if any, from our investments due to the lack of liquidity of loans relative to more commonly traded securities; • an increase in interest rates; 10 • the performance, financial condition and liquidity of our borrowers; and • legislative and regulatory changes (including changes to laws governing the taxation of REITs or the exclusion or exemption from registration as an investment company under the 1940 Act).
To the extent that our portfolio is concentrated in any region, or by type of property, downturns relating generally to such region, type of borrower or security may result in defaults on a number of our assets within a short time period, which may reduce our net income, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.
To the extent that our portfolio is concentrated in any region, or by type of property, downturns relating generally to such region, type of borrower or security may result in defaults on a number of our assets within a short time period, which may 17 reduce our net income, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.
Under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company.” In addition, we are also a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act.
Under the JOBS Act, our independent registered public 22 accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company.” In addition, we are also a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, security or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.
We have in the past and may in the future seek to grow our business by acquiring other businesses that we believe will complement or augment our existing businesses. For example, we completed the BDC Merger in October 2022. Acquisition 20 targets may not have a history of synergistic business operations, practices or, if applicable, investment criteria and strategies.
We have in the past and may in the future seek to grow our business by acquiring other businesses that we believe will complement or augment our existing businesses. For example, we completed the BDC Merger in October 2022. Acquisition targets may not have a history of synergistic business operations, practices or, if applicable, investment criteria and strategies.
If we or our borrowers experience a loss, due to such natural disasters or other relevant factors, that is uninsured or that exceeds policy limits, we could incur significant costs, which could have a material adverse effect on our results of operations, financial condition and cash flows. Maintenance of our 1940 Act exclusion imposes limits on our operations.
If we or our borrowers experience a loss, due to such natural disasters or other relevant factors, that is uninsured or that exceeds policy limits, we could incur significant costs, which could have a material adverse effect on our results of operations, financial condition and cash flows. 23 Maintenance of our 1940 Act exclusion imposes limits on our operations.
Such periods of increased turmoil and volatility may adversely impact liquidity in the financial markets and make financings less attractive or, in some cases, 35 unavailable. If our financing counterparties become capital constrained, tighten their lending standards or become insolvent, they may be unable or unwilling to fulfill their commitments to us.
Such periods of increased turmoil and volatility may adversely impact liquidity in the financial markets and make financings less attractive or, in some cases, unavailable. If our financing counterparties become capital constrained, tighten their lending standards or become insolvent, they may be unable or unwilling to fulfill their commitments to us.
Further, the SEC has recently adopted rules requiring public companies to disclose material cybersecurity incidents that they experience on a Current Report on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy and governance.
Further, the SEC has adopted rules requiring public companies to disclose material cybersecurity incidents that they experience on a Current Report on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy and governance.
For example, by relying on incorrect models and data, especially valuation models, our Manager may be induced to buy certain targeted assets at prices that are too high, to sell certain other 15 assets at prices that are too low or to miss favorable opportunities altogether. Similarly, any hedging based on faulty models and data may prove to be unsuccessful.
For example, by relying on incorrect models and data, especially valuation models, our Manager may be induced to buy certain targeted assets at prices that are too high, to sell certain other assets at prices that are too low or to miss favorable opportunities altogether. Similarly, any hedging based on faulty models and data may prove to be unsuccessful.
Also, as a result of this competition, desirable investments in our targeted assets 16 may be limited in the future and we may not be able to take advantage of attractive investment opportunities from time to time, as we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objectives.
Also, as a result of this competition, desirable investments in our targeted assets may be limited in the future and we may not be able to take advantage of attractive investment opportunities from time to time, as we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objectives.
Foreclosure can be an expensive and lengthy process, and foreclosing on certain properties where we directly hold the mortgage loan and the borrower’s default under the mortgage loan is continuing could result in actions that could be costly to 17 our operations, in addition to having a substantial negative effect on our anticipated return on the foreclosed mortgage loan.
Foreclosure can be an expensive and lengthy process, and foreclosing on certain properties where we directly hold the mortgage loan and the borrower’s default under the mortgage loan is continuing could result in actions that could be costly to our operations, in addition to having a substantial negative effect on our anticipated return on the foreclosed mortgage loan.
Because key employees of our Manager are given broad discretion to determine when to consummate a transaction, we will rely on these key persons to dictate the level of our business activity. Fees paid to our Manager reduce funds available for payment of distributions to our stockholders and principal and interest payments on our outstanding indebtedness.
Because key employees of our Manager are given broad discretion to determine when to consummate a transaction, we will rely on these key persons to dictate 26 the level of our business activity. Fees paid to our Manager reduce funds available for payment of distributions to our stockholders and principal and interest payments on our outstanding indebtedness.
Cybersecurity risk and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of the security, confidentiality, or integrity of our company, employee, customer or third-party confidential information and/or damage to our reputation or business relationships, any of which could negatively impact our financial results.
Cybersecurity risk and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of the security, confidentiality, integrity, or availability of our company, employee, customer or third-party confidential information and/or damage to our reputation or business relationships, any of which could negatively impact our financial results.
The B-notes in which we may invest may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us. As part of our whole loan origination platform, we may retain from whole loans we originate or acquire, subordinate interests referred to as B-notes.
The B-notes in which we may invest from time to time may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us. As part of our whole loan origination platform, we may retain from whole loans we originate or acquire, subordinate interests referred to as B-notes.
Subject to maintaining our qualification as a REIT, part of our strategy may involve entering into hedging transactions that could require us to fund cash payments in certain circumstances (such as the early termination of a hedging instrument caused by an event of default or other early termination event).
Subject to maintaining our qualification as a REIT, part of our strategy may involve entering into hedging transactions that could require us to fund cash payments in certain circumstances (such as the early termination of a hedging instrument caused 29 by an event of default or other early termination event).
We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date on which we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the preceding three-year period, and (iv) the end of the year in which the five-year anniversary of the initial public offering of our common stock occurs in the future, if applicable.
We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (ii) the date on which we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the preceding three-year period, and (iv) the end of the year in which the five-year anniversary of the initial public offering of our common stock occurs in the future, if applicable.
After we announce the expected characterization of distributions we have paid, the actual characterization (and, therefore, the rate at which holders of our common stock are taxed on the distributions they have received) could vary from our expectations, including due to errors, changes made in the course of preparing our corporate tax returns, or changes made in response to an audit by the Internal Revenue Service (the “IRS”), with the result that holders of our common stock could incur greater income tax liabilities than expected. 13 Investing in our common stock may involve a high degree of risk and may result in loss of capital invested in us.
After we announce the expected characterization of distributions we have paid, the actual characterization (and, therefore, the rate at which holders of our common stock are taxed on the distributions they have received) could vary from our expectations, including due to errors, changes made in the course of preparing our corporate tax returns, or changes made in response to an audit by the Internal Revenue Service (the “IRS”), with the result that holders of our common stock could incur greater income tax liabilities than expected. 12 Investing in our common stock may involve a high degree of risk and may result in loss of capital invested in us.
Rating agencies may assign a lower than expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our loans and CMBS assets in the future. In addition, we may originate or acquire assets with no rating or with below investment grade ratings.
Rating agencies may assign a lower than expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our loans and CMBS assets in the future. In addition, we may originate or acquire assets with no 18 rating or with below investment grade ratings.
Our ability to fund these obligations will depend on the liquidity of our assets and access 29 to capital at the time. The need to fund these obligations could have a material adverse effect on our results of operations, financial condition and cash flows.
Our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time. The need to fund these obligations could have a material adverse effect on our results of operations, financial condition and cash flows.
The value of the “investment 24 securities” held by an issuer must be less than 40% of the value of such issuer’s total assets on an unconsolidated basis (exclusive of U.S. government securities and cash items).
The value of the “investment securities” held by an issuer must be less than 40% of the value of such issuer’s total assets on an unconsolidated basis (exclusive of U.S. government securities and cash items).
The U.S. and global financial and banking sectors have experienced periods of increased turmoil and volatility in the recent past and may experience similar periods of disruption in the future due to factors beyond our control.
The U.S. and 35 global financial and banking sectors have experienced periods of increased turmoil and volatility in the recent past and may experience similar periods of disruption in the future due to factors beyond our control.
As a result, our Manager and its affiliates (for the period that such shares continue to be held by Terra Fund 7 and Terra Offshore REIT and not distributed to 12 their respective equity owners), subject to a voting agreement as described below, hold significant voting power over matters submitted to our stockholders for approval, including: • the election and removal of directors; and • the approval of any merger, consolidation or sale of all or substantially all of our assets.
As a result, 11 our Manager and its affiliates (for the period that such shares continue to be held by Terra Fund 7 and Terra Offshore REIT and not distributed to their respective equity owners), subject to a voting agreement as described below, hold significant voting power over matters submitted to our stockholders for approval, including: • the election and removal of directors; and • the approval of any merger, consolidation or sale of all or substantially all of our assets.
In the event models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential risks.
In the event models and data prove to be incorrect, misleading or incomplete, any 14 decisions made in reliance thereon expose us to potential risks.
Further, from time to time and in the ordinary course of business, our Manager may make exceptions to our predetermined loan underwriting guidelines. Loans originated with exceptions may result in a higher number of delinquencies and defaults, which could have a material and adverse effect on our results of operations, financial condition and cash flows.
Further, from time to time and in the ordinary course of business, our Manager may make exceptions to our predetermined loan underwriting guidelines. Loans originated with exceptions have resulted and may continue to result in a higher number of delinquencies and defaults, which could have a material and adverse effect on our results of operations, financial condition and cash flows.
The base management fees, incentive distributions or other amounts that would be payable to our Manager in the case of any such transaction are expected to be market-based fees determined in the case of any initial public offering by discussions between our Manager and the underwriters involved in the initial public offering.
The recurring management fees, incentive distributions or other amounts that would be payable to our Manager in the case of any such transaction are expected to be market-based fees determined in the case of any initial public offering by discussions between our Manager and the underwriters involved in the initial public offering.
There can be no assurance, however, that we will be able to comply with the 20% limitation discussed above or to avoid application of the 100% excise tax discussed above. Legislative, regulatory or administrative changes could adversely affect us.
There can be no assurance, however, that we will be able to comply with the TRS limitation discussed above or to avoid application of the 100% excise tax discussed above. Legislative, regulatory or administrative changes could adversely affect us.
For the years ended December 31, 2024 and 2023, our Board declared total cash distributions of $0.76 and $0.76 per share, respectively, which were paid monthly. We continue to prudently evaluate our liquidity and review the rate of future distributions in light of our financial condition and the applicable minimum distribution requirements under applicable REIT tax laws and regulations.
For the years ended December 31, 2025 and 2024, our Board declared total cash distributions of $0.48 and $0.76 per share, respectively, which were paid monthly. We continue to prudently evaluate our liquidity and review the rate of future distributions in light of our financial condition and the applicable minimum distribution requirements under applicable REIT tax laws and regulations.
Various bankruptcy legislation has been proposed that, among other provisions, could allow judges to modify the terms of residential mortgages in bankruptcy proceedings, could hinder the ability of the servicer to foreclose promptly on defaulted mortgage loans or permit limited assignee liability for certain violations in the mortgage loan origination process, any or all of which could adversely affect our business or result in us being held responsible for violations in the mortgage loan origination process even where we were not the originator of the loan.
Various bankruptcy legislation may be proposed that, among other provisions, could allow judges to modify the terms of residential mortgages in bankruptcy proceedings, could hinder the ability of the servicer to foreclose promptly on defaulted mortgage loans or permit limited assignee liability for certain violations in the mortgage loan origination process, any or all of which could adversely affect our business or result in us being held responsible for violations in the mortgage loan origination process even where we were not the originator of the loan.
These no-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of these no-action letters were issued more than 20 years ago.
These no-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of these no-action letters were issued more than 25 years ago.
Even if investment opportunities are available, 14 there can be no assurance that the due diligence processes of our Manager will uncover all relevant facts or that any particular investment will be successful.
Even if investment opportunities are available, 13 there can be no assurance that the due diligence processes of our Manager will uncover all relevant facts or that any particular investment will be successful.
Because the fees that we pay to our Manager are based in part on the level of our business activity, it is not possible to predict the amounts of compensation that we will be required to pay our Manager.
We cannot predict the amounts of compensation to be paid to the Manager. Because the fees that we pay to our Manager are based in part on the level of our business activity, it is not possible to predict the amounts of compensation that we will be required to pay our Manager.
We may use additional credit facilities, senior notes (including both a reopening of the unsecured notes or the issuance of a new series), term loans, repurchase agreements, first mortgage loans or other borrowings to finance the origination and/or structuring of real estate-related loans until a sufficient quantity of eligible assets has been accumulated, at which time we may decide to refinance these short-term facilities or repurchase agreements through the securitization market which could include the creation of CMBS, collateralized debt obligations (“CDOs”), or the private placement of loan participations or other long-term financing.
We may use additional credit facilities, senior notes, term loans, repurchase agreements, first mortgage loans or other borrowings to finance the origination and/or structuring of real estate-related loans until a sufficient quantity of eligible assets has been accumulated, at which time we may decide to refinance these short-term facilities or repurchase agreements through the securitization market which could include the creation of CMBS, collateralized debt obligations (“CDOs”), or the private placement of loan participations or other long-term financing.
In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk of loss of principal. 19 Our investments in B-notes are generally subject to losses.
In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk of loss of principal. Investments we may make in B-notes are generally subject to losses.
In addition, in general, no more than 5% of the value of our total assets (other than government securities, TRS securities and securities that are qualifying real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more TRSs, and no more than 25% of the value of our assets can consist of debt instruments issued by publicly offered REITs that are not otherwise secured by real property.
In addition, in general, no more than 5% of the value of our total assets (other than government securities, TRS securities and securities that are qualifying real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our assets can consist of debt instruments issued by publicly offered REITs that are not otherwise secured by real property.
Our failure to obtain or maintain licenses will restrict our options and ability to engage in desired activities, and could subject us to fines, suspensions, terminations and various other adverse actions if it is determined that we have engaged without the requisite approvals or licenses in activities that required an approval or license, which could have a material adverse effect on our results of operations, financial condition and cash flows.
Our failure to obtain or maintain licenses will restrict our options and ability to engage in desired activities, and could subject us to fines, suspensions, terminations and various other adverse actions if it is determined that we have engaged without the requisite approvals or licenses in activities that required an approval or license, which could have a material adverse effect on our results of operations, financial condition and cash flows. 21 The impact of financial reform legislation and legislation promulgated thereunder on us is uncertain.
In recent years, financial markets were affected by significant uncertainty relating to the stability of U.S. fiscal and political policy. On August 1, 2023, Fitch Ratings Inc. downgraded the U.S. government’s sovereign credit rating to AA+, down one notch from its highest rating of AAA, citing the country’s growing debt obligations, deterioration in governance and political polarization.
In recent years, financial markets have been affected by significant uncertainty relating to the stability of U.S. fiscal and political policy. For example, on August 1, 2023, Fitch Ratings Inc. downgraded the U.S. government’s sovereign credit rating to AA+, down one notch from its highest rating of AAA, citing the country’s growing debt obligations and political polarization.
If property securing or underlying loans become real estate owned as a result of foreclosure, we bear the risk of not being able to sell the property and recovering our investment and of being exposed to the risks attendant to the ownership of real property.
If property securing or underlying loans become real estate owned as a result of foreclosure, we bear the risk of not being able to sell the property and recovering our investment at all or on a timely basis, and of being exposed to the risks attendant to the ownership of real property.
Some statements in this section constitute forward-looking statements. See “Forward-Looking Statements.” Risks Related to Owning Our Common Stock There is no public market for our common stock and a market may never develop, which could cause our common stock to trade at a discount and make it difficult for holders of our common stock to sell their shares.
See “Forward-Looking Statements.” Risks Related to Owning Our Common Stock There is no public market for our common stock and a market may never develop, which could cause our common stock to trade at a discount and make it difficult for holders of our common stock to sell their shares.
The U.S. federal income tax laws and regulations applicable to REITs and holders of their securities are subject to ongoing review and may be amended at any time, potentially with retroactive effect. The interpretation and administration of these laws are also subject to change.
Changes in U.S. tax laws could adversely impact us. The U.S. federal income tax laws and regulations applicable to REITs and holders of their securities are subject to ongoing review and may be amended at any time, potentially with retroactive effect. The interpretation and administration of these laws are also subject to change.
Our governing documents contain no limit on the amount of debt we may incur, and, subject to compliance with financial covenants under our borrowings, including under the term loan, the unsecured notes, the repurchase agreement and the revolving line of credit, we may significantly increase the amount of leverage we utilize at any time without approval of 27 our stockholders.
Our governing documents contain no limit on the amount of debt we may incur, and, subject to compliance with financial covenants under our borrowings, including under the term loan, the unsecured notes and the secured borrowings, we may significantly increase the amount of leverage we utilize at any time without approval of our stockholders.
We may, in certain cases, provide a defaulting borrower with concessions that we would not typically offer. These modifications may include interest rate reductions, principal adjustments, term extensions, deferral of payments, or the capitalization of interest. Such adjustments are intended to mitigate potential losses and avoid foreclosure or asset repossession.
We have, in certain cases, provided a defaulting borrower with concessions that we would not typically offer and may continue to do so in the future. Modifications may include interest rate reductions, principal adjustments, term extensions, deferral of payments, or the capitalization of interest. Such adjustments are intended to mitigate potential losses and avoid foreclosure or asset repossession.
As of December 31, 2024, Terra Fund 7 and Terra Offshore REIT held approximately 8.7% and 10.1% of our issued and outstanding Class B Common Stock, respectively. Our principal stockholders, which are currently controlled by affiliates of our Manager, own a significant amount of our outstanding shares of common stock.
Our principal stockholders, which are currently controlled by affiliates of our Manager, own a significant amount of our outstanding shares of common stock. As of December 31, 2025, Terra Fund 7 and Terra Offshore REIT hold approximately 8.7% and 10.1% of our issued and outstanding Class B Common Stock, respectively. Our Manager also serves as manager to Terra Offshore REIT.
In the course of our business, we may take title to real estate, and, as a result, we could be subject to environmental liabilities with respect to these properties.
We may be exposed to environmental liabilities with respect to properties to which we take title, which may in turn decrease the value of the underlying properties. In the course of our business, we may take title to real estate, and, as a result, we could be subject to environmental liabilities with respect to these properties.
The loss of any of such individuals could have a material adverse effect on our results of operations, financial condition and cash flows We face certain conflicts of interest with respect to our operations and our relationship with our Manager and its affiliates. We are subject to conflicts of interest arising out of our relationship with our Manager.
Schwarzschild and our Manager’s investment professionals. The loss of any of such individuals could have a material adverse effect on our results of operations, financial condition and cash flows. We face certain conflicts of interest with respect to our operations and our relationship with our Manager and its affiliates.
The impact of financial reform legislation and legislation promulgated thereunder on us is uncertain. U.S. Federal government agencies, including the Federal Reserve, the Treasury Department and the SEC, as well as other governmental and regulatory bodies, have taken, are taking or may in the future take, various actions to address financial crises or other areas of national regulatory concern.
U.S. Federal government agencies, including the Federal Reserve, the Treasury Department and the SEC, as well as other governmental and regulatory bodies, have taken, are taking or may in the future take, various actions to address financial crises or other areas of national regulatory concern.
A material disruption to the banking system and financial markets could result in liquidity issues across the sector, which could adversely impact our access to capital and our cost of borrowing and adversely affect us, our business or our results of operations.
A material disruption to the banking system and financial markets could result in liquidity issues across the sector, which could adversely impact our access to capital and our cost of borrowing and adversely affect us, our business or our results of operations. Continued uncertainty over U.S. fiscal and political policy could adversely affect financial markets and our business.
Non-real estate-related investments are also not collateralized by real estate like our real estate investments and hence may be riskier because if the debt-like non-real estate-related investments default or do not perform, we may not have collateral to foreclose upon.
We may not be able to achieve the returns on any non-real estate-related investments that we achieved on our real estate-related investments. 20 Non-real estate-related investments are also not collateralized by real estate like our real estate investments and hence may be riskier because if the debt-like non-real estate-related investments default or do not perform, we may not have collateral to foreclose upon.
Further, our loans are concentrated in office, multifamily and infill land property types representing approximately 38.9%, 20.4% and 18.8%, respectively, of our net loan portfolio as of December 31, 2024. As a result, a downturn in any particular industry in which we are heavily invested may significantly impact the aggregate returns we realize.
Further, our loans are concentrated in office, infill land and multifamily property types representing approximately 52.9%, 21.1% and 19.7%, respectively, of our net loan portfolio as of December 31, 2025. As a result, a downturn in any particular industry in which we are heavily invested may significantly impact the aggregate returns we realize.
In calculating our loan-to-value ratios for the purpose of determining maximum borrowing capacity, we use the estimated value of the property at the time of completion of the project, which increases the risk that, if we foreclose on the collateral before it is fully developed, we may not be able to sell the collateral for the amount owed to us by the borrower, which in turn may have an adverse effect on our results of operations, financial condition and cash flows. 18 Loans to small businesses involve a high degree of business and financial risk, which can result in substantial losses that would adversely affect our business, results of operation and financial condition.
In calculating our loan-to-value ratios for the purpose of determining maximum borrowing capacity, we use the estimated value of the property at the time of completion of the project, which increases the risk that, if we foreclose on the collateral before it is fully developed, we may not be able to sell the collateral for the amount owed to us by the borrower, which in turn may have an adverse effect on our results of operations, financial condition and cash flows.
The risks set forth below are not the only risks we face, and we may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable. If any of the following risks occur, our results of operations, financial condition and cash flows could be materially adversely affected.
We may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable. If any of the following risks occur, our results of operations, financial condition and cash flows could be materially adversely affected. Some statements in this section constitute forward-looking statements.
We pay our Manager base management fees regardless of the performance of our portfolio. Our Manager’s entitlement to the base management fee, which is not based upon performance metrics or goals, might reduce its incentive to devote its time and effort to seeking assets that provide attractive risk-adjusted returns for our portfolio.
Our Manager’s entitlement to these recurring fees, which is not based upon performance metrics or goals, might reduce its incentive to devote its time and effort to seeking assets that provide attractive risk-adjusted returns for our portfolio.
In the event that our Manager underestimates the losses relative to the price we pay for a particular investment, we may experience losses with respect to such investment, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.
In certain cases, our Manager has underestimated the losses relative to the price we pay for a particular investment, and if such underestimation were to continue, we could experience losses with respect to such investment, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.
Cybersecurity risk and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could have an adverse effect on our results of operations, financial condition and cash flows. results.
Any security breach could expose us to risks of data loss, litigation and liability and could seriously disrupt our operations and harm our reputation. 19 Cybersecurity risk and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could have an adverse effect on our results of operations, financial condition and cash flows. results.
Rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing. A reduction in the volume of mortgage loans originated may affect the volume of our targeted assets available to us, which could adversely affect our ability to originate and acquire assets that satisfy our objectives.
A reduction in the volume of mortgage loans originated may affect the volume of our targeted assets available to us, which could adversely affect our ability to originate and acquire assets that satisfy our objectives.
The result of these incidents may include disrupted operations, misstated or unreliable financial data, misappropriation of assets, liability for stolen assets or information, increased cybersecurity protection and insurance cost, regulatory enforcement, litigation and damage to our relationships and reputation.
The result of these incidents may include disrupted operations, misstated or unreliable financial data, misappropriation of assets, liability for stolen assets or information, increased cybersecurity protection and insurance cost, increased expenses and lost revenue, regulatory enforcement, governmental fines, sanctions, or penalties (which may not be covered by our insurance policies), civil litigation and damage to our relationships and reputation.
To the extent we form a TRS, we will scrutinize all of our transactions with such TRS to ensure that they are entered into on arm’s length terms to avoid incurring the 100% excise tax. 34 We may engage in transactions with a TRS, in which case we intend to conduct our affairs so that we will not be subject to the 100% excise tax with respect to transactions with such TRS and so that we will comply with all other requirements applicable to our ownership of TRSs.
We may engage in transactions with a TRS, in which case we intend to conduct our affairs so that we will not be subject to the 100% excise tax with respect to transactions with such TRS and so that we will comply with all other requirements applicable to our ownership of TRSs.
Our debt agreements contain various financial and operating covenants, including, among other things, certain coverage ratios and limitations on our ability to incur secured and unsecured debt.
Covenants in our debt agreements may restrict our operating activities and adversely affect our financial condition, operating results and cash flows. Our debt agreements contain various financial and operating covenants, including, among other things, certain coverage ratios and limitations on our ability to incur secured and unsecured debt.
We would be required to pay the Manager the base management fee in a particular period even if we experienced a net loss or a decline in the value of our portfolio during that period. We cannot predict the amounts of compensation to be paid to the Manager.
We would be required to pay our Manager these recurring fees in a particular period even if we experienced a net loss or a decline in the value of our portfolio during that period.
Schwarzschild and the other investment professionals of our Manager to identify suitable investments. Certain other companies managed by our Manager or its affiliates also rely on many of these same professionals. These funds have similar investment objectives as we do. Many investment opportunities that are suitable for us may also be suitable for other affiliates advised by our Manager.
We rely on our officers and the officers of our Manager, including Messrs. Uppal, Pinkus and Cooperman, Ms. Schwarzschild and the other investment professionals of our Manager to identify suitable investments. Certain other companies managed by our Manager or its affiliates also rely on many of these same professionals. These funds have similar investment objectives as we do.
New entrants in the market for commercial loan originations and acquisitions could adversely impact our ability to originate and acquire real estate-related loans at attractive risk-adjusted returns. New entrants in the market for commercial loan originations and acquisitions could adversely impact our ability to execute our investment strategy on terms favorable to us.
New entrants in the market for commercial loan originations and acquisitions could adversely impact our ability to execute our investment strategy on terms favorable to us.
Overall, no more than 20% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs. We intend to limit the aggregate value of the stock and securities of our TRSs, if any, to less than 20% of the value of our total assets (including such TRS stock and securities).
We intend to limit the aggregate value of the stock and securities of our TRSs, if any, to less than 20% or 25%, as applicable, of the value of our total assets (including such TRS stock and securities).
To the extent we take advantage of some or all of the reduced reporting requirements applicable to emerging growth companies or smaller reporting companies, an investment in our company may be less attractive to investors. 23 We may be exposed to environmental liabilities with respect to properties to which we take title, which may in turn decrease the value of the underlying properties.
To the extent we take advantage of some or all of the reduced reporting requirements applicable to emerging growth companies or smaller reporting companies, an investment in our company may be less attractive to investors.
Our stockholders are encouraged to consult their tax advisors regarding the potential implications of legislative, regulatory, or administrative developments on their investment and to stay informed about any proposed changes to applicable tax laws. 25 Risks Related to Our Management and Our Relationship With Our Manager We rely entirely on the management team and employees of our Manager for our day-to-day operations.
Our stockholders are encouraged to consult their tax advisors regarding the potential implications of legislative, regulatory, or administrative developments on their investment and to stay informed about any proposed changes to applicable tax laws.
We have no employees and do not intend to have employees in the future. We rely entirely on the management team and employees of our Manager for our day-to-day operations, and our Manager has significant discretion as to the implementation of our operating policies and strategies.
Risks Related to Our Management and Our Relationship With Our Manager We rely entirely on the management team and employees of our Manager for our day-to-day operations. We have no employees and do not intend to have employees in the future.
Our acquisitions and the integration of acquired businesses subject us to various risks and may not result in all of the cost savings and benefits anticipated, which could adversely affect our financial condition or results of operations.
While we believe our cybersecurity risk management processes are reasonable and appropriate, they may not be effective against all emerging or future threats. Our acquisitions and the integration of acquired businesses subject us to various risks and may not result in all of the cost savings and benefits anticipated, which could adversely affect our financial condition or results of operations.
Such conflicts may not be resolved in our favor and our investors will not have the opportunity to evaluate the manner in which these conflicts of interest are resolved before or after making their investment.
Such conflicts may not be resolved in our favor and our investors will not have the opportunity to evaluate the manner in which these conflicts of interest are resolved before or after making their investment. 25 Our officers and the officers of our Manager are also officers of other affiliates of our Manager; therefore, our officers and the officers of our Manager will face competing demands based on the allocation of investment opportunities between us and our affiliates.
Our loans are concentrated in California, New York, Arizona, Georgia and Utah representing approximately 17.7%, 25.3%, 11.2%, 10.2% and 9.4%, respectively, of our net loan portfolio as of December 31, 2024. Additionally, we own eight industrial buildings in Texas.
Our loans are concentrated in New York, California, Georgia, New Jersey and Arizona representing approximately 39.5%, 18.8%, 16.5%, 11.9% and 9.2%, respectively, of our net loan portfolio as of December 31, 2025. Additionally, we own four industrial buildings in Texas.
We may enter into additional transactions with our Manager, its affiliates, or entities managed by our Manager or its affiliates.
We are subject to conflicts of interest arising out of our relationship with our Manager. We may enter into additional transactions with our Manager, its affiliates, or entities managed by our Manager or its affiliates.
Item 1A. Risk Factors. Before making an investment decision, you should carefully consider the following risk factors together with all of the other information contained in this Annual Report on Form 10-K.
Item 1A. Risk Factors. Before making an investment decision, you should carefully consider the following risk factors together with all of the other information contained in this Annual Report on Form 10-K. The risks set forth below are not the only risks we face, and the risks to which we are exposed may change or evolve over time.
The repurchased loans typically can only be financed at a steep discount to their repurchase price, if at all. They are also typically sold at a significant discount to the unpaid principal balance (“UPB”).
The repurchased loans typically can only be financed at a steep discount to their repurchase price, if at all. They are also typically sold at a significant discount to the unpaid principal balance. Significant repurchase activity could have a material adverse effect on our results of operations, financial condition and cash flows.
The breach of any of these covenants, if not cured within any applicable cure period, could result in a default, including a cross-default, and acceleration of certain of our indebtedness.
In the past, we have received waivers of certain covenants in our debt agreements, but there can be no assurance we will receive similar waivers in the future. The breach of any of these covenants, if not cured within any applicable cure period, could result in a default, including a cross-default, and acceleration of certain of our indebtedness.
Changes in accounting rules, interpretations or our assumptions could also undermine our ability to prepare timely and accurate financial statements, which could result in a lack of investor confidence in our financial information. 22 The CECL accounting standard requires us to make certain estimates and judgements, which may be difficult to determine and may have a material adverse effect on our financial condition and results of operations.
The CECL accounting standard requires us to make certain estimates and judgements, which may be difficult to determine and may have a material adverse effect on our financial condition and results of operations.
We cannot assure our stockholders that such changes will not negatively impact their tax treatment. Any such modifications could have adverse consequences for an investment in our securities.
Specifically, the tax treatment of REITs could be altered at any time through legislative, regulatory, or judicial action, possibly with retroactive application. We cannot assure our stockholders that such changes will not negatively impact their tax treatment. Any such modifications could have adverse consequences for an investment in our securities.
If a person is able to circumvent our security measures, he or she could destroy or misappropriate valuable information or disrupt our operations. Any security breach could expose us to risks of data loss, litigation and liability and could seriously disrupt our operations and harm our reputation.
If a person is able to circumvent our security measures, he or she could destroy or misappropriate valuable information or disrupt our operations.
The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance cost, litigation and damage to our relationships.
The result of these incidents may include additional regulatory scrutiny and exposing us to civil litigation, enforcement actions, government fines, sanctions, or penalties (which may not be covered by our insurance policies), increased expenses and lost revenue, disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance cost, litigation and damage to our relationships.
Such events could result in our acquiring investments that provide less attractive returns, which would have a material adverse effect on our results of operations, financial condition and cash flows. 26 Our Manager, our officers and the investment professionals assembled by our Manager will face competing demands relating to their time and this may cause our operations and our investors’ investments to suffer.
As a result, our officers or the officers of our Manager could direct attractive investment opportunities to other affiliated entities or investors. Such events could result in our acquiring investments that provide less attractive returns, which would have a material adverse effect on our results of operations, financial condition and cash flows.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity measures are designed to provide a structured approach to managing cybersecurity risks for an effective, efficient, an orderly response to any Incident. As a critical component of our overall risk management process, we have adopted a framework that shares existing reporting channels and governance processes to identify, assess, manage and report cybersecurity threats on an ongoing basis.
Biggest changeAs a critical component of our overall risk management process, we have adopted a framework that shares existing reporting channels and governance processes to identify, assess, manage and report cybersecurity threats on an ongoing basis. This risk management process is led by our Manager’s Chief Compliance Officer and Cyber Security Committee (“CSC”).
Our Manager’s Chief Compliance Officer has 17 years of experience in regulatory compliance, risk management, and cybersecurity governance, with expertise in implementing and overseeing security policies in financial and REIT sectors. [The CSC is composed of professionals with backgrounds in information security, IT risk management, and data protection, ensuring a well-rounded approach to cybersecurity oversight.
Our Manager’s Chief Compliance Officer has 18 years of experience in regulatory compliance, risk management, and cybersecurity governance, with expertise in implementing and overseeing security policies in financial and REIT sectors. The CSC is composed of professionals with backgrounds in information security, IT risk management, and data protection, ensuring a well-rounded approach to cybersecurity oversight.
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This risk management process is led by our Manager’s Chief Compliance Officer and Cyber Security Committee (“CSC”).
Added
Our cybersecurity measures are designed to provide a structured approach to managing cybersecurity risks, including risks associated with emerging technologies, data governance and third-party service providers, for an effective, efficient, and orderly response to any Incident.
Added
With respect to cybersecurity risk oversight, our Board and our audit committee receive periodic reports and updates from management on the primary cybersecurity risks facing us and our Manager and the measures our Manager is taking to mitigate such risks.
Added
In addition to such periodic reports, our Board and our audit committee receive updates from management as to changes to our and our Manager’s and its affiliates’ cybersecurity risk profile or certain newly identified risks.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Our administrative and principal executive offices are located at 205 West 28th Street, 12th Floor, New York, New York 10001. We believe that our office facilities are suitable and adequate for our business as it is presently conducted.
Biggest changeItem 2. Properties. Our administrative and principal executive offices are located at 205 West 28th Street, 12th Floor, New York, New York 10001. We believe that our office facilities are suitable and adequate for our business as it is presently conducted. 37

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that such proceedings will have a material effect upon our financial condition or results of operations. 37 Item 4. Mine Safety Disclosures. Not applicable. PART II
Biggest changeWhile the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that such proceedings will have a material effect upon our financial condition or results of operations. Item 4. Mine Safety Disclosures. Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information There is no established trading market for our Class B Common Stock. As of March 13, 2025, we had 24,338,366 shares of Class B Common Stock outstanding held by 5,401 investors.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information There is no established trading market for our Class B Common Stock. As of March 19, 2026, we had 24,340,069 shares of Class B Common Stock outstanding held by 5,413 investors.
Issuer Purchases of Equity Securities There were no issuer purchases of equity securities during the year ended December 31, 2024. Item 6. [Reserved].
Issuer Purchases of Equity Securities There were no issuer purchases of equity securities during the year ended December 31, 2025. Item 6. [Reserved].
As of March 13, 2025, there were no outstanding options, warrants to purchase our common stock or securities convertible into our shares of common stock. Sales of Unregistered Equity Securities There were no sales of unregistered equity securities during the year ended December 31, 2024.
As of March 19, 2026, there were no outstanding options, warrants to purchase our common stock or securities convertible into our shares of common stock. Sales of Unregistered Equity Securities There were no sales of unregistered equity securities during the year ended December 31, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations The following table presents the comparative results of our operations: Years Ended December 31, 2024 2023 Change Revenues Interest income $ 38,250,784 $ 56,140,437 $ (17,889,653) Real estate operating revenue 10,740,170 11,050,716 (310,546) Prepayment fee income 435,677 — 435,677 Other operating income 262,863 722,881 (460,018) 49,689,494 67,914,034 (18,224,540) Operating expenses Operating expenses reimbursed to Manager 7,468,132 9,234,357 (1,766,225) Asset management fee 6,207,231 7,807,198 (1,599,967) Asset servicing fee 1,489,674 1,857,765 (368,091) Provision for credit losses 16,627,739 45,548,803 (28,921,064) Real estate operating expenses 2,673,913 4,586,245 (1,912,332) Depreciation and amortization 7,357,295 6,968,985 388,310 Professional fees 3,012,046 3,741,720 (729,674) Directors’ fees 356,886 347,714 9,172 Other 558,638 539,957 18,681 Impairment charge — 11,765,540 (11,765,540) 45,751,554 92,398,284 (46,646,730) Operating income (loss) 3,937,940 (24,484,250) 28,422,190 Other income and expenses Interest expense on secured financing (25,052,058) (28,113,245) 3,061,187 Interest expense on unsecured notes payable (9,836,953) (9,643,974) (192,979) Interest expense on obligations under participation agreements (2,971,924) (1,353,006) (1,618,918) Unrealized gain (loss) on investments, net 100,149 (316,573) 416,722 Income (loss) from equity interest in unconsolidated investments 2,738,410 (2,383,938) 5,122,348 Loss on repayment of loan (5,629,510) — (5,629,510) Loss on disposal of real estate — (4,211,153) 4,211,153 Gain on extinguishment of debt — 14,079,379 (14,079,379) Realized loss on investments, net (446,009) (459,279) 13,270 (41,097,895) (32,401,789) (8,696,106) Net loss $ (37,159,955) $ (56,886,039) $ 19,726,084 43 Net Loan Portfolio In assessing the performance of our loans, we believe it is appropriate to evaluate the loans on an economic basis, that is, gross loans net of obligations under participation agreements, promissory notes payable, revolving credit facility, secured borrowing and repurchase agreements payable.
Biggest changeDue to the illiquidity of the loans, valuation of our loans may be difficult, as there generally will be no established markets for these loans. 43 Results of Operations The following table presents the comparative results of our operations: Years Ended December 31, 2025 2024 Change Revenues Interest income $ 28,296,872 $ 38,250,784 $ (9,953,912) Real estate operating revenue 6,802,853 10,740,170 (3,937,317) Prepayment fee income — 435,677 (435,677) Other operating income 339,295 262,863 76,432 35,439,020 49,689,494 (14,250,474) Operating expenses Operating expenses reimbursed to Manager 4,035,222 7,468,132 (3,432,910) Asset management fee 4,786,640 6,207,231 (1,420,591) Asset servicing fee 1,143,783 1,489,674 (345,891) Provision for credit losses 12,767,592 16,627,739 (3,860,147) Real estate operating expenses 3,113,673 2,673,913 439,760 Depreciation and amortization 3,841,661 7,357,295 (3,515,634) Professional fees 2,812,876 3,012,046 (199,170) Impairment charge on real estate assets 3,399,684 — 3,399,684 Directors’ fees 303,022 356,886 (53,864) Other 551,713 558,638 (6,925) 36,755,866 45,751,554 (8,995,688) Operating (loss) income (1,316,846) 3,937,940 (5,254,786) Other income and expenses Interest expense on secured financing (13,505,701) (25,052,058) 11,546,357 Interest expense on unsecured notes payable (9,913,012) (9,836,953) (76,059) Interest expense on obligations under participation agreements (3,648,329) (2,971,924) (676,405) Income from equity interest in unconsolidated investments 3,283,274 2,738,410 544,864 Gain on extinguishment of debt 548,625 — 548,625 Loss on sale of real estate, net (2,880,545) — (2,880,545) Unrealized gain on investments, net 39,290 100,149 (60,859) Loss on repayment of loan — (5,629,510) 5,629,510 Realized loss on investments, net — (446,009) 446,009 (26,076,398) (41,097,895) 15,021,497 Net loss before income taxes (27,393,244) (37,159,955) 9,766,711 Provision for income tax (432,602) — $ (432,602) Net loss $ (27,825,846) $ (37,159,955) $ 9,334,109 Net Loan Portfolio In assessing the performance of our loans, we believe it is appropriate to evaluate the loans on an economic basis, that is, gross loans net of obligations under participation agreements and secured financing agreements. 44 The following table presents a reconciliation of our loan portfolio on a weighted average basis from gross to net : Year Ended December 31, 2025 Year Ended December 31, 2024 Weighted Average Principal Amount (1) Weighted Average Coupon Rate (2) Weighted Average Principal Amount (1) Weighted Average Coupon Rate (2) Total portfolio Gross loans $ 262,261,404 13.0 % $ 414,141,672 12.6 % Obligations under participation agreements (18,910,392) 18.5 % (14,450,820) 18.6 % Secured borrowing (23,267,808) 9.5 % (2,311,475) 9.9 % Promissory notes payable (25,342,054) 9.3 % (66,170,732) 9.8 % Repurchase agreements payable (17,191,448) 9.0 % (69,518,266) 8.1 % Revolving line of credit payable (6,534,307) 7.0 % (35,411,716) 7.7 % Net loans (3) $ 171,015,395 14.0 % $ 226,278,663 15.2 % Senior loans Gross loans $ 146,765,769 12.5 % $ 314,283,363 12.5 % Secured borrowing (23,267,808) 9.5 % (2,311,475) 9.9 % Promissory notes payable (25,342,054) 9.3 % (66,170,732) 9.8 % Repurchase agreements payable (17,191,448) 9.0 % (69,518,266) 8.1 % Revolving line of credit payable (6,534,307) 7.0 % (35,411,716) 7.7 % Net loans (3) $ 74,430,152 15.8 % $ 140,871,174 17.2 % Subordinated loans (4) Gross loans $ 115,495,635 13.5 % $ 99,858,309 12.8 % Obligations under participation agreements (18,910,392) 18.5 % (14,450,820) 18.6 % Net loans (3) $ 96,585,243 12.5 % $ 85,407,489 11.8 % _______________ (1) Amount is calculated based on the number of days each loan is outstanding.
Cash Flows Used in Financing Activities For the year ended December 31, 2024, cash flows used in financing activities were $99.0 million, primarily related to principal repayments on secured financing of $177.5 million, distributions paid of $18.6 million and payment for financing costs of $1.1 million, partially offset by proceeds from secured financing of $81.3 million and proceeds from obligations under participation agreements of $18.0 million.
For the year ended December 31, 2024, cash flows used in financing activities were $99.0 million, primarily related to principal repayments on secured financing of $177.5 million, distributions paid of $18.6 million and payment for financing costs of $1.1 million, partially offset by proceeds from secured financing of $81.3 million and proceeds from obligations under participation agreements of $18.0 million.
The Management Agreement may be terminated by us during the Initial Term or any Renewal Term upon a finding by either (i) at least two-thirds of the independent directors on our Board or (ii) the holders of a majority of the outstanding shares of our common stock (other than those shares held by members of the our senior management team or affiliates of our Manager) that either (a) there has been unsatisfactory performance by our Manager that is materially detrimental to us, or (b) the compensation payable to our Manager pursuant to the Management Agreement is unfair; provided, however, that we will not have the right to terminate the Management Agreement on the basis of unfair compensation to our Manager if our Manager agrees to continue to provide its services under the Management Agreement in exchange for reduced fees that at least two-thirds of the independent directors on our Board determine to be fair pursuant to the procedures set forth in the Management Agreement.
The Management Agreement may be terminated by us during the Initial Term or any Renewal Term upon a finding by either (i) at least two-thirds of the independent directors on our Board or (ii) the holders of a majority of the outstanding shares of our common stock (other than those shares held by members of our senior management team or affiliates of our Manager) that either (a) there has been unsatisfactory performance by our Manager that is materially detrimental to us, or (b) the compensation payable to our Manager pursuant to the Management Agreement is unfair; provided, however, that we will not have the right to terminate the Management Agreement on the basis of unfair compensation to our Manager if our Manager agrees to continue to provide its services under the Management Agreement in exchange for reduced fees that at least two-thirds of the independent directors on our Board determine to be fair pursuant to the procedures set forth in the Management Agreement.
We may also terminate the Management Agreement, effective upon 30 calendar days’ prior written notice from our Board to our Manager, without payment of any Termination Fees or other penalties, upon (i) the material breach of the Management Agreement by our Manager or its affiliates that continues for 30 days after written notice thereof to our Manager (or 45 days after delivery of written notice thereof if our Manager takes diligent steps to cure such breach within 30 days of delivery of the written notice), (ii) any fraud or other criminal conduct, gross negligence or breach of fiduciary duty by our Manager or its affiliates in connection with the Management Agreement, as determined by a final, non-appealable judgment of a court of competent jurisdiction, (iii) our Manager’s bankruptcy, insolvency or dissolution, or (iv) an Internalization Event (as defined in the Management Agreement).
We may also terminate the Management Agreement, effective upon 30 calendar days’ prior written notice from our Board to our Manager, without payment of any Termination Fees or other penalties, upon (i) the material breach of the Management 52 Agreement by our Manager or its affiliates that continues for 30 days after written notice thereof to our Manager (or 45 days after delivery of written notice thereof if our Manager takes diligent steps to cure such breach within 30 days of delivery of the written notice), (ii) any fraud or other criminal conduct, gross negligence or breach of fiduciary duty by our Manager or its affiliates in connection with the Management Agreement, as determined by a final, non-appealable judgment of a court of competent jurisdiction, (iii) our Manager’s bankruptcy, insolvency or dissolution, or (iv) an Internalization Event (as defined in the Management Agreement).
If market conditions are not supportive of a direct listing that would in our view lead to a constructive trading environment for the Class A Common Stock, we will explore alternative paths to pursue our investment strategy and provide liquidity to our investors, including converting our company into a traditional “non-traded REIT.” As part of a potential conversion to a non-traded REIT, we would adopt a customary share repurchase plan pursuant to which our investors could request to have their shares of its common stock redeemed for cash.
If market conditions are not supportive of a direct listing that would in our view lead to a constructive trading environment for the Class A Common Stock, we will explore alternative paths to pursue our investment strategy and provide liquidity to our investors, including converting our company into a traditional “non-traded REIT.” As part of a potential conversion to a non-traded REIT, we would adopt a customary share repurchase plan pursuant to which our investors could request to have their shares of our common stock redeemed for cash.
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 42 industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; pandemics; natural disasters; and other acts of god.
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.
Upon any termination of the Management Agreement by us as discussed above, we will pay our Manager, on the date on which such termination is effective, a termination fee in an amount equal to three times the average annual fees of all types and expense reimbursements received by or owed to our Manager pursuant to the Management Agreement during the 24-month period immediately preceding such termination (the “Termination Fee”), calculated as of the end of the most recently completed monthly prior to the date of such termination.
Upon any termination of the Management Agreement by us as discussed above, we will pay our Manager, on the date on which such termination is effective, a termination fee in an amount equal to three times the average annual fees of all types and expense reimbursements received by or owed to our Manager pursuant to the Management Agreement during the 24-month period immediately preceding such termination (the “Termination Fee”), calculated as of the end of the most recently completed month prior to the date of such termination.
Cash Flows Provided by (Used in) Investing Activities For the year ended December 31, 2024, cash flows provided by investing activities were $101.6 million, primarily related to proceeds from repayment of loans of $215.1 million and promissory note receivable of $9.6 million, partially offset by origination and purchase of loans of $57.2 million, purchase of equity interests in unconsolidated investments of $65.6 million and funding for promissory note receivable of $5.0 million.
For the year ended December 31, 2024, cash flows provided by investing activities were $101.6 million, primarily related to proceeds from repayment of loans of $215.1 million and promissory note receivable of $9.6 million, partially offset by origination and purchase of loans of $57.2 million, purchase of equity interests in unconsolidated investments of $65.6 million and funding for promissory note receivable of $5.0 million.
Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of our Class B Common Stock, $0.01 par value per share ("Class B Common Stock"), were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of October 1, 2022.
Pursuant to the terms of the transactions described in the Merger Agreement, 4,847,910 shares of our Class B Common Stock, $0.01 par value per share, were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of October 1, 2022.
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 47 and interest we receive on our portfolio of investments, cash generated from our operating results and unused borrowing capacity under our financing sources.
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.
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.
Under certain interest rate and prepayment scenarios we may fail to recoup fully our cost of acquisition of certain loans. 42 Extension Risk Extension risk is the risk that our assets will be repaid at a slower rate than anticipated and generally increases when interest rates rise.
For the year ended December 31, 2024, provision for credit losses was $16.6 million, primarily related to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in senior funding.
For the year ended December 31, 2024, provision for credit losses was $16.6 million, primarily due to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in funding on the senior loan.
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.
Financial Condition, Liquidity and Capital Resources Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, funding and maintaining our assets and operations, making distributions to our stockholders and other general 48 business needs.
At the beginning of 2016, we completed the 38 merger of these private partnerships into a single entity as part of our plan to reorganize our business as a REIT for federal income tax purposes.
At the beginning of 2016, we completed the merger of these private partnerships into a single entity as part of our plan to reorganize our business as a REIT for federal income tax purposes.
The CECL model requires the consideration of 49 possible credit losses over the life of an instrument as opposed to estimating credit losses upon the occurrence of an actual loss event under the previous “incurred loss” methodology.
The CECL model requires the consideration of possible credit losses over the life of an instrument as opposed to estimating credit losses upon the occurrence of an actual loss event under the previous “incurred loss” methodology.
We will pay our Manager the Termination Fee upon such termination by our Manager. 51 Promissory Note Payable with Terra LLC On January 24, 2024, we, as borrower, entered into a revolving promissory note payable with Terra LLC.
We will pay our Manager the Termination Fee upon such termination by our Manager. Promissory Note Payable with Terra LLC On January 24, 2024, we, as borrower, entered into a revolving promissory note payable with Terra LLC.
In the event that we receive any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, our Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by our Manager with respect to its evaluation and pursuit of such transactions.
In the event that we receive any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any investment or disposition transaction, our Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by our Manager with respect to its evaluation and pursuit of such transactions.
As of December 31, 2024, Terra Fund 7 and Terra Offshore REIT held approximately 8.7% and 10.1%, respectively, of our issued and outstanding Class B Common Stock. As previously disclosed, we continue to explore alternative liquidity transactions on an opportunistic basis to maximize stockholder value.
As of December 31, 2025, Terra Fund 7 and Terra Offshore REIT held approximately 8.7% and 10.1%, respectively, of our issued and outstanding Class B Common Stock. As previously disclosed, we continue to explore alternative liquidity transactions on an opportunistic basis to maximize stockholder value.
Loss on Repayment of Loan In August 2024, a $65.0 million senior loan was repaid, resulting in a loss on repayment of $5.6 million for the year ended December 31, 2024, which included the write-off of interest receivable of $4.8 million. There was no such loss for the year ended December 31, 2023.
Loss on Repayment of Loan In August 2024, a $65.0 million senior loan was repaid, resulting in a loss on repayment of $5.6 million for the year ended December 31, 2024, which included the write-off of interest receivable of $4.8 million. There was no such loss for the year ended December 31, 2025.
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.
Asset Management Fee Under the terms of the Management Agreement with our Manager, we paid our Manager a monthly asset management fee at an annual rate of 1% of the aggregate funds under management, which included the aggregate gross acquisition price, net of participation interest sold to affiliates, for each investment and cash held by us.
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 and Use of Estimates Our consolidated financial statements are prepared in conformity with United States generally accepted accounting principles, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the 50 date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
Management Agreement with our Manager We currently pay the following fees to our Manager pursuant to the Management Agreement: Origination and Extension Fee . An origination fee in the amount of 1.0% of the amount used to originate, acquire, fund or structure real estate-related investments, including any third-party expenses related to such loan.
Management Agreement with our Manager We currently pay the following fees to our Manager pursuant to the Management Agreement: Origination and Extension Fee . An origination fee in the amount of 1.0% of the amount used to originate, acquire, fund or structure investments, including any third-party expenses related to such investments.
In the event that the term of any 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 .
In the event that the term of any loan is extended, our Manager also receives an origination fee equal to the lesser of (i) 1.0% of the principal amount of the loan being extended or (ii) the amount of the fee paid by the borrower in connection with such extension. Asset Management Fee .
Equity Investments As of both December 31, 2024 and 2023, we owned 14.9% of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.
Equity Interest in Unconsolidated Investments As of both December 31, 2025 and 2024, we owned 14.9% of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.
As of December 31, 2024, amount outstanding under the promissory note payable was $45.1 million. The activity associated with this agreement is eliminated in consolidation and therefore has no impact on our consolidated financial statements.
As of December 31, 2025 and 2024, amount outstanding under the promissory note payable was $48.1 million and $45.1 million, respectively. The activity associated with this agreement is eliminated in consolidation and therefore has no impact on our consolidated financial statements.
A disposition fee in the amount of 1.0% of the gross sale price received by our company from the disposition of each loan, but not upon the maturity, prepayment, workout, modification or extension of a loan unless there is a corresponding fee paid by the borrower, in which case the disposition fee will be the lesser of (i) 1.0% of the principal amount of the loan and (ii) the amount of the fee paid by the borrower in connection with such transaction.
A disposition fee in the amount of 1.0% of the gross sale price received by our company from the disposition of an investment, but not upon the maturity, prepayment, workout, modification or extension of a loan unless there 51 is a corresponding fee paid by the borrower, in which case the disposition fee will be the lesser of (i) 1.0% of the principal amount of the loan and (ii) the amount of the fee paid by the borrower in connection with such transaction.
We expect to maintain sufficient liquidity to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on our credit facilities. Obligation under participation agreement of $18.0 million will mature in the next twelve months. We use the proceeds from the repayment of the corresponding investment to repay the participation obligation.
We expect to maintain sufficient liquidity to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on our credit facilities. Obligations under participation agreements of $18.0 million will mature in the next twelve months. We will use the proceeds from the repayment of the corresponding investment to repay the participation obligations.
As of December 31, 2024, the principal balance of our participation obligation was $18.0 million, which was a participation obligation to a related-party managed by the Manager.
As of December 31, 2025, the principal balance of our participation obligation was $18.0 million, which was a participation obligation to a related-party managed by the Manager.
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 management fee at an annual rate equal to 1.0% of the aggregate funds under management, which includes the loan origination amount or aggregate gross acquisition cost, as applicable, for each investment and cash held by us. Asset Servicing Fee .
The performance and value of our loans and investments depend upon the owners’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us.
Credit Risk Our loans and investments are subject to credit risk. The performance and value of our loans and investments depend upon the owners’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us.
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.
We deploy moderate amounts of leverage as part of our operating strategy and use a number of sources to finance our target assets, including our senior notes and term loan. We may use other sources to finance our target assets, including bank financing and arranged financing facilities with domestic or international financing providers.
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.
Asset Servicing Fee Under the terms of the Management Agreement with our Manager, we paid our Manager a monthly servicing fee at an annual rate of 0.25% of the aggregate gross origination price or acquisition price for each investment held by us.
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 monthly asset servicing fee at an annual rate equal to 0.25% of the aggregate gross origination price or aggregate gross acquisition price for each investment then held by us (inclusive of closing costs and expenses). Disposition Fee .
As of December 31, 2024 and 2023, these equity investments had total carrying value of $106.8 million and $37.2 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.
As of December 31, 2025 and 2024, these equity interests had total carrying value of $94.2 million and $106.8 million, respectively. Book Value Per Share We calculate our book value per share by dividing our net equity by the number of outstanding shares of our common stock, unless otherwise determined by our Board.
For the year ended December 31, 2024 as compared to the year ended December 31, 2023, operating expenses reimbursed to our Manager decreased by $1.8 million, primarily due to a decrease in the allocation ratio as a result of a decrease in our total funds under management.
For the year ended December 31, 2025 as compared to the year ended December 31, 2024, operating expenses reimbursed to our Manager decreased by $3.4 million, primarily due to a decrease in the allocation ratio as a result of a decrease in our total funds under management.
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.
So long as we qualify as a REIT, we generally are not subject to U.S. federal income tax on our net taxable income to the extent that we annually distribute all of our net taxable income to our stockholders. Portfolio Summary Net Loan Portfolio The following tables provide a summary of our net loan portfolio.
There was no such gain for the year ended December 31, 2024 Realized Loss On Investments, Net For the year ended December 31, 2024, we sold a portion of our investments in marketable equity securities and recognized a net loss on sale of $0.4 million.
Realized Loss On Investments, Net There was no realized loss for the year ended December 31, 2025. For the year ended December 31, 2024, we sold a portion of our investments in trading securities and recognized a net loss on sale of $0.4 million.
As of December 31, 2024, our portfolio included underlying properties located in 13 markets, across nine states and includes property types such as multifamily housing, student housing, commercial offices, medical offices, mixed-use and infill properties. The profile of these properties ranges from stabilized and value-added properties to pre-development and construction.
As of December 31, 2025, our portfolio included underlying properties located in nine markets, across seven states and includes property types such as multifamily housing, commercial offices, industrial, retail, mixed-use and infill properties. The profile of these properties ranges from stabilized and value-added 38 properties to pre-development and construction.
As of December 31, 2024 and 2023, the real estate and related lease intangible assets and liabilities had a net carrying value of $125.3 million and $129.8 million, respectively, and the mortgage loans payable encumbering the real estate properties had an outstanding principal amount of $74.4 million and $73.5 million, respectively.
As of December 31, 2025 and 2024, the real estate and related lease intangible assets and liabilities had a net carrying value of $47.4 million and $125.3 million, respectively, and the mortgage loans payable encumbering the real estate properties had an outstanding principal amount of $20.7 million and $74.4 million, respectively.
As of December 31, 2024, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of 13 loans in nine states with an aggregate net principal balance of $299.3 million, a weighted average coupon rate of 12.5% and a weighted average remaining term to maturity of 1.0 years.
As of December 31, 2025, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of nine loans in seven states with an aggregate net principal balance of $192.4 million, a weighted average coupon rate of 13.4% and a weighted average remaining term to maturity of 0.7 years.
Interest from Obligations under Participation Agreements For the year ended December 31, 2024 as compared to the year ended December 31, 2023, interest expense from obligations under participation agreements increased by $1.6 million, primarily as a result of an increase in the weighted average principal amount outstanding as well as an increase in the weighted average interest rate on the obligations under participation agreements.
Interest from Obligations under Participation Agreements For the year ended December 31, 2025 as compared to the year ended December 31, 2024, interest expense from obligations under participation agreements increased by $0.7 million, primarily as a result of an increase in the weighted average principal amount outstanding.
For the years ended December 31, 2024 and 2023, the weighted average outstanding principal balance on obligations under participation agreements was approximately $14.5 million and $10.0 million, respectively, and the weighted average interest rate was approximately 18.6% and 17.4%, respectively.
For the years ended December 31, 2025 and 2024, the weighted average outstanding principal balance on obligations under participation agreements was approximately $18.9 million and $14.5 million, respectively, and the weighted average interest rate was approximately 18.5% and 18.6%, respectively. 53
For the year ended December 31, 2024 as compared to the year ended December 31, 2023, asset servicing fees decreased by $0.4 million, primarily due to a decrease in total assets under management resulting from the repayment of loans.
For the year ended December 31, 2025 as compared to the year ended December 31, 2024, asset servicing fees decreased by $0.3 million, primarily due to a decrease in total assets under management resulting from the repayment of loans as well as the sale of four industrial buildings in 2025.
One of the potential future liquidity transactions that we continue to evaluate is a “direct listing” of its Class A Common Stock, $0.01 par value per share (“Class A Common Stock”), on a national securities exchange (i.e., a listing not involving a concurrent public offering of newly issued shares).
One of the potential future liquidity transactions that we continue to evaluate is a “direct listing” of our Class A Common Stock on a national securities exchange (i.e., a listing not involving a concurrent public offering of newly issued shares).
For the year ended December 31, 2024 as compared to the year ended December 31, 2023, asset management fees decreased by $1.6 million, primarily due to a decrease in total assets under management resulting from repayment of loans.
For the year ended December 31, 2025 as compared to the year ended December 31, 2024, asset management fees decreased by $1.4 million, primarily due to a decrease in total assets under management resulting from repayment of loans as well as the sale of four industrial buildings in 2025.
W e also beneficially owned equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, and a preferred equity investment with residual profit-sharing. 46 Our income (loss) from equity interest in unconsolidated investments are as follows: Years Ended December 31, 2024 2023 Income from equity interest in RESOF $ 6,977,386 $ 1,125,790 Loss from equity interest in the joint ventures (5,483,997) (3,509,728) Income from other equity investment 1,245,021 — $ 2,738,410 $ (2,383,938) For the year ended December 31, 2024 as compared to the year ended December 31, 2023, equity income from RESOF increased as a result of an increase in RESOF’s net income associated with increased investments.
As of both December 31, 2025 and 2024, w e also beneficially owned equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, and a preferred equity investment with residual profit-sharing. 47 Our income (loss) from equity interest in unconsolidated investments are as follows: Years Ended December 31, 2025 2024 Income from equity interest in RESOF $ 8,661,998 $ 6,977,386 Income from equity interest in VS2 316,072 — Loss from equity interest in the joint ventures (8,293,140) (5,483,997) Income from other equity investment 2,598,344 1,245,021 $ 3,283,274 $ 2,738,410 For the year ended December 31, 2025 as compared to the year ended December 31, 2024, equity income from RESOF increased as a result of an increase in RESOF’s net income generated by an increase in the amount of invested capital.
The decrease in operating cash flows was primarily due to a decrease in net contractual interest income.
The increase in operating cash flows was primarily due to a decrease in contractual interest expense, partially offset by a decrease in contractual interest income.
Additionally, two promissory notes payable with a total outstanding principal balance of $22.3 million that is collateralized by senior loans with aggregate principal balance of $50.9 million will mature within the next twelve months. We expect to use proceeds from the repayment of the underlying loans to repay the promissory notes payable.
Additionally, secured borrowing with a total outstanding principal balance of $13.3 million that is collateralized by a senior loan with an aggregate principal balance of $31.8 million will mature within the next twelve months. We expect to use proceeds from the repayment of the underlying loan to repay the secured borrowing.
Allowance for Credit Losses On January 1, 2023, we adopted the provisions of ASU 2016-13, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.
Allowance for Credit Losses We follow the provisions of ASC 326, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.
Coupon rates shown were determined using average SOFR of 4.53% and Term SOFR of 4.33% as of December 31, 2024, and average SOFR of 5.34% and Term SOFR of 5.35% as of December 31, 2023.
Coupon rates shown were determined using the average SOFR of 3.79% and Term SOFR of 3.69% as of December 31, 2025 and average SOFR of 4.53% and Term SOFR of 4.33% as of December 31, 2024.
For the year ended December 31, 2024 as compared to the year ended December 31, 2023, interest expense on unsecured notes payable increased by $0.2 million, primarily due to an increase in the amortization of financing costs using the effective interest rate method.
For the year ended December 31, 2025 as compared to the year ended December 31, 2024, interest expense on unsecured notes payable increased by $0.1 million, primarily due to an increase in the amortization of financing costs using the effective interest rate method, partially offset by a decrease in interest expense driven by the retirement of 189,465 units of the 6.00% Senior Notes Due 2026 in 2025.
Interest 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.
In connection with the BDC Merger, we assumed $38.4 million in aggregate principal amount of 7.00% notes due in 2026.
Other equity investment relates to a preferred equity agreement in which we also share residual profit from the sale of underlying property with the borrower. There was no such investment during the year ended December 31, 2023.
Other equity investment relates to a preferred equity agreement we acquired in June 2024 in which we also share residual profit from the sale of underlying property with the borrower.
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.
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.
(4) Excludes nonperforming loans for which recovery of interest income was not probable. (5) Represents current effective maturity as of December 31, 2024 and 2023, exclusive of any extension options available. Real Estate Ownership In addition to our net loan portfolio, we own eight industrial buildings.
(5) Excludes loans that are in maturity default and represents current effective maturity as of December 31, 2025 and 2024, exclusive of any extension available. Real Estate Owned In addition to our net loan portfolio, we own four industrial buildings.
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.
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.
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.
Provision for Credit Losses We follow the provisions of Accounting Standards Codification 326, Financial Instruments – Credit Losses (“ASC 326”), which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.
Portfolio Investment Activity Net Loan Portfolio For the years ended December 31, 2024 and 2023, we invested $95.8 million and $37.1 million in new and add-on investments and had $112.7 million and $29.8 million of repayments, resulting in net repayments of $16.9 million and net investments of $7.3 million, respectively.
Our book value per share of Class B Common Stock as of December 31, 2025 and 2024 was $6.02 and $7.63, respectively. 40 Portfolio Investment Activity Net Loan Portfolio For the years ended December 31, 2025 and 2024, we invested $4.1 million and $95.8 million in new and add-on investments and had $17.8 million and $112.7 million of repayments, resulting in net repayments of $13.7 million and $16.9 million, respectively.
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.
Market Risk Our loans are highly illiquid, and there is no assurance that we will achieve our investment objectives, including targeted returns.
For the year ended December 31, 2024 as compared to the year ended December 31, 2023, interest expense on secured financing decreased by $3.1 million, as a result of a decrease in the weighted average principal amount outstanding as well as a decrease in the index rate on secured financing agreements.
For the year ended December 31, 2025 as compared to the year ended December 31, 2024, interest expense on secured financing decreased by $11.5 million as a result of a decrease in the weighted average principal amount outstanding. Interest Expense on Unsecured Notes Payable In June 2021, we issued $85.1 million in aggregate principal amount of 6.00% notes due 2026.
Interest Income For the year ended December 31, 2024 as compared to the year ended December 31, 2023, interest income decreased by $17.9 million, primarily due to a decrease in contractual interest income as a result of a decrease in the weighted average principal balance of performing loans as well as an increase in suspended interest income accrual on non-performing loans of $3.0 million.
(4) Subordinated loans include mezzanine loans, preferred equity investments and credit facilities. Interest Income For the year ended December 31, 2025 as compared to the year ended December 31, 2024, interest income decreased by $10.0 million, primarily due to a decrease in contractual interest income as a result of a decrease in the weighted average principal balance of performing loans.
Portfolio Summary Net Loan Portfolio The following tables provide a summary of our net loan portfolio as of: December 31, 2024 Fixed Rate Floating Rate (1)(2)(3) Total Gross Loans Obligations under Participation Agreements Total Net Loans Number of loans 2 11 13 1 13 Principal balance $ 12,680,463 $ 304,574,560 $ 317,255,023 $ 18,000,000 $ 299,255,023 Carrying value 12,106,695 262,542,450 274,649,145 18,177,107 256,472,038 Fair value 11,740,671 264,796,547 276,537,218 18,254,853 258,282,365 Weighted average coupon rate (4) 8.50 % 13.18 % 13.04 % 19.53 % 12.52 % Weighted-average remaining term (years) (5) 2.68 0.84 0.91 0.10 0.99 39 December 31, 2023 Fixed Rate Floating Rate (1)(2)(3) Total Gross Loans Obligations under Participation Agreements Total Net Loans Number of loans 5 16 21 — 21 Principal balance $ 53,998,648 $ 455,462,178 $ 509,460,826 $ — $ 509,460,826 Carrying value 54,095,173 402,377,085 456,472,258 — 456,472,258 Fair value 53,435,742 403,904,207 457,339,949 — 457,339,949 Weighted average coupon rate (4) 13.03 % 13.05 % 13.05 % — % 13.05 % Weighted-average remaining term (years) (5) 1.18 0.70 0.77 — 0.77 _______________ (1) These loans pay a coupon rate of Secured Overnight Financing Rate (“SOFR”), or forward-looking term rate SOFR (“Term SOFR”) plus a fixed spread.
December 31, 2025 Fixed Rate Floating Rate (1)(2)(3) Total Gross Loans Obligations under Participation Agreements Total Net Loans Number of loans 3 6 9 1 9 Principal balance $ 14,012,427 $ 196,429,911 $ 210,442,338 $ 18,020,576 $ 192,421,762 Carrying value 13,226,342 140,161,071 153,387,413 18,197,981 135,189,432 Fair value 13,133,944 139,806,938 152,940,882 18,197,981 134,742,901 Weighted average coupon rate (4) 9.42 % 14.46 % 14.16 % 18.79 % 13.44 % Weighted-average remaining term (years) (5) 1.48 0.59 0.71 — 0.71 39 December 31, 2024 Fixed Rate Floating Rate (1)(2)(3) Total Gross Loans Obligations under Participation Agreements Total Net Loans Number of loans 2 11 13 1 13 Principal balance $ 12,680,463 $ 304,574,560 $ 317,255,023 $ 18,000,000 $ 299,255,023 Carrying value 12,106,695 262,542,450 274,649,145 18,177,107 256,472,038 Fair value 11,740,671 264,796,547 276,537,218 18,254,853 258,282,365 Weighted average coupon rate (4) 8.50 % 13.18 % 13.04 % 19.53 % 12.52 % Weighted-average remaining term (years) (5) 2.68 0.84 0.91 0.10 0.99 _______________ (1) These loans pay a coupon rate of Secured Overnight Financing Rate (“SOFR”) or forward-looking term rate based on SOFR (“Term SOFR”), as applicable, plus a fixed spread.
Interest Expense on Secured Financing Our secured financing consists of repurchase agreements, revolving line of credit, term loan, promissory notes and property mortgages.
There was no such impairment charge for the year ended December 31, 2024. Interest Expense on Secured Financing Our secured financing agreements consisted of repurchase agreements, revolving line of credit, term loan, promissory notes, secured borrowings and property mortgages.
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. 50 The following table presents a summary of fees paid and costs reimbursed to our Manager in connection with providing services to us: Years Ended December 31, 2024 2023 Origination and extension fee expense (1) $ 1,334,709 $ 2,312,656 Asset management fee 6,207,231 7,807,198 Asset servicing fee 1,489,674 1,857,765 Operating expenses reimbursed to Manager 7,468,132 9,234,357 Disposition fee (2) 907,224 1,451,063 Total $ 17,406,970 $ 22,663,039 _______________ (1) Origination and extension fee expense is generally offset with origination and extension fee income.
The following table presents a summary of fees paid and costs reimbursed to our Manager in connection with providing services to us: Years Ended December 31, 2025 2024 Origination and extension fee expense (1) $ 1,189,878 $ 1,334,709 Asset management fee 4,786,640 6,207,231 Asset servicing fee 1,143,783 1,489,674 Operating expenses reimbursed to Manager 4,035,222 7,468,132 Disposition fee (2) 1,698,415 907,224 Total $ 12,853,938 $ 17,406,970 _______________ (1) Origination and extension fee expense is generally offset with origination and extension fee income.
For the year ended December 31, 2024 as compared to the year ended December 31, 2023, equity loss from the joint ventures increased primarily due to an increase in operating expenses, depreciation and amortization, and interest expense recognized by the joint ventures, partially offset by an increase in revenues and a gain on sale of real estate recognized by the joint ventures.
For the year ended December 31, 2025 as compared to the year ended December 31, 2024, equity loss from the joint ventures increased primarily due to a loss recognized in 2025 by a joint venture in connection with a loss incurred on a portfolio investment as well as a gain recognized by a joint venture in connection with the sale of property in 2024.
These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for our business. We expect to fund approximately $18.7 million of the unfunded commitments to borrowers during the next twelve months.
These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for our business.
Amounts are net of obligations under participation agreements and secured financing agreements. 40 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: December 31, 2024 December 31, 2023 Loan Structure Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total First mortgages $ 207,985,740 $ 209,496,879 81.6 % $ 365,465,500 $ 354,004,530 77.5 % Preferred equity investments 76,224,551 31,937,149 12.5 % 126,550,969 85,222,201 18.7 % Mezzanine loans 15,044,732 15,038,010 5.9 % 17,444,357 17,245,527 3.8 % Total $ 299,255,023 $ 256,472,038 100.0 % $ 509,460,826 $ 456,472,258 100.0 % December 31, 2024 December 31, 2023 Property Type Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total Office $ 116,539,650 $ 72,991,791 28.4 % $ 144,812,619 $ 106,462,535 23.3 % Infill land 56,307,815 57,050,952 22.2 % 52,839,509 54,024,545 11.8 % Multifamily 60,969,051 60,662,514 23.7 % 85,660,082 84,417,184 18.5 % Mixed-use 30,438,507 29,890,548 11.7 % 63,096,365 47,362,653 10.4 % Student housing 28,000,000 28,910,000 11.3 % 31,000,000 31,758,493 7.0 % Industrial 7,000,000 6,966,233 2.7 % 67,579,869 67,543,553 14.8 % Hotel - full/select service — — — % 43,222,382 43,460,206 9.5 % Infrastructure — — — % 21,250,000 21,443,089 4.7 % Total $ 299,255,023 $ 256,472,038 100.0 % $ 509,460,826 $ 456,472,258 100.0 % December 31, 2024 December 31, 2023 Geographic Location Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total United States California $ 53,006,023 $ 53,096,008 20.6 % $ 119,093,246 $ 117,955,109 25.9 % Arizona 33,407,815 33,005,952 12.9 % 31,000,000 31,151,623 6.8 % New York 75,657,255 31,536,808 12.3 % 90,483,672 49,041,668 10.7 % Georgia 30,562,858 30,586,450 11.9 % 74,335,828 62,564,770 13.8 % Utah 28,000,000 28,910,000 11.3 % 49,250,000 50,293,850 11.0 % Washington 26,894,593 26,907,157 10.5 % 34,052,223 33,908,737 7.4 % New Jersey 22,900,000 24,045,000 9.4 % 82,419,378 83,485,543 18.3 % North Carolina 21,826,479 21,418,430 8.4 % 21,826,479 21,140,026 4.6 % Massachusetts 7,000,000 6,966,233 2.7 % 7,000,000 6,930,932 1.5 % Total $ 299,255,023 $ 256,472,038 100.0 % $ 509,460,826 $ 456,472,258 100.0 % 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.
December 31, 2025 December 31, 2024 Loan Structure Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total First mortgages $ 86,456,898 $ 88,060,452 65.2 % $ 207,985,740 $ 209,496,879 81.6 % Mezzanine loans 24,703,471 24,763,765 18.3 % 15,044,732 15,038,010 5.9 % Preferred equity investments 81,261,393 22,365,215 16.5 % 76,224,551 31,937,149 12.5 % Total $ 192,421,762 $ 135,189,432 100.0 % $ 299,255,023 $ 256,472,038 100.0 % December 31, 2025 December 31, 2024 Property Type Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total Office $ 101,711,046 $ 43,696,575 32.3 % $ 116,539,650 $ 72,991,791 28.4 % Infill land 40,609,561 41,821,242 30.9 % 56,307,815 57,050,952 22.2 % Multifamily 37,855,514 37,390,000 27.7 % 60,969,051 60,662,514 23.7 % Industrial 7,000,000 6,993,917 5.2 % 7,000,000 6,966,233 2.7 % Mixed-use 4,272,174 4,314,231 3.2 % 30,438,507 29,890,548 11.7 % Retail 973,467 973,467 0.7 % — — — % Student housing — — — % 28,000,000 28,910,000 11.3 % Total $ 192,421,762 $ 135,189,432 100.0 % $ 299,255,023 $ 256,472,038 100.0 % December 31, 2025 December 31, 2024 Geographic Location Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total United States California $ 36,088,728 $ 36,445,271 27.0 % $ 53,006,023 $ 53,096,008 20.6 % Georgia 31,734,254 31,878,019 23.6 % 30,562,858 30,586,450 11.9 % New Jersey 22,906,090 24,051,394 17.8 % 22,900,000 24,045,000 9.4 % Arizona 17,703,471 17,769,848 13.1 % 33,407,815 33,005,952 12.9 % New York 76,015,752 17,077,516 12.6 % 75,657,255 31,536,808 12.3 % Massachusetts 7,000,000 6,993,917 5.2 % 7,000,000 6,966,233 2.7 % Illinois 973,467 973,467 0.7 % — — — % Washington — — — % 26,894,593 26,907,157 10.5 % North Carolina — — — % 21,826,479 21,418,430 8.4 % Utah — — — % 28,000,000 28,910,000 11.3 % Total $ 192,421,762 $ 135,189,432 100.0 % $ 299,255,023 $ 256,472,038 100.0 % 41 Factors Impacting Operating Results Our results of operations are affected by a number of factors and primarily depend on, among other things, the level of the interest income from targeted assets, the market value of our assets and the supply of, and demand for, real estate-related loans, including mezzanine loans, first mortgage loans, subordinated mortgage loans, preferred equity investments and other loans related to high quality commercial real estate in the United States, and the financing and other costs associated with our business.
(“Terra BDC”) merged with and into Terra Income Fund 6, LLC (“Terra LLC”), our wholly owned subsidiary, with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as our wholly owned subsidiary.
On October 1, 2022, pursuant to that certain Merger Agreement, Terra BDC merged with and into Terra LLC, our wholly owned subsidiary, with Terra LLC continuing as the surviving entity of the merger and as our wholly owned subsidiary.
Real Estate Operating Expenses For the year ended December 31, 2024 as compared to the year ended December 31, 2023, real estate operating expenses decreased by $1.9 million, primarily due to the disposal of the office building in October 2023 which resulted in a reduction in rent expense of $1.5 million. 45 Depreciation and Amortization For the year ended December 31, 2024 as compared to the year ended December 31, 2023, depreciation and amortization increased by $0.4 million, primarily due to the five industrial buildings that we acquired in May 2023, partially offset by a reduction in depreciation and amortization related to the disposal of the office building in October 2023.
Real Estate Operating Expenses For the year ended December 31, 2025 as compared to the year ended December 31, 2024, real estate operating expenses increased by $0.4 million, primarily due to an increase in real estate taxes as well as an increase in repairs and maintenance, partially offset by a reduction in operating expenses driven by the sale of four industrial buildings in 2025.
Income (Loss) from Equity Interest in Unconsolidated Investments As of both December 31, 2024 and December 31, 2023, we owned a 14.9% equity interest in RESOF, an affiliated limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.
Both RESOF and VS2 are affiliated limited partnerships that invest primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.
Loss on Disposal of Real Estate In October 2023, we conveyed our interest in an office building to the lender by deed in lieu of foreclosure and recognized a net loss on disposal of real estate of $4.2 million for the year ended December 31, 2023. There was no such loss for the year ended December 31, 2024.
Loss on Sale of Real Estate, Net For the year ended December 31, 2025, we sold four industrial buildings, and recognized a net loss on sale of $2.9 million. There was no such gain or loss for the year ended December 31, 2024.
For the year ended December 31, 2023, cash flows used in financing activities were $15.5 million, primarily related to principal repayments on secured financing of $205.3 million, distributions paid of $18.6 million and payment for financing costs of $3.3 million, partially offset by proceeds from secured financing of $211.0 million.
Cash Flows Used in Financing Activities For the year ended December 31, 2025, cash flows used in financing activities were $163.6 million, primarily related to principal repayments on secured financing of $170.9 million, distributions paid of $11.6 million, repayments on unsecured notes payable of $4.2 million, repayments on obligations under participation agreements of $2.6 million and a decrease in interest reserve and other deposits held on investments of $1.7 million, partially offset by proceeds from secured financing of $24.8 million and proceeds from obligations under participation agreements of $2.6 million.
(2) As of December 31, 2024 and 2023, amount included $208.0 million and $342.9 million of senior mortgages used as collateral for $123.2 million and $204.9 million of borrowings under credit facilities, respectively. (3) As of December 31, 2024 and 2023, 10 and 14 loans, respectively, are subject to a SOFR, or Term SOFR floor, as applicable.
(2) As of December 31, 2025 and 2024, amount included $63.6 million and $208.0 million of senior mortgages used as collateral for $31.3 million and $123.2 million of borrowings under secured financing agreements, respectively ( Note 8 ).
For the year ended December 31, 2023, provision for credit losses was $45.5 million, primarily related to the decline in our estimated recoverable amount on three non-performing loans in the investment portfolio due to a decline in the macroeconomic outlook for commercial real estate.
For the year ended December 31, 2025, provision for credit losses was $12.8 million, primarily due to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in funding on the senior loan as well as a decrease in the estimated fair value of underlying collateral.
For the year ended December 31, 2023, cash flows used in investing activities were $10.0 million, primarily related to origination and purchase of loans of $78.9 million, purchase of real estate properties of $52.5 million, purchase of held-to-maturity securities of $20.0 million, purchase of marketable securities of $7.9 million, purchase of equity interests in unconsolidated investments of $7.3 million, and funding for promissory note receivable of $3.8 million, partially offset by proceeds from repayments of loans of $126.1 million, proceeds from redemption of held-to-maturity securities of $20.0 million, return of capital on unconsolidated investments of $11.3 million, and proceeds from sale of marketable equity securities of $2.4 million.
Cash Flows Provided by Investing Activities For the year ended December 31, 2025, cash flows provided by investing activities were $180.6 million, primarily related to proceeds from repayment of loans of $136.4 million, proceeds from sale of real estate of $69.1 million and distributions received in excess of income of $5.5 million, partially offset by origination, purchase and funding of loans of $29.6 million.
Professional Fees For the year ended December 31, 2024 as compared to the year ended December 31, 2023, professional fees decreased by $0.7 million, primarily due to legal fees incurred in connection with a review of strategic alternatives for our company in 2023.
Depreciation and Amortization For the year ended December 31, 2025 as compared to the year ended December 31, 2024, depreciation and amortization decreased by $3.5 million, primarily due to the sale of four industrial buildings in 2025, as well as the write off of the unamortized in-place lease intangibles in January 2024 in connection with a lease termination.
There was no such prepayment fee income for the year ended December 31, 2023. Other Operating Income For the year ended December 31, 2024 as compared to the year ended December 31, 2023, other operating income decreased by $0.5 million, primarily due to a decline in dividend income earned on our marketable securities.
Prepayment Fee Income There was no prepayment fee income for the year ended December 31, 2025. For the year ended December 31, 2024 prepayment fee income was $0.4 million, related to the early repayment of one of our loans.
Real Estate Operating Revenue For the year ended December 31, 2024 as compared to the year ended December 31, 2023, real estate operating revenue decreased by $0.3 million, primarily due to a reduction in lease revenue resulting from the disposal of the office building in October 2023, partially offset by an increase in lease revenue contributed by the five industrial buildings acquired in May 2023. 44 Prepayment Fee Income For the year ended December 31, 2024 prepayment fee income was $0.4 million, related to the early repayment of one of our loans.
Real Estate Operating Revenue For the year ended December 31, 2025 as compared to the year ended December 31, 2024, real estate operating revenue decreased by $3.9 million, primarily due to the sale of four industrial buildings in 2025, the expiration of a lease in December 2024, and the write off of an unamortized below-market rent intangible in January 2024 in connection with a lease termination.
Summary of Financing The table below summarizes our debt financing as of December 31, 2024: Type of Financing Maximum Amount Available Outstanding Balance Amount Remaining Available Interest Rate Maturity Date Fixed Rate: Unsecured notes payable N/A $ 85,125,000 N/A 6.00% June 2026 Unsecured notes payable N/A 38,375,000 N/A 7.00% March 2026 Property mortgages N/A 40,250,000 N/A 6.25% June 2028 Term loan payable N/A 10,000,000 N/A Interest free until 6/30/2025, after that 9.00% December 2027 $ 173,750,000 Variable Rate: Property mortgages N/A $ 34,100,000 N/A Term SOFR +3.5% (Term SOFR Floor of 3.75%) April 2027 Promissory notes payable N/A 40,694,390 N/A Term SOFR plus a spread ranging from 4.75% to 5.98% with a combined floor rate ranging from 9.0% to 11.28% March 2025 - March 2026 Secured borrowing N/A 18,000,000 N/A Term SOFR + 5%, (combined floor rate of 9.85% November 2026 Revolving line of credit (1) 16,361,111 16,361,111 — Term SOFR + 3.5% (combined floor rate of 7.0%) December 2024 Goldman Sachs Bank repurchase agreement (2) 48,188,441 48,188,441 — Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 2.0% to 5.00%) February 2025 $ 64,549,552 $ 157,343,942 $ — _______________ (1) In January 2025, the maturity of the facility was extended to June 30, 2025.
The timing and amount of any transactions will be determined by our Manager based on its evaluation of market conditions, prices, legal requirements and other factors, and may be made from time to time on the open market, in privately negotiated transactions or otherwise, in each case subject to compliance with all SEC rules and other legal requirements. 49 Summary of Financing The table below summarizes our debt financing as of December 31, 2025: Type of Financing Outstanding Balance Interest Rate Maturity Date Fixed Rate: Unsecured notes payable $ 80,388,375 6.00% June 2026 Unsecured notes payable 38,375,000 7.00% March 2026 Property mortgages 20,700,000 6.25% June 2028 Term loan payable 10,000,000 9.00% December 2027 $ 149,463,375 Variable Rate: Secured borrowing 31,250,000 Term SOFR + 5%, (combined floor rate ranging from 9.32% to 9.85%) Nov 2026 - Jun 2027 $ 31,250,000 Cash Flows Provided by (Used in) Operating Activities For the year ended December 31, 2025, cash flows provided by operating activities were $1.9 million compared to cash used in operating activities of $3.3 million for the year ended December 31, 2024.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−0 removed7 unchanged
Biggest changeAs 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. 52 The following table summarizes the aggregate principal balance of variable rate investments and indebtedness as of: December 31, 2024 Variable rate investments $ 304,574,560 Variable rate debt $ 157,343,942 The following table summarizes estimated changes in net investment income on our variable rate investments and indebtedness as of December 31, 2024 assuming hypothetical increases or decreases in Term SOFR or SOFR: 1.00% Decrease 1.00% Increase Increase (decrease) in investment income from variable rate investments $ (2,487,373) $ 3,045,746 Decrease (increase) in interest expense from variable rate debt 831,933 (1,274,517) Net increase (decrease) in investment income from variable rate instruments $ (1,655,440) $ 1,771,229 We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts.
Biggest changeThe following table summarizes the aggregate principal balance of variable rate investments and indebtedness as of: December 31, 2025 Variable rate investments $ 178,409,335 Variable rate debt $ 31,250,000 The following table summarizes estimated changes in net investment income on our variable rate investments and indebtedness as of December 31, 2025 assuming hypothetical increases or decreases in Term SOFR or SOFR: 1.00% Decrease 1.00% Increase Increase (decrease) in investment income from variable rate investments $ (1,288,893) $ 1,357,496 Decrease (increase) in interest expense from variable rate debt (1) — (66,152) Net increase (decrease) in investment income from variable rate instruments $ (1,288,893) $ 1,291,344 _______________ (1) A 1.00% decrease in Term SOFR or SOFR had no impact on interest expense because the interest rate on the debt is subject to a floor.
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.
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; 54 pandemics; natural disasters; and other Acts of God.
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. 53
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.
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.
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.
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 years ended December 31, 2024 and 2023, we did not engage in interest rate hedging activities that qualify for hedge accounting.
We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts. 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.
In periods of rising interest rates, our cost of funds would increase, which may reduce our net investment income.
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.
Added
For the years ended December 31, 2025 and 2024, we did not engage in interest rate hedging activities that qualify for hedge accounting. Prepayment Risks Prepayments can either positively or adversely affect the yields on our loans.

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