# EDGAR Filing Document

**Accession Number:** 0001674356
**File Stem:** 0001674356-23-000005
**Filing Date:** 2023-3
**Character Count:** 646191
**Document Hash:** 0004023f2c3c475e60f5f7419f9e421a
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001674356-23-000005.hdr.sgml**: 20230313

**ACCESSION NUMBER**: 0001674356-23-000005

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 110

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230313

**DATE AS OF CHANGE**: 20230310

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Terra Property Trust, Inc.
- **CENTRAL INDEX KEY:** 0001674356
- **STANDARD INDUSTRIAL CLASSIFICATION:** REAL ESTATE INVESTMENT TRUSTS [6798]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** MD
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40496
- **FILM NUMBER:** 23725219

**BUSINESS ADDRESS:**
- **STREET 1:** 805 THIRD AVENUE
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10022
- **BUSINESS PHONE:** 212-754-5100

**MAIL ADDRESS:**
- **STREET 1:** 805 THIRD AVENUE
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10022

?xml version="1.0" ? tpt-20221231

**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K** 

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| | |
|:---|:---|
| ☑ | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

---

**For the Fiscal Year Ended December 31, 2022** 

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the Transition Period from to**

**Commission File Number: 001-40496** 

**Terra Property Trust, Inc.** 

**(Exact name of registrant as specified in its charter)**

---

| | |
|:---|:---|
| **Maryland** | **81-0963486** |
| **(State or other jurisdiction of<br>incorporation or organization)** | **(I.R.S. Employer<br>Identification No.)** |

---

**205 West 28th Street, 12**<sup>th</sup> **Floor** 

**New York, New York 10001** 

**(Address of principal executive offices)**

**(212) 753-5100** 

**(Registrant's telephone number, including area code)**

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

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| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of exchange on <br>which registered** |
| **6.00% Notes due 2026** | **TPTA** | **New York Stock Exchange** |

---

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

**Class A Common Stock $0.01 par value per share**

**Class B Common Stock, $0.01 par value per share**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes □ No 🗹

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes □ No 🗹

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 🗹No □

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes 🗹 No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ◻ | Accelerated filer | ◻ |
| Non-accelerated filer | 🗹 | Smaller reporting company | ☑ |
| | | Emerging growth company | ☑ |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☑

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of March 10, 2023, the registrant had 24,335,379 shares of Class B Common Stock, $0.01 par value, outstanding. No market value has been computed based upon the fact that no active trading market had been established as of the date of this document.

**Documents Incorporated by Reference**

The registrant incorporates by reference its definitive Proxy Statement with respect to its 2023 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of its fiscal year, into Part III of this Annual Report on Form 10-K.

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**TABLE OF CONTENTS**

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| | |
|:---|:---|
| | **Page** |
| **PART I** | |
| <u>[Item 1. Business](#i8c55800180e74ade95e69ecdac0328fb_166)</u> | <u>[1](#i8c55800180e74ade95e69ecdac0328fb_166)</u> |
| <u>[Item 1A. Risk Factors](#i8c55800180e74ade95e69ecdac0328fb_169)</u> | <u>[10](#i8c55800180e74ade95e69ecdac0328fb_169)</u> |
| <u>[Item 1B. Unresolved Staff Comments](#i8c55800180e74ade95e69ecdac0328fb_172)</u> | <u>[36](#i8c55800180e74ade95e69ecdac0328fb_172)</u> |
| <u>[Item 2. Properties](#i8c55800180e74ade95e69ecdac0328fb_175)</u> | <u>[36](#i8c55800180e74ade95e69ecdac0328fb_175)</u> |
| <u>[Item 3. Legal Proceedings](#i8c55800180e74ade95e69ecdac0328fb_178)</u> | <u>[36](#i8c55800180e74ade95e69ecdac0328fb_178)</u> |
| <u>[Item 4. Mine Safety Disclosures](#i8c55800180e74ade95e69ecdac0328fb_181)</u> | <u>[36](#i8c55800180e74ade95e69ecdac0328fb_181)</u> |
| **PART II** |  |
| <u>[Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#i8c55800180e74ade95e69ecdac0328fb_127)</u> | <u>[36](#i8c55800180e74ade95e69ecdac0328fb_127)</u> |
| <u>[Item 6. \[Reserved\]](#i8c55800180e74ade95e69ecdac0328fb_130)</u> | <u>[36](#i8c55800180e74ade95e69ecdac0328fb_130)</u> |
| <u>[Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](#i8c55800180e74ade95e69ecdac0328fb_100)</u> | <u>[37](#i8c55800180e74ade95e69ecdac0328fb_100)</u> |
| <u>[Item 7A. Quantitative and Qualitative Disclosures about Market Risk](#i8c55800180e74ade95e69ecdac0328fb_118)</u> | <u>[52](#i8c55800180e74ade95e69ecdac0328fb_118)</u> |
| <u>[Item 8. Financial Statements and Supplementary Data](#i8c55800180e74ade95e69ecdac0328fb_133)</u> | <u>[54](#i8c55800180e74ade95e69ecdac0328fb_133)</u> |
| <u>[Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#i8c55800180e74ade95e69ecdac0328fb_136)</u> | <u>[54](#i8c55800180e74ade95e69ecdac0328fb_136)</u> |
| <u>[Item 9A. Controls and Procedures](#i8c55800180e74ade95e69ecdac0328fb_121)</u> | <u>[54](#i8c55800180e74ade95e69ecdac0328fb_121)</u> |
| <u>[Item 9B. Other Information](#i8c55800180e74ade95e69ecdac0328fb_139)</u> | <u>[55](#i8c55800180e74ade95e69ecdac0328fb_139)</u> |
| <u>[Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#i8c55800180e74ade95e69ecdac0328fb_142)</u> | <u>[55](#i8c55800180e74ade95e69ecdac0328fb_142)</u> |
| **PART III** |  |
| <u>[Item 10. Directors, Executive Officers and Corporate Governance](#i8c55800180e74ade95e69ecdac0328fb_187)</u> | <u>[55](#i8c55800180e74ade95e69ecdac0328fb_187)</u> |
| <u>[Item 11. Executive Compensation](#i8c55800180e74ade95e69ecdac0328fb_190)</u> | <u>[55](#i8c55800180e74ade95e69ecdac0328fb_190)</u> |
| <u>[Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#i8c55800180e74ade95e69ecdac0328fb_193)</u> | <u>[55](#i8c55800180e74ade95e69ecdac0328fb_193)</u> |
| <u>[Item 13. Certain Relationships and Related Transactions, and Director Independence](#i8c55800180e74ade95e69ecdac0328fb_196)</u> | <u>[55](#i8c55800180e74ade95e69ecdac0328fb_196)</u> |
| <u>[Item 14. Principal Accountant Fees and Services](#i8c55800180e74ade95e69ecdac0328fb_199)</u> | <u>[56](#i8c55800180e74ade95e69ecdac0328fb_199)</u> |
| **PART IV** |  |
| <u>[Item 15. Exhibits and Financial Statement Schedules](#i8c55800180e74ade95e69ecdac0328fb_205)</u> | <u>[56](#i8c55800180e74ade95e69ecdac0328fb_205)</u> |
| <u>[Item 16. Form 10-K Summary](#i8c55800180e74ade95e69ecdac0328fb_208)</u> | <u>[58](#i8c55800180e74ade95e69ecdac0328fb_208)</u> |
| <u>[Signatures](#i8c55800180e74ade95e69ecdac0328fb_214)</u> | <u>[59](#i8c55800180e74ade95e69ecdac0328fb_214)</u> |

---

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**CERTAIN DEFINITIONS**

Except as otherwise specified herein, the terms: "we," "us," "our," "our company" and the "company" refer to Terra Property Trust, Inc., a Maryland corporation, together with its subsidiaries. Additionally, the following defined terms are used in this Annual Report on Form 10-K.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• "Terra Capital Advisors" refers to Terra Capital Advisors, LLC, a subsidiary of Terra Capital Partners, LLC;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• "Terra Capital Advisors 2" refers to Terra Capital Advisors 2, LLC, a subsidiary of Terra Capital Advisors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• "Terra Capital Partners" refers to Terra Capital Partners, LLC, our sponsor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• "Terra Fund 1" refers to Terra Secured Income Fund, LLC; "Terra Fund 2" refers to Terra Secured Income Fund 2, LLC; "Terra Fund 3" refers to Terra Secured Income Fund 3, LLC; "Terra JV" refers to Terra JV, LLC (formerly known as Terra Secured Income Fund 4, LLC or Terra Fund 4); "Terra Fund 5" refers to Terra Secured Income Fund 5, LLC; "Fund 5 International" refers to Terra Secured Income Fund 5 International; "TIFI" refers to Terra Income Fund International; "Terra BDC" refers to Terra Income Fund 6, Inc.; "Terra Offshore REIT" refers to Terra Offshore Funds REIT, LLC; "Terra Fund 7" refers to Terra Secured Income Fund 7, LLC; "Terra Property Trust 2" refers to Terra Property Trust 2, Inc., formerly a subsidiary of Terra Fund 7; "RESOF" refers to Mavik Real Estate Special Opportunities Fund, L.P.; "RESOF REIT" refers to Mavik Real Estate Special Opportunities Fund REIT, LLC, a subsidiary of RESOF; and "Terra LLC" refers to Terra Income Fund 6, LLC (formerly Terra Merger Sub, LLC), our wholly owned subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• "Terra Fund Advisors" refers to Terra Fund Advisors, LLC, an affiliate of Terra Capital Partners, and the manager of Terra Fund 5;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• "Terra Funds" refer to Terra Fund 1, Terra Fund 2, Terra Fund 3, Terra Fund 4 and Terra Fund 5, collectively;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• "Terra Income Advisors" refers to Terra Income Advisors, LLC, an affiliate of Terra Capital Partners;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• "Terra Income Advisors 2" refers to Terra Income Advisors 2, LLC, an affiliate of Terra Capital Partners; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• "Terra REIT Advisors" or our "Manager" refers to Terra REIT Advisors, LLC, a subsidiary of Terra Capital Partners and our external manager.

**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**

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

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

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

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

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in our investment objectives and business strategy;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the performance and financial condition of our borrowers;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• borrower defaults or decreased recovery rates from our borrowers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in prepayment rates on our loans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our use of financial leverage;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• actual and potential conflicts of interest with any of the following affiliated entities: our Manager, Terra Income Advisors, Terra Capital Partners, Terra Fund 7, Terra 5 International, TIFI, Terra Offshore REIT, RESOF, or any of their affiliates;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• liquidity transactions that may be available to us in the future, including a liquidation of our assets, a sale of our company, a listing of our shares of common stock on a national securities exchange, or an adoption of a share repurchase plan or a strategic business combination, in each case, which may include the distribution of our common stock indirectly owned by certain of our affiliate funds to the ultimate investors in the Terra Funds, and the timing of any such transactions;

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the degree and nature of our competition.

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in the economy;

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

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

We have based the forward-looking statements included in this Annual Report on Form 10-K on information available to us on the date of this Annual Report on Form 10-K. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders are advised to consult any additional disclosures that we may make directly to stockholders or through reports that

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we may file in the future with the Securities and Exchange Commission (the "SEC"), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

**RISK FACTOR SUMMARY**

We are subject to numerous risks and uncertainties that could cause our actual results and future events to differ materially from those set forth or contemplated in our forward-looking statements, including those summarized below. The following list of risks and uncertainties is only a summary of some of the most important factors and is not intended to be exhaustive. This risk factor summary should be read together with the more detailed discussion of risks and uncertainties set forth under "Risk Factors."

**Risks Related to Owning Our Common Stock**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Common stock and preferred stock eligible for future sale may have adverse effects on our share price.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our principal stockholders, which are currently controlled by affiliates of our Manager, own a significant amount of our outstanding shares of common stock, which is sufficient to approve or veto most corporate actions requiring a vote of our stockholders.

**Risks Related to Our Business**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in national, regional or local economic, demographic or real estate market conditions may adversely affect our results of operations, our financial position, the value of our assets and our cash flows.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Inflation in the U.S. has accelerated recently and is currently expected to continue at an elevated level in the near-to medium-term, which may have an adverse impact on the valuation of our investments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The lack of liquidity of our assets may adversely affect our business, including our ability to value and sell our assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our investments are selected by our Manager and our investors will not have input into investment decisions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• If our Manager underestimates the borrower's credit analysis or originates loans by using an exception to its loan underwriting guidelines, we may experience losses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in interest rates could adversely affect the demand for our target loans, the value of our loans, commercial mortgage-backed securities ("CMBS") and other real-estate debt or equity assets and the availability and yield on our targeted assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our loan portfolio may at times be concentrated in certain property types or secured by properties concentrated in a limited number of geographic areas, which increases our exposure to economic downturn with respect to those property types or geographic locations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The mezzanine loans, preferred equity and other subordinated loans in which we invest involve greater risks of loss than senior loans secured by income-producing commercial properties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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.

**Risks Related to Regulation**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Maintenance of our 1940 Act exclusion imposes limits on our operations.

**Risks Related to Our Management and Our Relationship With Our Manager**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We rely entirely on the management team and employees of our Manager for our day-to-day operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We face certain conflicts of interest with respect to our operations and our relationship with our Manager and its affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The compensation that our Manager receives was not determined on an arm's-length basis and therefore may not be on the same terms as we could achieve from a third-party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our Manager and its affiliates have limited prior experience operating a REIT and therefore may have difficulty in successfully and profitably operating our business or complying with regulatory requirements, including REIT provisions of the Internal Revenue Code of 1986, as amended (the "Code"), which may hinder their ability to achieve our objectives or result in loss of our qualification as a REIT.

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**Risks Related to Financing and Hedging**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our inability to access funding could have a material adverse effect on our results of operations, financial condition and business. We may rely on short-term financing and thus are especially exposed to changes in the availability of financing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We may enter into hedging transactions that could expose us to contingent liabilities in the future and adversely impact our financial condition.

**Risks Related to Our Organization and Structure**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exclusion from the 1940 Act.

**Risks Related to Our Qualification as a REIT**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our failure to qualify or remain qualified as a REIT would subject us to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of cash available for principal and interest payments on the notes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• REIT distribution requirements could adversely affect our ability to execute our business plan and may require us to incur debt or sell assets to make such distributions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Complying with the REIT requirements may force us to liquidate or forego otherwise attractive investments.

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**PART I** 

**Item 1. Business.**

**Overview**

&nbsp;&nbsp;&nbsp;&nbsp;We are a real estate credit focused company that originates, structures, funds and manages commercial real estate credit investments, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments throughout the United States, which we collectively refer to as our targeted assets. Our loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. We focus on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties primarily in primary and secondary markets. We believe loans in this size range are subject to less competition, offer higher risk adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. Our investment objective is to provide attractive risk-adjusted returns to our stockholders, primarily through regular distributions. There can be no assurances that we will be successful in meeting our investment objective.

&nbsp;&nbsp;&nbsp;&nbsp;Each of our loans was originated by Terra Capital Partners or its affiliates. Our portfolio is diversified based on location of the underlying properties, loan structure and property type. As of December 31, 2022, our portfolio included underlying properties located in 31 markets, across ten states and includes property types such as multifamily housing, hotels, student housing, commercial offices, medical offices, mixed-use and industrial properties. The profile of these properties ranges from stabilized and value-added properties to pre-development and construction. Our loans are structured across mezzanine debt, first mortgages, preferred equity investments and credit facilities.

&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated under the general corporation laws of the State of Maryland on December 31, 2015. Through December 31, 2015, our business was conducted through a series of predecessor private partnerships. At the beginning of 2016, we completed the merger of these private partnerships into a single entity as part of our plan to reorganize our business as a REIT for federal income tax purposes (the "REIT formation transaction"). 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.

&nbsp;&nbsp;&nbsp;&nbsp;On March 1, 2020, Terra Property Trust 2 merged with and into our company, and we continued as the surviving corporation (the "Merger"). 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. 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. 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 ("Issuance of Common Stock to Terra Offshore REIT").

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

At the Effective Time, except for any shares of 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.

Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of the Closing Date. Following the consummation of the BDC Merger and as of December 31, 2022, former Terra BDC stockholders owned approximately 19.9% of our common equity, Terra JV held

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70.0% of the issued and outstanding shares of our common stock with the remainder of 10.1% held by Terra Offshore REIT; and Terra Fund 5 and Terra Fund 7 owned an 87.6% and 12.4% interest, respectively, in Terra JV.

On the Closing Date, we filed with the SDAT our Articles of Amendment to the Articles of Amendment and Restatement (the "Charter Amendment"). 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.

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 as set forth below with respect to conversion.

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

As previously disclosed, we continue to explore alternative liquidity transactions on an opportunistic basis to maximize stockholder value. Examples of the alternative liquidity transactions that, depending on market conditions, may be available to us include a listing of our shares of common stock on a national securities exchange, adoption of a share repurchase plan, a liquidation of our assets, a sale of our company or a strategic business combination, in each case, which may include the in-kind distribution of our shares of common stock indirectly owned by certain Terra Funds to the ultimate investors in the Terra Funds. We may pursue such a liquidity transaction as early as 2023, but 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 have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2016. So long as we qualify as a REIT, we generally are not subject to U.S. federal income tax on our net taxable income to the extent that we annually distribute all of our net taxable income to our stockholders.

**Our Manager, MAVIK Capital Management, LP and Terra Capital Partners**

&nbsp;&nbsp;&nbsp;&nbsp;We are externally managed by our Manager, which is registered as an investment adviser under the Investment Advisers Act of 1940 Act, and is a subsidiary of Terra Capital Partners.

On April 1, 2021, MAVIK Capital Management, LP ("Mavik"), an entity controlled by Vikram S. Uppal, our Chief Executive Officer, completed a series of related transactions that resulted in all of the outstanding interests in Terra Capital Partners being acquired by Mavik for a combination of cash and interests in Mavik (the "Recapitalization"). As part of the Recapitalization, a private fund managed by a division of a publicly-traded alternative asset manager, acquired a passive interest consisting of "non-voting securities," as that term is defined under the 1940 Act, in Mavik.&nbsp;&nbsp;&nbsp;&nbsp;

Terra Capital Partners is led by Vikram S. Uppal (Chief Executive Officer), Gregory M. Pinkus (Chief Financial Officer) and Daniel Cooperman (Chief Originations Officer). Mr. Uppal was a Partner of Axar Capital Management L.P. ("Axar Capital Management") and its Head of Real Estate. Prior to Axar Capital Management, Mr. Uppal was a Managing Director on the Investment Team at Fortress Investment Group's Credit and Real Estate Funds and Co-Head of North American Real Estate Investments at Mount Kellett Capital Management. Members of the Terra Capital Partners management team have broad based, long-term relationships with major financial institutions, property owners and commercial real estate service providers. The

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entire senior management team has held leadership roles at many top international real estate and investment banking firms, including Mount Kellett Capital Management and Fortress Investment Group.

Terra Capital Partners is a real estate credit focused investment manager based in New York City with a 19-year track record focused primarily on the origination and management of mezzanine loans, as well as first mortgage loans, bridge loans, and preferred equity investments in all major property types through multiple public and private pooled investment vehicles. Since its formation in 2001 and its commencement of operations in 2002, Terra Capital Partners has been engaged in providing financing on commercial properties of all major property types throughout the United States. In the lead up to the global financial crisis in 2007, believing that the risks associated with commercial real estate markets had grown out of proportion to the potential returns from such markets, Terra Capital Partners sold 100% of its investment management interests prior to the global financial crisis. It was not until mid-2009, after its assessment that commercial mortgage markets would begin a period of stabilization and growth, that Terra Capital Partners began to sponsor new investment vehicles, which included the predecessor private partnerships, to again provide debt capital to commercial real estate markets. The financings provided by all vehicles managed by Terra Capital Partners from January 2004 through December 31, 2022 have been secured by approximately 13.9 million square feet of office properties, 3.7 million square feet of retail properties, 5.9 million square feet of industrial properties, 5,058 hotel rooms and 28,493 apartment units. The value of the properties underlying this capital was approximately $11.2 billion based on appraised values as of the closing dates of each financing. In addition to its extensive experience originating and managing debt financings, Terra Capital Partners and its affiliates owned and operated over six million square feet of office and industrial space between 2005 and 2007, and this operational experience further informs its robust origination and underwriting standards and enables our Manager to effectively operate property underlying a financing upon a foreclosure.

**Our Investment Strategy**

&nbsp;&nbsp;&nbsp;&nbsp;We focus on providing commercial real estate loans to creditworthy borrowers and seek to generate an attractive and consistent low volatility cash income stream. Our focus on originating debt and debt-like instruments emphasizes the payment of current returns to investors and the preservation of invested capital.

&nbsp;&nbsp;&nbsp;&nbsp;As part of our investment strategy, we:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• target middle market loans of approximately $10 million to $50 million;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• focus on the origination of new loans, not on the acquisition of loans originated by other lenders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• originate loans expected to be repaid within one to five years;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• maximize current income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• lend to creditworthy borrowers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• construct a portfolio that is diversified by property type, geographic location, tenancy and borrower;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• source off-market transactions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• hold loans until maturity unless, in our Manager's judgment, market conditions warrant earlier disposition.

**Our Financing Strategy**

&nbsp;&nbsp;&nbsp;&nbsp;We have historically utilized only limited amounts of borrowings as part of our financing strategy. One of the reasons we completed the REIT formation transactions, as described under "—Overview," is to expand our financing options, access to capital and capital flexibility in order to position us for future growth. 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 may in the future also deploy leverage through other credit facilities and senior notes and we may divide the loans we originate into senior and junior tranches and dispose of the more

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senior tranches as an additional means of providing financing to our business. In addition, we intend to match our use of floating rate leverage with floating rate investments.

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022, we had outstanding indebtedness, consisting of borrowings under a mortgage loan of $29.3 million, unsecured notes payable of $123.5 million, a term loan of $25.0 million, a line of credit of $90.1 million and the repurchase agreements of $170.9 million. As of December 31, 2022, the amount remaining available under the line of credit and the repurchase agreements was $34.9 million and $224.1 million, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;Additionally, as of December 31, 2022, we had obligations under participation agreements with an aggregate outstanding principal amount of $12.6 million. However, we do not have direct liability to a participant under the participation agreements with respect to the underlying loan and the participants' share of the investments is repayable only from the proceeds received from the related borrower/issuer of the investments and, therefore, the participants also are subject to credit risk (i.e., risk of default by the underlying borrower/ issuer). With our larger size and enhanced access to capital and capital flexibility, our company expects to deemphasize our use of participation arrangements. For additional information concerning our indebtedness, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K.

**Targeted Assets**

***Real Estate-Related Loans***

&nbsp;&nbsp;&nbsp;&nbsp;We originate, structure, fund and manage commercial real estate loans, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments related to high-quality commercial real estate in the United States. We may also, to the extent consistent with our qualification as a REIT, acquire equity participations in the underlying collateral of some of such loans. We originate, structure and underwrite most, if not all, of our loans. We, in reliance on our Manager, use what we consider to be conservative underwriting criteria, and our underwriting process involves comprehensive financial, structural, operational and legal due diligence to assess the risks of financings so that we can optimize pricing and structuring. By originating, not purchasing, loans, we are able to structure and underwrite financings that satisfy our standards, utilize our proprietary documentation and establish a direct relationship with our borrower. Described below are some of the types of loans we own and seek to originate with respect to high-quality properties in the United States. We continue to see attractive lending opportunities, and we expect market conditions to remain favorable for our strategy for the foreseeable future.

*&nbsp;&nbsp;&nbsp;&nbsp;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. Mezzanine loans may be either short-term (one to five years) or long-term (up to 10 years) and may be fixed or floating rate. We may own mezzanine loans directly or we may hold a participation in a mezzanine loan or a sub-participation in a mezzanine loan. These loans generally pay interest on a specified due date (although there may be a portion of the interest that is deferred) and may, to the extent consistent with our qualification as a REIT, provide for participation in the value or cash flow appreciation of the underlying property as described below. Generally, we invest in mezzanine loans with last dollar loan-to-value ratios ranging from 60% to 85%. As of December 31, 2022, we owned five mezzanine loans with a total net principal amount of $26.8 million, which constituted 4.2% of our net loan investment portfolio.

*&nbsp;&nbsp;&nbsp;&nbsp;Preferred Equity Investments*. These are investments in preferred membership interests in an entity that owns commercial real estate and generally finance the acquisition, refinancing, rehabilitation or construction of commercial real estate. These investments are expected to have characteristics and returns similar to mezzanine loans. As of December 31, 2022, we owned five preferred equity investments with a total net principal amount of $121.2 million, which constituted 19.1% of our net loan investment portfolio.

*&nbsp;&nbsp;&nbsp;&nbsp;First Mortgage Loans*. These loans generally finance the acquisition, refinancing, rehabilitation or construction of commercial real estate. First mortgage loans may be either short-term (one to five years) or long-term (up to 10 years), may be fixed or floating rate and are predominantly current-pay loans. Our Manager originates current-pay first mortgage loans backed by high-quality properties in the United States that fit our investment strategy. Certain of our first mortgage loans finance the acquisition, rehabilitation and construction of infill land property and for these loans we target a weighted average last dollar loan-to-value of 70%. We may selectively syndicate portions of our first mortgage loans, including senior or junior participations to provide third-party financing for a portion of the loan or optimize returns which may include retained origination fees.

&nbsp;&nbsp;&nbsp;&nbsp;First mortgage loans are expected to provide for a higher recovery rate and lower defaults than other debt positions due to the lender's senior position. However, such loans typically generate lower returns than subordinate debt such as mezzanine

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loans, B-notes, or preferred equity investments. As of December 31, 2022, we owned 20 first mortgage loans with a total net principal amount of $456.4 million, which constituted 72.1% of our net loan investment portfolio. As of December 31, 2022, we used $413.1 million of senior mortgage loans as collateral for $261.0 million of borrowings under a revolving line of credit and two repurchase agreements.

*&nbsp;&nbsp;&nbsp;&nbsp;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. Like first mortgage loans, these loans generally finance the acquisition, refinancing, rehabilitation or construction of commercial real estate. B-notes may be either short-term (one to five years) or long-term (up to 10 years), may be fixed or floating rate and are predominantly current-pay loans. We may create B-notes by tranching our directly originated first mortgage loans generally through syndications of senior first mortgages or buy these loans directly from third-party originators. As a result of the current credit market disruption related to the most recent recession and the decrease in capital available in this part of the capital structure, we believe that the opportunities to both directly originate and to buy these types of loans from third parties on favorable terms will continue to be attractive.

&nbsp;&nbsp;&nbsp;&nbsp;Investors in B-notes are compensated for the increased risk of such assets from a pricing perspective but still benefit from a mortgage lien on the related property. Investors typically receive principal and interest payments at the same time as senior debt unless a default occurs, in which case any such payments are made only after any senior debt is made whole. Rights of holders of B-notes are usually governed by participation and other agreements that, subject to certain limitations, typically provide the holders of subordinated positions of the mortgage loan with the ability to cure certain defaults and control certain decisions of holders of senior debt secured by the same properties (or otherwise exercise the right to purchase the senior debt), which provides for additional downside protection and higher recoveries. As of December 31, 2022, we did not own any B-notes.

*&nbsp;&nbsp;&nbsp;&nbsp;Equity Participations*. In connection with our loan origination activities, 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. 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. We expect to obtain equity participations in certain instances where the loan collateral consists of a property that is being repositioned, expanded or improved in some fashion which is anticipated to improve future cash flow. In such case, the borrower may wish to defer some portion of the debt service or obtain higher leverage than might be merited by the pricing and leverage level based on historical performance of the underlying property. 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, 2022, we did not own any equity participations.

*&nbsp;&nbsp;&nbsp;&nbsp;Other Real Estate-Related Investments*. We may invest in other real estate-related investments, which may include CMBS or other real estate debt or equity securities, so long as such investments do not constitute more than 15% of our assets**.** Certain of our real estate-related loans require the borrower to make payments of interest on the fully committed principal amount of the loan regardless of whether the full loan amount is outstanding. As of December 31, 2022, we owned a 27.9% equity interest in a limited partnership that invests in performing and non-performing mortgages, loans, mezzanines, B-notes and other credit instruments supported by underlying commercial real estate assets. Additionally, we owned beneficial equity interests in three joint ventures that invest in real estate properties. We also owned a credit facility that is collateralized by underlying commercial real estate assets. In 2022, in connection with a mezzanine loan we originated, we entered into a residual profit sharing arrangement with the borrower. We accounted for this arrangement as an equity investment. These equity interests had a total carrying value of $62.5 million and the credit facility had a principal balance of $28.8 million as of December 31, 2022.

**Operating Real Estate**

&nbsp;&nbsp;&nbsp;&nbsp;From time to time, we may acquire operating real estate properties, including properties acquired in connection with foreclosures or deed in lieu of foreclosure. In July 2018, we acquired a multi-tenant office building through foreclosure of a first mortgage loan. In January 2019, we acquired a 4.9 acre development parcel through deed in lieu of foreclosure. In June 2022, the development parcel was sold. As of December 31, 2022, the multi-tenant office building had a carrying value of $40.6 million, and the mortgage loan payable encumbering the office building had a principal amount of $29.3 million.

**Investment Guidelines**

&nbsp;&nbsp;&nbsp;&nbsp;Our Board has adopted investment guidelines, which may be amended from time to time, that set forth certain criteria for the Manger to use when evaluating specific investment opportunities as well as our overall portfolio composition. Our Board

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will review the Manager's compliance with the investment guidelines periodically and receive an investment report at each quarter-end in conjunction with the review of our quarterly results by our Board.

&nbsp;&nbsp;&nbsp;&nbsp;Our Board adopted the following investment guidelines:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• no origination or acquisition shall be made that would cause us to fail to qualify as a REIT;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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.

&nbsp;&nbsp;&nbsp;&nbsp;These investment guidelines may be changed from time to time by a majority of our Board without the approval of our stockholders.

**Disposition Policies**

&nbsp;&nbsp;&nbsp;&nbsp;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. Our Manager continually performs a hold-sell analysis on each asset in order to determine the optimal time to hold the asset and generate a strong return to our stockholders. Economic and market conditions may influence us to hold investments for longer or shorter periods of time. We may sell an asset before the end of the expected holding period if we believe that market conditions have maximized its value to us or the sale of the asset would otherwise be in our best interests. 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***

&nbsp;&nbsp;&nbsp;&nbsp;We elected to be taxed as a REIT under the Code commencing with our taxable year ended December 31, 2016. We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and that our manner of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT. To qualify as a REIT, we must meet on a continuing basis, through our organization and actual investment and operating results, various requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of shares of our stock. If we fail to qualify as a REIT in any taxable year and do not qualify for certain statutory relief provisions, we will be subject to U.S. federal income tax at regular corporate rates and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which we failed to qualify as a REIT. Even if we qualify for taxation as a REIT, we may be subject to some U.S. federal, state and local taxes on our income or property. In addition, subject to maintaining our qualification as a REIT, a portion of our business may be conducted through, and a portion of our income may be earned with respect to, our taxable REIT subsidiaries ("TRSs"), should we decide to form TRSs in the future, which are subject to corporate income tax. Any distributions paid by us generally will not be eligible for taxation at the preferential U.S. federal income tax rates that currently apply to certain distributions received by individuals from taxable corporations, unless such distributions are attributable to dividends received by us from our TRSs, should we form a TRS in the future. As of December 31, 2022, 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***

&nbsp;&nbsp;&nbsp;&nbsp;We are not registered as an investment company under the 1940 Act. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the 1940 Act that impose, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• limitations on our capital structure and the use of leverage;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• restrictions on specified investments;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• prohibitions on transactions with affiliates; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• compliance with reporting, record keeping, and other rules and regulations that would significantly change our operations.

&nbsp;&nbsp;&nbsp;&nbsp;We conduct our operations so that neither we nor our subsidiaries are required to register as an investment company under the 1940 Act. Section 3(a)(1)(A) of the 1940 Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. 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. Excluded from the term "investment securities," among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act. 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). 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. Rather, we and our subsidiaries are primarily engaged in the non-investment company businesses.

&nbsp;&nbsp;&nbsp;&nbsp;We and certain of our subsidiaries may at times rely primarily on the exclusion from the definition of an investment company under Section 3(c)(5)(C) of the 1940 Act, or any other exclusions that may be available to us (other than the exclusions under Section 3(c)(1) or Section 3(c)(7)). Section 3(c)(5)(C) of the 1940 Act is available for entities primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate. This exclusion generally requires that at least 55% of our portfolio must be comprised of "qualifying real estate" assets and at least 80% of our portfolio must be comprised of "qualifying real estate" assets and "real estate-related" assets (and no more than 20% comprised of miscellaneous assets). For purposes of the Section 3(c)(5)(C) exclusion, we classify our investments based in large measure on no-action letters issued by the staff of the SEC and other SEC interpretive guidance and, in the absence of SEC guidance, on our view of what constitutes a "qualifying real estate" asset and a "real estate-related" asset. 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. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain mortgage loans, participations in mortgage loans, mortgage-backed securities, mezzanine loans, joint venture investments, preferred equity and the equity securities of other entities may not constitute qualifying real estate assets and therefore our investments in these types of assets may be limited. No assurance can be given that the SEC or its staff will concur with our classification of the assets we hold for purposes of the 3(c)(5)(C) exclusion or any other exclusion or exemption under the 1940 Act. Future revisions to the 1940 Act or further guidance from the SEC or its staff may cause us to lose our exclusion from registration or force us to re-evaluate our portfolio and investment strategy. Such changes may prevent us from operating our business successfully.

&nbsp;&nbsp;&nbsp;&nbsp;In order to maintain an exclusion from registration under the 1940 Act, we may be unable to sell assets that we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire assets that we would otherwise want to acquire and would be important to our strategy.

&nbsp;&nbsp;&nbsp;&nbsp;Although we monitor our portfolio periodically and prior to each acquisition and disposition, we may not be able to maintain an exclusion from registration as an investment company. If we were required to register as an investment company, but failed to do so, we would be prohibited from engaging in our business, and legal proceedings could be instituted against us. In addition, our contracts may be unenforceable, and a court could appoint a receiver to take control of us and liquidate our business, all of which would have an adverse effect on our business.

**Emerging Growth Company Status**

&nbsp;&nbsp;&nbsp;&nbsp;We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"), and as such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not

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previously approved. A number of these exemptions are not relevant to us, but we intend to take advantage of the exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002.

&nbsp;&nbsp;&nbsp;&nbsp;In addition, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 13(a) of the Exchange Act for complying with new or revised accounting standards. This permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. 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.

&nbsp;&nbsp;&nbsp;&nbsp;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.

**Competition**

&nbsp;&nbsp;&nbsp;&nbsp;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. The effect of the existence of additional REITs and other institutions may be increased competition for the available supply of our targeted assets suitable for purchase, which may cause the price for such assets to rise.

&nbsp;&nbsp;&nbsp;&nbsp;In the face of this competition, we expect to have access to our Manager's professionals and their industry expertise, which may provide us with a competitive advantage in sourcing transactions and help us assess origination and acquisition risks and determine appropriate pricing for potential assets. The more conservative underwriting standards used by many large commercial banks and traditional providers of commercial real estate capital following the 2008 downturn has and we believe will continue to constrain the lending capacity of these institutions. However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face. For additional information concerning these competitive risks, see "Item 1A. Risk Factors — 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" in this Annual Report on Form 10-K.

**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.

Compliance with the federal, state and local laws described above has not had a material, adverse effect on our business, assets, results of operations, financial condition and ability to pay distributions, and we do not believe that our existing portfolio will require us to incur material expenditures to comply with these laws and regulations.

**Employees; Staffing; Human Capital**

&nbsp;&nbsp;&nbsp;&nbsp;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. Our Manager is not obligated under the Management Agreement to dedicate any of its personnel exclusively to us, nor is it or its personnel obligated to dedicate any specific portion of its or their time to our business. We are responsible for the costs of our own employees; however, we do not currently have any employees and do not currently expect to have any employees.

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**Information About our Executive Officers**

The names, ages, positions and biographies of our officers are as follows:

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position(s) Held with the Company** |
| Vikram S. Uppal | 39 | Chairman of the Board of Directors, Chief Executive Officer and Chief Investment <br> Officer |
| Gregory M. Pinkus | 58 | Chief Financial Officer, Chief Operating Officer, Treasurer and Secretary |
| Daniel J. Cooperman | 48 | Chief Originations Officer |

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**Vikram S. 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 also served as Chief Investment Officer for our company, Terra Capital Partners and our Manager since February 2018. 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. Uppal was a Partner and Head of Real Estate at Axar Capital Management since 2016. Prior to Axar Capital Management, Mr. Uppal was a Managing Director on the Investment Team at Fortress Investment Group's Credit and Real Estate Funds from 2015 to 2016. From 2012 to 2015, Mr. Uppal worked at Mount Kellett Capital Management, a private investment organization, and served as Co-Head of North American Real Estate Investments. Mr. Uppal holds a B.S. from the University of St. Thomas and a M.S. from Columbia University.

**Gregory M. Pinkus** has served as the Chief Financial Officer, Chief Operating Officer, Treasurer and Secretary of our company and the Chief Financial Officer and Chief Operating Officer of our Manager, and Terra Fund Advisors since January 2016, October 2017, and October 2017, respectively. He has served as (i) the Chief Financial Officer of Terra Capital Advisors, Terra Capital Advisors 2 and Terra Income Advisors 2 since May 2012, September 2012 and October 2016; (ii) the Chief Operating Officer of Terra Capital Advisors, Terra Capital Advisors 2 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. Prior to joining Terra Capital Partners in May 2012, he served as Assistant Controller for W.P. Carey & Co. from 2006 to August 2010 and as Controller from August 2010 to May 2012. Mr. Pinkus also served as Controller and Vice President of Finance for several early-stage technology companies during the period of 1999 to 2005. Additionally, he managed large-scale information technology budgets at New York Life Insurance Company from 2003 to 2004 and oversaw an international reporting group at Bank of America from 1992 to 1996. Mr. Pinkus is a Certified Public Accountant and member of the American Institute of Certified Public Accountants. He holds a B.S. in Accounting from the Leonard N. 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 201, respectively. Mr. Cooperman has served as Chief Originations Officer of (i) each of Terra Capital Advisors and Terra Capital Advisors 2 since January 2015, having previously served as Managing Director of Originations until January 2015 of Terra Capital Advisors and Terra Capital Advisors 2 since April 2009 and September 2012, respectively; (ii) Fund 5 International since January 2015, having previously served as Managing Director of Originations of Terra BDC from June 2014 to June 2014; (iii) Terra Income Advisors and Terra BDC from February 2015 to October 2022, having previously served as Managing Director of Originations from May 2013 until February 2015; and (iv) each of Terra Income Advisors 2, Terra International, and Terra Fund 7 since October 2016. 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. 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. Cooperman holds a B.S. in Finance from the University of Colorado at Boulder.

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**Available Information**

We are subject to the information requirements of the Exchange Act. Therefore, we file periodic reports and other information with the SEC. Stockholders may obtain copies of our filings with the SEC, free of charge from the website maintained by the SEC at www.sec.gov or from our website at www.terrapropertytrust.com. We will provide without charge a copy of this Annual Report on Form 10-K, including financial statements and schedules, upon written request delivered to our principal executive offices.

We are providing the address to our website solely for the information of investors. The information on our website is not a part of, nor is it incorporated by reference into, this Annual Report on Form 10-K.

**Item 1A. Risk Factors.**

*&nbsp;&nbsp;&nbsp;&nbsp;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 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. 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.***

&nbsp;&nbsp;&nbsp;&nbsp;There is no established trading market for our common stock, and there can be no assurance that an active trading market for our common stock will develop, or if one develops, be maintained. Accordingly, no assurance can be given as to the ability of our stockholders to sell their common stock or the price that our stockholders may obtain for their common stock.

&nbsp;&nbsp;&nbsp;&nbsp;Some of the factors that could negatively affect the market price of our common stock include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our expected operating results and our ability to make distributions to our stockholders in the future;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the availability of attractive risk-adjusted investment opportunities in real estate-related loans that satisfy our objectives and strategies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the degree and nature of our competition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in personnel of our Manager and lack of availability of qualified personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• unanticipated costs, delays and other difficulties in executing our long-term growth strategy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the timing of cash flows, if any, from our investments due to the lack of liquidity of loans relative to more commonly traded securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• an increase in interest rates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the performance, financial condition and liquidity of our borrowers; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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).

&nbsp;&nbsp;&nbsp;&nbsp;Market factors unrelated to our performance could also negatively impact the market price of our common stock. One of the factors that investors may consider in deciding whether to buy or sell our common stock is our distribution rate as a percentage of our stock price relative to market interest rates. If market interest rates increase, prospective investors may demand a higher distribution rate or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and conditions in capital markets can affect the fair market value of our common stock. For instance, if interest rates rise, it is likely that the market price of our common stock will decrease as market rates on interest-bearing securities increase.

***If we complete an alternative liquidity transaction by pursuing an initial public offering or listing of our shares of common stock in the future, you will be subject to additional risks.***

&nbsp;&nbsp;&nbsp;&nbsp;As previously disclosed, we continue to explore alternative liquidity transactions on an opportunistic basis to maximize stockholder value. Examples of the alternative liquidity transactions that, depending on market conditions, may be available to us include a listing of our shares of common stock on a national securities exchange, adoption of a share repurchase plan, a liquidation of our assets, a sale of our company or a strategic business combination, in each case, which may include the in-kind distribution of our shares of common stock indirectly owned by certain Terra Funds to the ultimate investors in the Terra Funds. We may pursue such a liquidity transaction as early as 2023, but 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. If we complete an alternative liquidity transaction that involves us becoming a publicly traded company through an initial public offering or listing of our shares of common stock on a national securities exchange, you will subject to the following additional risks:

*&nbsp;&nbsp;&nbsp;&nbsp;Trading Value of our Shares*: Our shares will be publicly traded and investors will be able to assess the value of their shares by reference to the public trading price of our shares.

*&nbsp;&nbsp;&nbsp;&nbsp;Distributions*: We do not expect that the distributions investors receive following any such liquidity event would be adversely impacted. Following any such transaction, we would be expected to pay regular monthly distributions to our stockholders and would continue to be required to distribute dividends equal to at least 90% of our taxable income (calculated without regard to our net capital gain and the dividends paid deduction) to our investors each year in order to maintain our qualification as a REIT.

*&nbsp;&nbsp;&nbsp;&nbsp;Manager Compensation*: We expect we will enter into a new management agreement with our Manager or an affiliate of our Manager. 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. Any such fees are expected to be paid in lieu of the fees currently payable to our Manager.

*&nbsp;&nbsp;&nbsp;&nbsp;Transfer Restrictions*: We expect that shares currently held by our stockholders will constitute restricted securities under the Securities Act and will be subject to restrictions on transfer under applicable U.S. securities laws

***Common stock and preferred stock eligible for future sale may have adverse effects on our share price.***

&nbsp;&nbsp;&nbsp;&nbsp;Our Board has the power, without further stockholder approval, to authorize us to issue additional authorized shares of common stock and preferred stock on the terms and for the consideration it deems appropriate subject, if applicable, to the rules of any stock exchange on which our securities may be listed or traded and the terms of any class or series of our stock. We cannot predict the effect, if any, of future sales of our common stock, or the availability of shares for future sales, on the market price of our common stock. Sales of substantial amounts of common stock or the perception that such sales could occur may adversely affect the prevailing market price for our common stock. Following the consummation of the BDC Merger and as of December 31, 2022, Terra JV, former shareholders of Terra BDC and Terra Offshore REIT held 70.0%, 19.9% and 10.1% of the issued and outstanding shares of the Class B Common Stock, respectively.

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***Our principal stockholders, which are currently controlled by affiliates of our Manager, own a significant amount of our outstanding shares of common stock, which is sufficient to approve or veto most corporate actions requiring a vote of our stockholders.***

&nbsp;&nbsp;&nbsp;&nbsp;Through Terra JV, Terra Fund 5 and Terra Fund 7 beneficially own shares of our common stock representing 61.3% and 8.7% of the voting power of our outstanding shares of common stock, respectively. In addition, the former BDC stockholders and Terra Offshore REIT owns shares of our common stock representing 19.9% and 10.1% of the voting power of our outstanding shares of common stock, respectively. Our Manager also serves as manager to Terra Offshore REIT. As a result, our Manager and its affiliates (for the period that such shares continue to be held by Terra Fund 5 and Terra Fund 7 through Terra JV, and Terra Offshore REIT and not distributed to their respective equity owners), subject to a voting agreement as described below, have significant control over matters submitted to our stockholders for approval, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the election and removal of directors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the approval of any merger, consolidation or sale of all or substantially all of our assets.

&nbsp;&nbsp;&nbsp;&nbsp;Our Manager is a subsidiary of Terra Capital Partners. On April 1, 2021, Mavik, an entity controlled by Vikram S. Uppal, our Chief Executive Officer, completed a series of related transactions that resulted in all of the outstanding interests in Terra Capital Partners being acquired by Mavik for a combination of cash and interests in Mavik. Terra Fund 5 and Terra Fund 7 are managed by Terra Fund Advisors, which is 51% owned by the estate of Bruce Batkin, Dan Cooperman and Simon Mildé and 49% owned by an affiliate of Axar Capital Management. On March 2, 2020, we, Terra Fund 5, Terra JV and Terra REIT Advisors also entered into the Amended and Restated Voting Agreement (the "2020 Voting Agreement"), pursuant to which Terra Fund 5 assigned its rights and obligations under the 2020 Voting Agreement to Terra JV. Consistent with the original voting agreement dated February 8, 2018, for the period that Terra REIT Advisors remains our external manager, Terra REIT Advisors will have the right to nominate two individuals to serve as our directors and, until Terra JV no longer holds at least 10% of our outstanding shares of common stock, Terra JV will have the right to nominate one individual to serve as one of our director.

Except as otherwise required by law or the provisions of other agreements to which the parties are or may in the future become bound, the parties have agreed to vote all shares of our common stock directly or indirectly owned in favor (or against removal) of the directors properly nominated in accordance with the 2020 Voting Agreement. Other than with respect to the election of directors, the 2020 Voting Agreement requires that Terra Fund 5 vote all shares of our common stock directly or indirectly owned by Terra Fund 5 in accordance with the recommendations made by our Board.

On October 1, 2022, we entered into a Voting Support Agreement with Terra JV and Terra Offshore REIT (the "2022 Voting Agreement"). Pursuant to the 2022 Voting Agreement, effective as of October 1, 2022, Terra JV and Terra Offshore REIT have agreed to, at any meeting of our stockholders called for the purpose of electing directors (or by any consent in writing or by electronic transmission in lieu of any such meeting), cast all votes entitled to be cast by each of them in favor of the election of Spencer Goldenberg, Adrienne Everett and Gaurav Misra (each a "Terra BDC Designee", and collectively, the "Terra BDC Designees") until the earlier of (i) the first anniversary of October 1, 2022, (ii) the TPT Class B Common Stock Distributions (as defined in the 2022 Voting Agreement) or (iii) an amendment and restatement of the amended and restated management agreement between us and Terra REIT Advisors approved by the our Board, including the Terra BDC Designees.

&nbsp;&nbsp;&nbsp;&nbsp;In addition, our Manager's and its affiliates' voting control may discourage transactions involving a change of control of our company, including transactions in which a holder of our common stock might otherwise receive a premium for his or her shares over the then-current market price.

***Holders of our common stock may receive distributions on a delayed basis or distributions may decrease over time. Changes in the amount and timing of distributions we pay or in the tax characterization of distributions we pay may adversely affect the fair value of our common stock or may result in holders of our common stock being taxed on distributions at a higher rate than initially expected.***

Our distributions are driven by a variety of factors, including our minimum distribution requirements under the REIT tax laws and our REIT taxable income (including certain items of non-cash income) as calculated pursuant to the Internal Revenue Code. We are generally required to distribute to our stockholders dividends equal to at least 90% of our REIT taxable income (calculated without regard to our net capital gain and the dividends paid deduction), although our reported financial results for United States generally accepted accounting principles ("U.S. GAAP") purposes may differ materially from our REIT taxable income.

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For the years ended December 31, 2022 and 2021, our Board declared total cash distributions of $0.78 and $0.88 per share, respectively, that were paid monthly in the same period in which each was declared.

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. We may determine to pay distributions on a delayed basis or decrease distributions for a number of factors, including the risk factors described in this Annual Report on Form 10-K.

To the extent we determine that future distributions would represent a return of capital to investors or would not be required under applicable REIT tax laws and regulations rather than the distribution of income, we may determine to discontinue distribution payments until such time that distributions would again represent a distribution of income or be required under applicable REIT tax laws and regulations. Any reduction or elimination of our payment of distributions would not only reduce the amount of distributions you would receive as a holder of our common stock, but could also have the effect of reducing the fair value of our common stock and our ability to raise capital in future securities offerings.

In addition, the rate at which holders of our common stock are taxed on distributions we pay and the characterization of our distribution, whether through ordinary income, capital gains, or a return of capital, could have an impact on the fair value of our common stock. 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.

***Investing in our common stock may involve a high degree of risk and may result in loss of capital invested in us.***

&nbsp;&nbsp;&nbsp;&nbsp;Our investment strategy and our originations may result in a high amount of risk when compared to alternative strategies and volatility or loss of principal. Our originations or acquisitions may be highly speculative and aggressive, and therefore an investment in our shares of common stock may not be suitable for someone with lower risk tolerance.

**Risks Related to Our Business**

***Changes in national, regional or local economic, demographic or real estate market conditions may adversely affect our results of operations, our financial position, the value of our assets and our cash flows.***

We are subject to risks incident to the ownership of real estate-related assets including: changes in national, regional or local economic, demographic or real estate market conditions; changes in supply of, or demand for, similar properties in an area; increased competition for real estate assets targeted by our investment strategy; bankruptcies, financial difficulties or lease defaults by property owners and tenants; inflation; changes in interest rates and availability of financing; and changes in government rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws. Our assets are also subject to the risk of significant adverse changes in financial market conditions that can result in a deleveraging of the global financial system and the forced sale of large quantities of mortgage-related and other financial assets. Concerns over economic recession, inflation, geopolitical issues, including events such as the Russia's invasion of Ukraine, United Kingdom's exit from the European Union, unemployment, the availability and cost of finance, or a prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets, which could result in an increase in mortgage defaults or a decline in the value of our assets. In addition, any increase in mortgage defaults in the residential market may have a negative impact on the credit markets generally as well as on economic conditions generally. We do not know whether the values of the property securing our real estate-related loans will remain at the levels existing on the dates of origination of such loans, and we are unable to predict future changes in national, regional or local economic, demographic or real estate market conditions. These conditions, or others we cannot predict, may adversely affect our results of operations, our financial position, the value of our assets and our cash flows.

***Inflation in the U.S. has accelerated recently and is currently expected to continue at an elevated level in the near-to medium-term, which may have an adverse impact on the valuation of our investments.***

Inflation in the U.S. has accelerated recently and is currently expected to continue at an elevated level in the near-to medium-term. Further, heightened competition for workers, supply chain issues, the relocation of foreign production and manufacturing businesses to the U.S., and rising energy and commodity prices have contributed to increasing wages and other economic inputs. Higher inflation and rising input costs may have adverse effects on our commercial real estate-related loans, commercial real estate-related debt securities and select commercial real estate equity investments, which are subject to the

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risks typically associated with real estate. Inflation can negatively impact the profitability of real estate assets with long-term leases that do not provide for short-term rent increases or that provide for rent increases with a lower annual percentage increase than inflation. Continued inflation, particularly at higher levels, may have an adverse impact on the valuation of our investments.

***The lack of liquidity of our assets may adversely affect our business, including our ability to value and sell our assets.***

A portion of the real estate-related loans and other assets we originate or acquire may be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly-traded securities. The illiquidity of our assets may make it difficult for us to sell such assets if the need or desire arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less value than the value at which we have previously recorded our assets. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which could adversely affect our results of operations, financial condition and cash flows.

***Our investments are selected by our Manager and our investors will not have input into investment decisions.***

Pursuant to the terms of the Management Agreement, our Manager is responsible for, among other services, managing the investment and reinvestment of our assets, subject to the oversight and supervision of our Board. Our investors will not have input into investment decisions. This will increase the uncertainty, and thus the risk, of investing in us, as we may make investments with which you may not agree. Our Manager intends to conduct due diligence with respect to each investment and suitable investment opportunities may not be immediately available. The failure of our Manager to find investments that meet our investment criteria in sufficient time or on acceptable terms could result in unfavorable returns and could cause a material adverse effect on our results of operations, financial condition and cash flows. Even if investment opportunities are available, 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.

From time to time, before appropriate real estate-related investments can be identified, our Manager may choose to have us invest in interest-bearing, short-term investments, including money market accounts and/or funds, that are consistent with our intention to maintain our qualification as a REIT. These short-term, non-real estate-related investments, if any, are expected to provide a lower net return than we will seek to achieve from investments in real estate-related loans and other commercial real estate assets. Furthermore, when our Manager does identify suitable real estate- related loans and other commercial real estate assets that are the types of assets which we target, you will be unable to influence the decision of our Manager ultimately to invest in, or refrain from investing in, such assets.

***Our Manager's due diligence of potential real estate-related loans and other commercial real estate assets may not reveal all of the liabilities associated with such assets and may not reveal other weaknesses in our assets, which could lead to investment losses.***

Before originating or acquiring a financing, our Manager calculates the level of risk associated with the real estate-related loans and other commercial real estate assets to be originated or acquired based on several factors which include the following: top-down reviews of both the current macroeconomic environment generally and the real estate and commercial real estate loan market specifically; detailed evaluation of the real estate industry and its sectors; bottom-up reviews of each individual investment's attributes and risk/reward profile relative to the macroeconomic environment; and quantitative cash flow analysis and impact of the potential investment on our portfolio. In making the assessment and otherwise conducting customary due diligence, we employ standard documentation requirements and require appraisals prepared by local independent third-party appraisers selected by us. Additionally, we seek to have borrowers or sellers provide representations and warranties on loans we originate or acquire, and if we are unable to obtain representations and warranties, we factor the increased risk into the price we pay for such loans. Despite our review process, there can be no assurance that our Manager's due diligence process will uncover all relevant facts or that any investment will be successful.

***If our Manager underestimates the borrower's credit analysis or originates loans by using an exception to its loan underwriting guidelines, we may experience losses.***

Our Manager values our real estate-related loans based on an initial credit analysis and the investment's expected risk-adjusted return relative to other comparable investment opportunities available to us, taking into account estimated future losses on the loans, and the estimated impact of these losses on expected future cash flows. Our Manager's loss estimates may not prove accurate, as actual results may vary from estimates. 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.

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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.

***Deficiencies in appraisal quality in the mortgage loan origination process may result in increased principal loss severity.***

During the loan underwriting process, appraisals are generally obtained on the collateral underlying each prospective loan. The quality of these appraisals may vary widely in accuracy and consistency. The appraiser may feel pressure from the broker or lender to provide an appraisal in the amount necessary to enable the originator to make the loan, whether or not the value of the property justifies such an appraised value. Inaccurate or inflated appraisals may result in an increase in the severity of losses on the loans, which could have a material and adverse effect on our results of operations, financial condition and cash flows.

***Our Manager utilizes analytical models and data in connection with the valuation of our real estate-related loans and other commercial real estate assets, and any incorrect, misleading or incomplete information used in connection therewith would subject us to potential risks.***

As part of the risk management process our Manager uses detailed proprietary models, including loan level non-performing loan models, to evaluate collateral liquidation timelines and price changes by region, along with the impact of different loss mitigation plans. Additionally, our Manager uses information, models and data supplied by third parties. Models and data are used to value potential targeted 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. 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. If any of the aforementioned occur, such event could have a material adverse effect on our results of operations, financial condition and cash flows.

***Changes in interest rates could adversely affect the demand for our target loans, the value of our loans, CMBS and other real-estate debt or equity assets and the availability and yield on our targeted assets.***

We invest in real estate-related loans and other commercial real estate assets, which are subject to changes in interest rates. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. 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. Rising interest rates may also cause our targeted assets that were issued prior to an interest rate increase to provide yields that are below prevailing market interest rates. If rising interest rates cause us to be unable to originate or acquire a sufficient volume of our targeted assets with a yield that is above our borrowing cost, our ability to satisfy our objectives and to generate income and make distributions may be materially and adversely affected. Conversely, if interest rates decrease, we will be adversely affected to the extent that real estate-related loans are prepaid, because we may not be able to make new loans at the previously higher interest rate.

The relationship between short-term and longer-term interest rates is often referred to as the "yield curve." Ordinarily, short-term interest rates are lower than longer-term interest rates. If short-term interest rates rise disproportionately relative to longer-term interest rates (a flattening of the yield curve), our borrowing costs may increase more rapidly than the interest income earned on our assets. Because our loans and CMBS assets generally will bear, on average, interest based on longer-term rates than our borrowings, a flattening of the yield curve would tend to decrease our net income and the fair market value of our net assets. Additionally, to the extent cash flows from loans and CMBS assets that return scheduled and unscheduled principal are reinvested, the spread between the yields on the new loans and CMBS assets and available borrowing rates may decline, which would likely decrease our net income. It is also possible that short-term interest rates may exceed longer-term interest rates (a yield curve inversion), in which event our borrowing costs may exceed our interest income and we could incur operating losses.

The values of our loans and CMBS assets may decline without any general increase in interest rates for a number of reasons, such as increases or expected increases in defaults, or increases or expected increases in voluntary prepayments for those loans and CMBS assets that are subject to prepayment risk or widening of credit spreads.

In addition, in a period of rising interest rates, our operating results will depend in large part on the difference between the income from our assets and our financing costs. We anticipate that, in most cases, the income from such assets will respond

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more slowly to interest rate fluctuations than the cost of our borrowings. Consequently, changes in interest rates, particularly short-term interest rates, may significantly influence our net income. Increases in these rates will tend to decrease our net income, which may have a material adverse effect on our results of operations, financial condition and cash flows.

***The expected discontinuance of the London interbank offered rate ("LIBOR") and transition to alternative reference rates may adversely impact our borrowings and assets.***

The United Kingdom Financial Conduct Authority ("FCA"), which regulates LIBOR, has announced that the most commonly used tenors (overnight and one, three, six and 12 months) will cease to be published or will no longer be representative after June 30, 2023. The FCA's announcement coincided with the March 5, 2021 announcement of LIBOR's administrator, the ICE Benchmark Administration Limited ("IBA"), indicating that, as a result of not having access to input data necessary to calculate LIBOR tenors relevant to us on a representative basis after June 30, 2023, IBA would have to cease

publication of such LIBOR tenors immediately after the last publication on June 30, 2023. These announcements mean that any

of our LIBOR-based borrowings and assets that mature beyond June 30, 2023 need to be converted to alternative interest rates.

Many of our counterparties are now subject to regulatory guidance not to enter new LIBOR contracts except in limited circumstances.

The Alternative Reference Rates Committee ("ARRC"), a group of private-market participants convened by the U.S. Federal Reserve Board and the New York Federal Reserve, has recommended the Secured Overnight Financing Rate ("SOFR"), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, as a more robust reference rate alternative to U.S. dollar LIBOR. The use of SOFR as a substitute for U.S. dollar LIBOR is voluntary and may not be suitable for all market participants. To approximate economic equivalence to LIBOR, SOFR can be compounded over a relevant term and a spread adjustment may be added. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities. If our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available, which could have a material adverse effect on our results. Although SOFR is the ARRC's recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher borrowing costs for us. It is not yet possible to predict the magnitude of LIBOR's end on our borrowing costs given the uncertainty about which rates will replace LIBOR and the timing of actual replacement. Market practices related to SOFR calculation conventions continue to develop and may vary, and inconsistent calculation conventions may develop among financial products.

Certain of our indebtedness, including the term loan, the repurchase agreement, the mortgage loan payable and the revolving line of credit, as well as certain of our floating rate loan assets, are, and other future financings may be, linked to LIBOR. We are not able to predict when LIBOR will cease to be available; however, we expect that a significant portion of these financing arrangements and loan assets will not have matured, been prepaid or otherwise terminated prior to the time at which the IBA ceases to publish LIBOR. It is not possible to predict all consequences of the IBA's proposals to cease publishing LIBOR, any related regulatory actions and the expected discontinuance of the use of LIBOR as a reference rate for financial contracts. If such debt or loan assets mature after LIBOR ceases to be published, our counterparties may disagree with us about how to calculate or replace LIBOR. Even when robust fallback language is included, there can be no assurance that the replacement rate plus any spread adjustment will be economically equivalent to LIBOR, which could result in a higher interest rate being paid by us on our borrowings and a lower interest rate being paid to us on such assets. Modifications to any debt, loan assets, interest rate hedging transactions or other contracts to replace LIBOR with an alternative reference rate could result in adverse tax consequences. In addition, any resulting differences in interest rate standards among our assets and our financing arrangements may result in interest rate mismatches between our assets and the borrowings used to fund such assets.

We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities, increasing the difficulty of investing, hedging, and risk management. Because the impact of LIBOR cessation is dependent on unknown future facts, the language of individual contracts, and the outcome of potential future legislation or litigation, it is not currently practical for our valuation models to account for the cessation of LIBOR.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The process of transition involves operational risks. References to LIBOR may be embedded in computer code or models, and we may not identify and correct all of those references. Because compounded SOFR is backward-looking rather than forward-looking, parties making or receiving LIBOR-based payments may be unable to calculate payment amounts until the day that payment is due. Proposed mechanisms to solve the operational timing issue may result in a payment amount that does not fully reflect interest rates during the calculation period.

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Potential changes, or uncertainty related to such potential changes, may also adversely affect the market for LIBOR-based loans, including our portfolio of LIBOR-indexed, floating-rate loans, or the cost of our borrowings. In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based loans, including the value of the LIBOR-indexed, floating-rate loans in our portfolio, or the cost of our borrowings. There is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers, any of which could have a material adverse effect on our results of operations, financial condition and our cash flows.

***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. In originating and acquiring our targeted assets, we may compete with other REITs, numerous regional and community banks, specialty finance companies, savings and loan associations, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, other lenders and other entities, and we expect that others may be organized in the future. The effect of the existence of additional REITs and other institutions may be increased competition for the available supply of assets suitable for investment by us, which may cause the price for such assets to rise, which may limit our ability to generate desired returns. Additionally, origination of our target loans by our competitors may increase the availability of such loans which may result in a reduction of interest rates on these loans. Some competitors may have a lower cost of funds and access to funding sources that may not be available to us. Many of our competitors are not subject to the operating constraints associated with REIT tax compliance or maintenance of an exclusion or exemption from the 1940 Act. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of real estate-related loans and establish more relationships than us.

We cannot assure you that the competitive pressures we may face will not have a material adverse effect on our results of operations, financial condition and cash flows. 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.

***Our loans are dependent on the ability of the commercial property owner to generate net income from operating the property, which may result in the inability of such property owner to repay a loan, as well as the risk of foreclosure.***

Our loans may be secured by office, multifamily, student housing, hotel, commercial or warehouse properties and are subject to risks of delinquency, foreclosure and of loss that may be greater than similar risks associated with loans made on the security of single-family residential property. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower's ability to repay the loan may be impaired. Net operating income of an income-producing property can be adversely affected by, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• tenant mix;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• success of tenant businesses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• property management decisions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• property location, condition and design;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• competition from comparable types of properties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in national, regional or local economic conditions and/or specific industry segments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• declines in regional or local real estate values;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• declines in regional or local rental or occupancy rates;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increases in interest rates, real estate tax rates and other operating expenses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• costs of remediation and liabilities associated with environmental conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the potential for uninsured or underinsured property losses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• pandemics or other calamities that may affect tenants' ability to pay their rent; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• acts of God, terrorism, social and political unrest, armed conflict, geopolitical events and civil disturbances.

In the event of any default under a mortgage loan held directly by us, we bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our results of operations, financial condition and cash flows. In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.

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. 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.

***Our loan portfolio may at times be concentrated in certain property types or secured by properties concentrated in a limited number of geographic areas, which increases our exposure to economic downturn with respect to those property types or geographic locations.***

We are not required to observe specific diversification criteria. Therefore, our portfolio of assets may, at times, be concentrated in certain property types that are subject to higher risk of foreclosure, or secured by properties concentrated in a limited number of geographic locations.

Our loans are concentrated in California, New York, Georgia, Texas and New Jersey representing approximately 24.0%, 14.5%, 11.4%, 10.7% and 9.8%, respectively, of our net loan portfolio as of December 31, 2022. Additionally, we own a multi-tenant office building in California. If economic conditions in these or in any other state in which we have a significant concentration of borrowers were to deteriorate, such adverse conditions could have a material and adverse effect on our business by reducing demand for new financings, limiting the ability of customers to repay existing loans and impairing the value of our real estate collateral and real estate owned properties.

Further, our loans are concentrated in office, industrial and multifamily property types representing approximately 27.1%, 23.3% and 16.5%, respectively, of our net loan portfolio as of December 31, 2022. As a result, a downturn in any particular industry in which we are heavily invested may significantly impact the aggregate returns we realize. If an industry in which we are heavily invested suffers from adverse business or economic conditions, a material portion of our investment could be affected adversely, which, in turn, could adversely affect our results of operations, financial condition and cash flows.

In addition, from time to time, there have been proposals to base property taxes on commercial properties on their current market value, without any limit based on purchase price. 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. From time to time, lawmakers and political coalitions have initiated efforts to repeal or amend Proposition 13 to eliminate its application to commercial and industrial properties. If successful, a repeal of Proposition 13 could substantially increase the assessed values and property taxes for our customers in California which in turn could limit their ability to borrow funds.

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

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reduce our net income, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.

***We expect that a significant portion of the mortgage loans invested in by us may be development mortgage loans on infill land, which are speculative in nature.***

We expect that a significant portion of our assets may be mortgage loans for the development of real estate, which will initially be secured by infill land. These types of loans are speculative, because:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• until improvement, the property may not generate separate income for the borrower to make loan payments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the completion of planned development may require additional development financing by the borrower, which may not be available; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• there is no assurance that we will be able to sell unimproved infill land promptly if we are forced to foreclose upon it.

If in fact the land is not developed, the borrower may not be able to refinance the loan and, therefore, may not be able to make the balloon payment when due. If a borrower defaults and we foreclose on the collateral, we may not be able to sell the collateral for the amount owed to us by the borrower. 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.

***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.***

Our operations and activities include loans to small, privately owned businesses to purchase real estate used in their operations or by investors seeking to acquire small office, multifamily, student housing, hotel, commercial or warehouse properties. Additionally, such loans are also often accompanied by personal guarantees. Often, there is little or no publicly available information about these businesses. Accordingly, we must rely on our own due diligence to obtain information in connection with our investment decisions. Our borrowers may not meet net income, cash flow and other coverage tests typically imposed by banks. A borrower's ability to repay its loan may be adversely impacted by numerous factors, including a downturn in its industry or other negative local or more general economic conditions. Deterioration in a borrower's financial condition and prospects may be accompanied by deterioration in the collateral for the loan. In addition, small businesses typically depend on the management talents and efforts of one person or a small group of people for their success. The loss of services of one or more of these persons could have a material and adverse impact on the operations of the small business. Small companies are typically more vulnerable to customer preferences, market conditions and economic downturns and often need additional capital to expand or compete. These factors may have an impact on loans involving such businesses. Loans to small businesses, therefore, involve a high degree of business and financial risk, which can result in substantial losses.

***Our investments may include subordinated tranches of CMBS, which are subordinate in right of payment to more senior securities.***

Our investments may include subordinated tranches of CMBS, which are subordinated classes of securities in a structure of securities collateralized by a pool of assets consisting primarily of commercial loans and, accordingly, are the first or among the first to bear the loss upon a restructuring or liquidation of the underlying collateral and the last to receive payment of interest and principal. Additionally, estimated fair values of these subordinated interests tend to be more sensitive to changes in economic conditions than more senior securities. As a result, such subordinated interests generally are not actively traded and may not provide holders thereof with liquid investments.

***Any credit ratings assigned to our loans and CMBS assets will be subject to ongoing evaluations and revisions and we cannot assure you that those ratings will not be downgraded.***

Some of our loan and CMBS assets may be rated by Moody's Investors Service, Standard & Poor's, or Fitch Ratings. Any credit ratings on our loans and CMBS assets are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. 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

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rating or with below investment grade ratings. If the rating agencies take adverse action with respect to the rating of our loans and CMBS assets or if our unrated assets are illiquid, the value of these loans and CMBS assets could significantly decline, which would adversely affect the value of our investment portfolio and could result in losses upon disposition or the failure of borrowers to satisfy their debt service obligations to us.

***The mezzanine loans, preferred equity and other subordinated loans in which we invest involve greater risks of loss than senior loans secured by income-producing commercial properties.***

We invest in mezzanine loans that take the form of subordinated loans secured by second mortgages on the underlying real property or loans secured by a pledge of the ownership interests of the entity owning the real property. These types of investments involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property because the investment may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to such loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt is fully satisfied. As a result, we may not recover some or all of our investment. 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.

***Our investments in B-notes are generally subject to losses. 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. B-notes are commercial real estate loans secured by a first mortgage on a single large commercial property or group of related properties and subordinated to a senior interest, referred to as an A-note. As a result, if a borrower defaults, there may not be sufficient funds remaining for B-note owners after payment to the A-note owners. In addition, our rights to control the process following a borrower default may be subject to the rights of A-note owners whose interests may not be aligned with ours. B-notes reflect similar credit risks to comparably rated CMBS. However, since each transaction is privately negotiated, B-notes can vary in their structural characteristics and risks. For example, the rights of holders of B-notes to control the process following a borrower default may be limited in certain investments. We cannot predict the terms of each B-note investment. Significant losses related to our B-notes would result in operating losses for us, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.

***Any disruption in the availability and/or functionality of our Manager's technology infrastructure and systems and any failure or our security measures related to these systems could adversely impact our business.***

Our ability to originate and acquire real estate-related loans and manage any related interest rate risks and credit risks is critical to our success and is highly dependent upon the efficient and uninterrupted operation of our computer and communications hardware and software systems. For example, we rely on our Manager's proprietary database to track and maintain all loan performance and servicing activity data for loans in our portfolio. This data is used to manage the portfolio, track loan performance, and develop and execute asset disposition strategies. In addition, this data is used to evaluate and price new investment opportunities. If we lost access to our loan servicing activity data or other important business information due to a network or utility failure, our ability to effectively manage our business could be impaired.

Some of these systems are located at our facility and some are maintained by third-party vendors. Any significant interruption in the availability and functionality of these systems could harm our business. In the event of a systems failure or interruption by our third-party vendors, we will have limited ability to affect the timing and success of systems restoration. If such systems failures or interruptions continue for a prolonged period of time, there could be a material and adverse impact on results of operations, financial condition and cash flows.

In addition, some of our security measures may not effectively prohibit others from obtaining improper access to our information. 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.

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***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.***

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. 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. As our reliance on technology has increased, so have the risks posed to our information systems both internal and those provided by our Manager, Terra Capital Partners, its affiliates and third-party service providers. 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. 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. However, these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations or confidential information will not be negatively impacted by such an incident.

***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.***

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. We cannot predict with certainty the benefits of such acquisitions, which often constitute multi-year endeavors. There is risk that our acquisitions may not have the anticipated positive results, including results relating to: correctly assessing the asset quality of the assets being acquired; the total cost and time required to complete the integration successfully; being able to profitably deploy funds acquired in an acquisition; or the overall performance of the combined entity.

If we are unable to successfully integrate our acquisitions into our business, we may never realize their expected benefits. With each acquisition, we may discover unexpected costs, liabilities for which we are not indemnified, delays, lower than expected cost savings or synergies, or incurrence of other significant charges such as impairment of goodwill or other intangible assets and asset devaluation. We also may be unable to successfully integrate the diverse company cultures, retain key personnel, apply our expertise to new competencies, or react to adverse changes in industry conditions.

Acquisitions may also result in business disruptions that could cause customers to move their business to our competitors. It is possible that the integration process related to acquisitions could result in the disruption of our ongoing businesses or inconsistencies in standards, controls, procedures and policies that could adversely affect our ability to maintain relationships with borrowers, clients, customers, and employees. The loss of key employees in connection with an acquisition could adversely affect our ability to successfully conduct our business. Acquisition and integration efforts could divert management attention and resources, which could have an adverse effect on our financial condition and results of operations. Additionally, the operation of the acquired businesses may adversely affect our existing profitability, and we may not be able to achieve results in the future similar to those achieved by our existing business or manage growth resulting from the acquisition effectively.

***We are subject to environmental, social and governance ("ESG") risks that could adversely affect our reputation, business,***

***operations and earnings.***

Certain organizations that provide corporate risk information to investors and shareholders have developed scores and ratings to evaluate companies based upon various ESG metrics. Currently, there are no universal standards for such scores or ratings, but ESG evaluations are increasingly being integrated into investment analysis. Views about ESG matters are diverse and rapidly changing, and companies are facing increasing scrutiny from regulators, investors, and other stakeholders related to their ESG practices and disclosure. If we fail to adapt to or comply with regulatory requirements or investor or stakeholder ESG standards, our reputation, ability to do business with certain partners, access to capital, operations and earnings could be adversely affected.

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**Risks Related to Regulation**

***The increasing number of proposed U.S. federal, state and local laws may affect certain mortgage-related assets in which we invest and could materially increase our cost of doing business.***

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. We do not know what impact this type of legislation, which has been primarily, if not entirely, focused on residential mortgage originations, would have on the commercial loan market. We are unable to predict whether U.S. federal, state or local authorities, or other pertinent bodies, will enact legislation, laws, rules, regulations, handbooks, guidelines or similar provisions that will affect our business or require changes in our practices in the future, and any such changes could have a material adverse effect on our results of operations, financial condition and cash flows.

***Failure to obtain or maintain required approvals and/or state licenses necessary to operate our mortgage-related activities may adversely impact our investment strategy.***

We may be required to obtain and maintain various approvals and/or licenses from federal or state governmental authorities, government sponsored entities or similar bodies in connection with some or all of our activities. There is no assurance that we can obtain and maintain any or all of the approvals and licenses that we desire or that we will avoid experiencing significant delays in seeking such approvals and licenses. Furthermore, we may be subject to various disclosure and other requirements to obtain and maintain these approvals and licenses, and there is no assurance that we will satisfy those requirements. 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.

***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. Such actions could materially and adversely impact our business and investments, and dramatically increase the costs of complying with any additional laws and regulations. The elimination or reduction in scope of various existing laws and regulations could similarly materially and adversely impact our business and investments, results of operations and financial condition. Any far-ranging government intervention in the U.S. economic and financial systems may carry unintended consequences and cause market distortions. We are unable to predict at this time the extent and nature of such unintended consequences and market distortions, if any. The inability to evaluate such potential impacts could have a material adverse effect on our results of operations, financial condition and cash flows.

***Accounting rules for certain of our transactions are highly complex and involve significant judgment and assumptions, and changes in such rules, accounting interpretations or our assumptions could adversely impact our ability to timely and accurately prepare our consolidated financial statements.***

We are subject to Financial Accounting Standards Board ("FASB") interpretations that can result in significant accounting changes that could have a material and adverse impact on our results of operations and financial condition. Accounting rules for financial instruments, including the origination, acquisition and sales or securitization of mortgage loans, derivatives, investment consolidations and other aspects of our anticipated operations are highly complex and involve significant judgment and assumptions. For example, our estimates and judgments are based on a number of factors, including projected cash flows from the collateral securing our loans, the likelihood of repayment in full at the maturity of a loan, potential for a loan refinancing opportunity in the future and expected market discount rates for varying property types. These complexities could lead to a delay in the preparation of financial information and the delivery of this information to our investors.

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.

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***The Current Expected Credit Loss ("CECL") accounting standard could result in a significant change in how we recognize***

***credit losses and may have a material adverse effect on our financial condition and results of operations.***

In June 2016, the FASB issued an Accounting Standards Update ("ASU"), Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which replaces the current "incurred loss" model for recognizing credit losses with an "expected loss" model referred to as the CECL model. The new CECL standard became effective for us on January 1, 2023. Under the CECL model, we are required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected. The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the "incurred loss" model required under current U.S. GAAP, which delays recognition until it is probable a loss has been incurred. The adoption of ASU 2016-13 resulted in an incremental reserve of approximately $4.6 million, which included reserve on future loan funding commitments. Accordingly, the adoption of the CECL model may materially affect how we determine our allowance for credit losses and require us to increase our allowance. If we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, financial condition and results of operations.

***We are an "emerging growth company," and a "smaller reporting company" and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies or smaller reporting companies will make an investment in us less attractive to investors. In particular, our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act.***

We are an "emerging growth company" as defined in the JOBS Act. 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 may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. 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. In the event that we are still considered a smaller reporting company at such time as we cease being an emerging growth company, the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an emerging growth company or a smaller reporting company.

Rule 12b-2 of the Exchange Act defines a "smaller reporting company" as an issuer that is not an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)had a public float of less than $250 million; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available and either had no public float or a public float of less than $700 million.

Similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings, and have certain other decreased disclosure obligations in their SEC filings, including, among other things, being required to provide only two years of audited financial statements in annual reports.

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.

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***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. In such a circumstance, we may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or we may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. If we ever become subject to significant environmental liabilities, our business, financial condition, liquidity, and results of operations could be materially and adversely affected. In addition, an owner or operator of real property may become liable under various federal, state and local laws, for the costs of removal of certain hazardous substances released on its property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. The presence of hazardous substances may adversely affect an owner's ability to sell real estate or borrow using real estate as collateral. To the extent that an owner of an underlying property becomes liable for removal costs, the ability of the owner to make debt payments may be reduced, which in turn may adversely affect the value of the relevant mortgage-related assets held by us.

***Insurance on the properties underlying our loans may not adequately cover all losses and uninsured losses could materially and adversely affect us.***

Generally, our borrowers will be responsible for the costs of insurance coverage for the properties we lease, including for casualty, liability, fire, floods, earthquakes, extended coverage and rental or business interruption loss. However, there are certain risks, such as losses from terrorism, that are not generally insured against, or that are not generally fully insured against, because it is not deemed economically feasible or prudent to do so. In addition, changes in the cost or availability of insurance could expose us to uninsured casualty losses. Under certain circumstances insurance proceeds may not be sufficient to restore our economic position with respect to an affected property, and we could be materially and adversely affected. Furthermore, we do not have any insurance designated to limit any losses that we may incur as a result of known or unknown environmental conditions which are not caused by an insured event.

In addition, certain of the properties underlying our loans may be located in areas that are more susceptible to, and could be significantly affected by, natural disasters that could cause significant damage to the properties. 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.***

We are not registered as an investment company under the 1940 Act. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the 1940 Act that impose, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• limitations on our capital structure and the use of leverage;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• restrictions on specified investments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• prohibitions on transactions with affiliates; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• compliance with reporting, record keeping, and other rules and regulations that would significantly change our operations.

We conduct our operations so that neither we nor our subsidiaries are required to register as an investment company under the 1940 Act. Section 3(a) (1)(A) of the 1940 Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. 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. Excluded from the term "investment securities," among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act. The value of the "investment

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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). 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. Rather, we are primarily engaged in the non-investment company businesses of our subsidiaries.

We and certain of our subsidiaries may from time to time rely primarily on the exclusion from the definition of an investment company under Section 3(c)(5)(C) of the 1940 Act, or any other exclusions that may be available to us (other than the exclusions under Section 3(c)(1) or Section 3(c)(7)). Section 3(c)(5)(C) of the 1940 Act is available for entities primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate. This exclusion generally requires that at least 55% of our portfolio must be comprised of "qualifying real estate" assets and at least 80% of our portfolio must be comprised of "qualifying real estate" assets and "real estate-related" assets (and no more than 20% comprised of miscellaneous assets). For purposes of the Section 3(c)(5)(C) exclusion, we classify our investments based in large measure on no-action letters issued by the staff of the SEC, and other SEC interpretive guidance and, in the absence of SEC guidance, on our view of what constitutes a "qualifying real estate" asset and a "real estate-related" asset. 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. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain mortgage loans, participations in mortgage loans, mortgage-backed securities, mezzanine loans, joint venture investments, preferred equity and the equity securities of other entities may not constitute qualifying real estate assets and therefore our investments in these types of assets may be limited. No assurance can be given that the SEC or its staff will concur with our classification of the assets we hold for purposes of the 3(c)(5)(C) exclusion or any other exclusion or exemption under the 1940 Act. Future revisions to the 1940 Act or further guidance from the SEC or its staff may cause us to lose our exclusion from registration or force us to re-evaluate our portfolio and investment strategy. Such changes may prevent us from operating our business successfully.

In order to maintain an exclusion from registration under the 1940 Act, we may be unable to sell assets that we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire assets that we would otherwise want to acquire and would be important to our strategy.

Although we monitor our portfolio periodically and prior to each acquisition and disposition, we may not be able to maintain an exclusion from registration as an investment company. If we were required to register as an investment company, but failed to do so, we would be prohibited from engaging in our business, and legal proceedings could be instituted against us. In addition, our contracts may be unenforceable, and a court could appoint a receiver to take control of us and liquidate our business, all of which could have a material adverse effect on our results of operations, financial condition and cash flows.

**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. 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. Our success depends substantially on the efforts and abilities of the management team of our Manager, including Messrs. Uppal, Pinkus and Cooperman, and our Manager's debt finance 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.***

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. In particular, we may invest in, or acquire, certain of our investments through joint ventures or co-investments with other affiliates or purchase assets from, sell assets to or arrange financing from or provide financing to other affiliates, or engage in other transactions with entities managed by our Manger or its affiliates. Future joint venture investments could be adversely affected by our lack of sole decision-making

authority, our reliance on our Manager's and its affiliates' financial condition and liquidity, and disputes between us and our Manager or its affiliates. There can be no assurance that any procedural protections will be sufficient to assure that these transactions will be made on terms that will be at least as favorable to us as those that would have been obtained in an arm's-length transaction.

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In addition, we will rely on our Manager for our day-to-day operations. Under the Management Agreement, our Manager has and will have a contractual, as opposed to a fiduciary, relationship with us that limits its obligations to us to those specifically set forth in the Management Agreement. Our Manager may be subject to conflicts of interest in making investment decisions on assets on our behalf as opposed to other entities that have similar investment objectives. Our Manager may have different incentives in determining when to sell assets with respect to which it is entitled to fees and compensation and such determinations may not be in our best interest.

Our Manager and its affiliates serve as manager of certain other funds and investment vehicles, all of which have investment objectives that overlap with ours. In addition, future programs may be sponsored by our Manager and its affiliates. As a result, our Manager and its affiliates may face conflicts of interest arising from potential competition with other programs for investors and investment opportunities. There may be periods during which one or more programs managed by our Manager or its affiliates will be raising capital and which might compete with us for investment capital. 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.

***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.***

We rely on our officers and the officers of our Manager, including Messrs. Uppal, Pinkus and Cooperman, and the other debt finance 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.

When our officers or the officers of our Manager identify an investment opportunity that may be suitable for us as well as an affiliated entity, they, in their sole discretion, will first evaluate the investment objectives of each program to determine if the opportunity is suitable for each program. If the proposed investment is appropriate for more than one program, our Manager will then evaluate the portfolio of each program, in terms of diversity of geography, underlying property type, tenant concentration and borrower, to determine if the investment is most suitable for one program in order to create portfolio diversification. If such analysis is not determinative, our Manager will allocate the investment to the program with uncommitted funds available for the longest period or, to the extent feasible, prorate the investment between the programs in accordance with uninvested funds. 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.

***Our Manager, our officers and the debt finance 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.***

We will rely on our Manager, its officers and on the debt finance professionals that our Manager retains to provide services to us for the day-to-day operation of our business. Messrs. Uppal, Pinkus and Cooperman are executive officers of our Manager as well as certain other funds managed by our Manager or its affiliates. As a result of their interests in other programs, their obligations to other investors and the fact that they engage in and will continue to engage in other business activities on behalf of themselves and others, Messrs. Uppal, Pinkus and Cooperman face conflicts of interest in allocating their time between us and other Terra Capital Partners-sponsored programs and other business activities in which they are involved. Should our Manager devote insufficient time or resources to our business, our returns on our direct or indirect investments, may decline, which in turn could have a material adverse effect on our results of operations, financial condition and cash flows.

***The compensation that our Manager receives was not determined on an arm's-length basis and therefore may not be on the same terms as we could achieve from a third-party.***

Our Manager's compensation for services it provides to us was not determined on an arm's-length basis. We cannot assure you that a third-party unaffiliated with us would not be able to provide such services to us at a lower price.

***The base management fees we pay our Manager may reduce its incentive to devote its time and effort to seeking attractive assets for our portfolio because the fees are payable regardless of our performance.***

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. We would be required to pay the

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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.***

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. In addition, we have entered into a cost sharing and reimbursement agreement with Terra LLC, effective October 1, 2022, pursuant to which Terra LLC will be responsible for its allocable share of our expenses, including fees paid by us to our Manager. 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 we cannot predict the amount of fees due our Manager, we cannot predict how precisely such fees will impact such payments.

***If our Manager causes us to enter into a transaction with an affiliate, our Manager may face conflicts of interest that would not exist if such transaction had been negotiated at arm's-length with an independent party.***

Our Manager may face conflicts of interests if we enter into transactions with affiliates of our Manager, or entities managed by our Manager or its affiliates. In these circumstances, the persons who serve as our Manager's management team may have a fiduciary responsibility to both us and the affiliate. Transactions between us and our Manager's affiliates, including entities managed by our Manager or its affiliates, will not have the benefit of arm's-length negotiation of the type normally conducted between unrelated parties. This conflict of interest may cause our Manager to sacrifice our best interests in favor of its affiliate or the entity it or its affiliates manages, thereby causing us to enter into a transaction that is not in our best interest and that may negatively impact our performance.

***Our Manager and its affiliates have limited prior experience operating a REIT and therefore may have difficulty in successfully and profitably operating our business or complying with regulatory requirements, including REIT provisions of the Code, which may hinder their ability to achieve our objectives or result in loss of our qualification as a REIT.***

Prior to the completion of the REIT formation transaction, our Manager and its affiliates had no experience operating a REIT or complying with regulatory requirements, including the REIT provisions of the Code. The REIT rules and regulations are highly technical and complex, and the failure to comply with the income, asset, and other limitations imposed by these rules and regulations could prevent us from qualifying as a REIT or could force us to pay unexpected taxes and penalties. Our Manager and its affiliates have limited experience operating a business in compliance with the numerous technical restrictions and limitations set forth in the Code applicable to REITs or the 1940 Act. We cannot assure you that our Manager or our management team will perform on our behalf as they have in their previous endeavors. The inexperience of our Manager and its affiliates described above may hinder our Manager's ability to achieve our objectives or result in loss of our qualification as a REIT or payment of taxes and penalties. As a result, we cannot assure you that we have been able to or will continue to be able to successfully operate as a REIT, execute our business strategies or comply with regulatory requirements applicable to REITs.

**Risks Related to Financing and Hedging**

***Our Board may change our leverage policy and or investment strategy and guidelines, asset allocation and financing strategy without stockholder consent.***

We currently have outstanding indebtedness and expect to deploy moderate amounts of additional leverage as part of our operating strategy. 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 our stockholders. Depending on market conditions, additional borrowings may include credit facilities, senior notes (including both a reopening of the unsecured notes or the issuance of a new series), repurchase agreements, additional first mortgage loans and securitizations. In addition, we may divide the loans we originate into senior and junior tranches and dispose of the more senior tranches as an additional means of providing financing to our business. To the extent that we use leverage to finance our assets, we would expect to have a larger portfolio of loan assets, but our financing costs relating to our borrowings will reduce our net income. We may not be able to meet our financing obligations and, to the extent that we cannot, we risk the loss of some or all of our assets to liquidation or sale to satisfy such obligations. Any reduction in our ability to make principal and

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interest payments on our debt obligations, including the term loan, the unsecured notes and the revolving line of credit, may have a material adverse effect on our results of operations, financial condition and cash flows.

Our Manager is authorized to follow broad investment guidelines that have been approved by our Board. Those investment guidelines, as well as our target assets, investment strategy, financing strategy and hedging policies with respect to investments, originations, acquisitions, growth, operations, indebtedness, capitalization and distributions, may be changed at any time without notice to, or the consent of, our investors. This could result in a loan portfolio with a different risk profile. A change in our investment strategy may increase our exposure to interest rate risk, default risk and real estate market fluctuations. Furthermore, a change in our asset allocation could result in our making investments in asset categories different from those described herein. These changes could have a material adverse effect on our results of operations, financial condition and cash flows.

***We may pursue and not be able to successfully complete securitization transactions, which could limit potential future sources of financing and could inhibit the growth of our business.***

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. If we employ this strategy, we are subject to the risk that we would not be able to obtain, during the period that our short-term financing arrangements are available, a sufficient amount of eligible assets to maximize the efficiency of a CMBS, CDO or private placement issuance. We 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.

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.

***We may be required to repurchase loans or indemnify investors if we breach representations and warranties, which could harm our earnings.***

We may, on occasion, consistent with our qualification as a REIT and our desire to avoid being subject to the "prohibited transaction" penalty tax, sell some of our loans in the secondary market or as a part of a securitization of a portfolio of our loans. If we sell loans, we would be required to make customary representations and warranties about such loans to the loan purchaser. Our loan sale agreements may require us to repurchase or substitute loans in the event we breach a representation or warranty given to the loan purchaser. In addition, we may be required to repurchase loans as a result of borrower fraud or in the event of early payment default on a loan. Likewise, we may be required to repurchase or substitute loans if we breach a representation or warranty in connection with our securitizations, if any.

The remedies available to a purchaser of loans are generally broader than those available to us against the originating broker or correspondent. Further, if a purchaser enforces its remedies against us, we may not be able to enforce the remedies we have against the sellers. 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"). Significant repurchase activity could have a material adverse effect on our results of operations, financial condition and cash flows.

***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. These restrictive covenants and operating restrictions could have a material adverse effect on our operating results, cause us to lose our REIT status, restrict our ability to finance or securitize new originations and acquisitions, force us to liquidate collateral and negatively affect our financial condition and our ability to pay dividends. 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. Accelerating repayment and terminating the agreements will require immediate repayment by us of the borrowed funds, which may require us to liquidate assets at a

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disadvantageous time, causing us to incur further losses and adversely affecting our results of operations and financial condition, which may impair our ability to make principal and interest payments on our debt obligations. Any failure to make payments when due or upon acceleration could result in the foreclosure upon our assets by our lenders.

***Our inability to access funding could have a material adverse effect on our results of operations, financial condition and cash flows. We may rely on short-term financing and thus are especially exposed to changes in the availability of financing.***

We currently have outstanding indebtedness and expect to use additional borrowings, such as first mortgage financings, credit facilities, senior notes, term loans and repurchase agreements, and other financings, as part of our operating strategy. Our use of financings exposes us to the risk that our lenders may respond to market conditions by making it more difficult for us to renew or replace on a continuous basis our maturing short-term borrowings. If we are not able to renew our then existing short-term facilities or arrange for new financing on terms acceptable to us, or if we default on our covenants or are otherwise unable to access funds under these types of financing, we may have to curtail our asset origination activities and/or dispose of assets.

It is possible that the lenders that provide us with financing could experience changes in their ability to advance funds to us, independent of our performance or the performance of our portfolio of assets. Further, if many of our potential lenders are unwilling or unable to provide us with financing, we could be forced to sell our assets at an inopportune time when prices are depressed. In addition, if the regulatory capital requirements imposed on our lenders change, they may be required to significantly increase the cost of the financing that they provide to us. Our lenders also may revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, based on, among other factors, the regulatory environment and their management of perceived risk, particularly with respect to assignee liability. Moreover, the amount of financing we receive under our short-term borrowing arrangements will be directly related to the lenders' valuation of our targeted assets that cover the outstanding borrowings.

This could increase our financing costs and reduce our access to liquidity, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.

***An increase in our borrowing costs relative to the interest we receive on our leveraged assets may have a material adverse effect on our results of operations, financial condition and cash flows.***

As our financings mature, we will be required either to enter into new borrowings or to sell certain of our assets. An increase in short-term interest rates at the time that we seek to enter into new borrowings would reduce the spread between the returns on our assets and the cost of our borrowings. This would adversely affect the returns on our assets, which would reduce our net income and, in turn, have a material adverse effect on our results of operations, financial condition and cash flows.

***We may enter into hedging transactions that could expose us to contingent liabilities in the future and adversely impact our financial condition.***

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). The amount due would be equal to the unrealized loss of the open swap positions with the respective counterparty and could also include other fees and charges, and these economic losses will be reflected in our results of operations. We may also be required to provide margin to our counterparties to collateralize our obligations under hedging agreements. 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.

***If we attempt to qualify for fair value hedge accounting treatment for any derivative instruments, but we fail to so qualify, we may suffer because losses on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction.***

If we attempt to qualify for hedge accounting treatment for any derivative instruments, but we fail to so qualify for a number of reasons, including if we use instruments that do not meet the definition of a derivative (such as short sales), if we fail to satisfy hedge documentation and hedge effectiveness assessment requirements, or if our instruments are not highly effective, we may suffer because losses on any derivatives we hold which may not be offset by a change in the fair value of the related hedged transaction.

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**Risks Related to Our Organization and Structure**

***Our rights to take action against our directors and officers are limited.***

Our charter limits the liability of our present and former directors and officers to us for money damages to the maximum extent permitted under Maryland law. Under Maryland law, our present and former directors and officers will not have any liability to us for money damages other than liability resulting from:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• actual receipt of an improper benefit or profit in money, property or services; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• active and deliberate dishonesty by the director or officer that was established by a final judgment and was material to the cause of action adjudicated.

Our charter authorizes us to indemnify our directors and officers for actions taken by them in those and other capacities to the maximum extent permitted by Maryland law. Our bylaws require us to indemnify each present and former director or officer, and each person who served any predecessor of our company, including the Terra Funds, in a similar capacity, to the maximum extent permitted by Maryland law, in connection with the defense of any proceeding to which he or she is made, or threatened to be made, a party or a witness by reason of his or her service to us or such predecessor. In addition, we may be obligated to pay or reimburse the expenses incurred by such persons in any such proceedings without requiring a preliminary determination of their ultimate entitlement to indemnification.

***Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exclusion from the 1940 Act.***

If the fair market value or income potential of our assets declines as a result of increased interest rates, prepayment rates, general market conditions, government actions or other factors, we may need to increase our real estate assets and income or liquidate our non-qualifying assets to maintain our REIT qualification or our exclusion from the 1940 Act. If the decline in real estate asset values or income occurs quickly, this may be especially difficult to accomplish. We may have to make decisions that we otherwise would not make absent the REIT and 1940 Act considerations.

***Our ownership limitations may restrict our change of control or business combination opportunities.***

In order for us to qualify as a REIT under the Code, shares of our stock must be owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of our stock may be owned, directly or constructively, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made). To assist us in preserving our REIT qualification, among other purposes, our charter generally prohibits any person from directly or indirectly owning more than 9.8% by value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock, the outstanding shares of any class or series of our preferred stock or the aggregate outstanding shares of all classes and series of our capital stock. These ownership limits could have the effect of discouraging a takeover or other transaction.

**Risks Related to Our Qualification as a REIT**

***Our failure to qualify or remain qualified as a REIT would subject us to U.S. federal income tax and applicable state and local taxes, which could have a material adverse effect on our results of operations, financial condition and cash flows.***

We believe that we have been organized and operated in a manner that has enabled us to qualify as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2016, and we intend to continue to operate in a manner that will allow us to continue to so qualify. 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 (determined without regard to our net capital gain and the dividends paid deduction) to our stockholders. We have not requested, and do not intend to request, a ruling from the IRS that we qualify as a REIT. The U.S. federal income tax laws governing REITs are complex, and judicial and administrative interpretations of the U.S. federal income tax laws governing REIT qualification are limited.

To qualify as a REIT, we must meet, on an ongoing basis, various tests regarding the nature and diversification of our assets and our income, the ownership of our outstanding shares and the amount of our distributions. Our compliance with the annual income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our

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income and assets on an ongoing basis. Our ability to satisfy these asset tests depends upon our analysis of the characterization of our assets for U.S. federal income tax purposes and fair market values of our assets. The fair market values of certain of our assets are not susceptible to a precise determination, and we will generally not obtain independent appraisals of such assets. Furthermore, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it difficult or impossible for us to qualify as a REIT. Thus, while we believe that we have been organized and operated and intend to continue to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations and the possibility of future changes in our circumstances, no assurance can be given that we have qualified or will qualify as a REIT for any particular year.

If we fail to qualify as a REIT in any taxable year, and we do not qualify for certain statutory relief, we would be required to pay U.S. federal income tax, including applicable state and local taxes, on our taxable income at regular corporate rates, and distributions to our stockholders would not be deductible by us in determining our taxable income. In such a case, we might need to borrow money, sell assets, or reduce or even cease making principal and interest payments on our outstanding indebtedness in order to pay our taxes. Our payment of income tax would significantly reduce the amount of operating cash flow available for principal and interest payments on our indebtedness and distributions to our stockholders. In addition, unless we were eligible for certain statutory relief provisions, we could not re-elect to be taxed as a REIT until the fifth calendar year following the year in which we failed to qualify.

***REIT distribution requirements could adversely affect our ability to execute our business plan and may require us to incur debt or sell assets to make such distributions.***

In order to qualify as a REIT, we must distribute dividends to our stockholders, each calendar year, equal to at least 90% of our REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our taxable income, we will be subject to U.S. federal corporate income tax on our undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws. We intend to distribute our taxable income to our stockholders in a manner intended to satisfy the 90% distribution requirement and to avoid both corporate income tax and the 4% nondeductible excise tax.

Differences in timing between our recognition of taxable income and the actual receipt of cash may occur. For example, we may be required to accrue income from mortgage loans before we receive any payments of interest or principal on such assets. We generally are required to recognize certain amounts in income no later than the time such amounts are reflected on our financial statements. The application of this rule may require the accrual of income with respect to our loans earlier than would be the case under the otherwise applicable tax rules. Also, in certain circumstances, our ability to deduct interest expenses for U.S. federal income tax purposes may be limited. As a result of the foregoing, we may generate less cash flow than taxable income in a particular year and find it difficult or impossible to meet the REIT distribution requirements in certain circumstances. In particular, where we experience differences in timing between the recognition of taxable income and the actual receipt of cash, the requirement to distribute a substantial portion of our taxable income could cause us to: (i) sell assets in adverse market conditions, (ii) borrow on unfavorable terms, (iii) distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt, (iv) make a taxable distribution of our shares as part of a distribution in which stockholders may elect to receive shares or (subject to a limit measured as a percentage of the total distribution) cash or (v) use cash reserves, in order to comply with the REIT distribution requirements and to avoid U.S. federal corporate income tax and the 4% nondeductible excise tax. Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could have a material adverse effect on our results of operations, financial condition and cash flows.

***Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.***

Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from certain activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes, such as mortgage recording taxes. In addition, we could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain our qualification as a REIT. Any of these taxes would reduce cash available for principal and interest payments on our outstanding indebtedness or distributions to our stockholders. In addition, we will be subject to a 100% tax on gains derived from the disposition of dealer property or inventory. In order to meet the REIT qualification requirements, we may hold some of our assets or engage in certain activities that would otherwise be nonqualifying for REIT purposes through a TRS or other subsidiary corporation that will be subject to corporate-level income tax at regular rates. In addition, although the BDC Merger was intended to be treated as a "reorganization" within the meaning

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of Section 368(a) of the Code for U.S. federal income tax purposes, if the BDC Merger is determined not to have qualified as a reorganization, or if Terra BDC is determined to have failed to qualify as a REIT, we could be subject to additional tax liabilities. In addition, we would inherit any liability with respect to unpaid taxes of Terra BDC for any periods prior to the BDC Merger for which Terra BDC did not qualify as a REIT. Any resulting taxes would decrease the cash available for distributions to our stockholders.

***Complying with the REIT requirements may force us to liquidate or forego otherwise attractive investments.***

In order to qualify as a REIT, we annually must satisfy two gross income requirements. First, at least 75% of our gross income for each taxable year, excluding gross income from prohibited transactions and certain hedging and foreign currency transactions, must be derived from investments relating to real property or mortgages on real property, including interest income derived from mortgage loans secured by real property (including certain types of qualified mezzanine loans and mortgage-backed securities), "rents from real property," dividends received from and gain from the disposition of shares of other REITs, and gains from the sale of real estate assets, as well as income from certain kinds of qualified temporary investments. Second, at least 95% of our gross income in each taxable year, excluding gross income from prohibited transactions and certain hedging and foreign currency transactions, must be derived from some combination of income that qualifies under the 75% gross income test described above, as well as other dividends, interest, and gain from the sale or disposition of stock or securities, which need not have any relation to real property. We may receive various fees in connection with our operations. The fees generally will be qualifying income for purposes of both the 75% and 95% gross income tests if they are received in consideration for entering into an agreement to make a loan secured by real property and the fees are not determined by income or profits. In addition, we also treat any origination fees we receive as a reduction in the principal balance of our loans, which we accrue over the life of the relevant loan under the original issue discount rules, discussed below. We treat any exit fees and other fees representing charges for the use or forbearance of money as additional interest. Other fees which are considered compensation for services are not qualifying income for purposes of either the 75% or 95% gross income test.

Further, at the end of each calendar quarter, at least 75% of the value of our total assets must consist of cash, cash items, government securities, shares in other REITs and other qualifying real estate assets, including certain mortgage loans, mezzanine loans and certain mortgage-backed securities. The remainder of our investment in securities (other than government securities, TRS securities and securities that are qualifying real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. 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. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.

As a result, we may be required to liquidate from our portfolio, or contribute to a TRS, otherwise attractive investments, and may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source of income or asset diversification requirements for qualifying as a REIT. 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 of reducing our income, which could have a material adverse effect on our results of operations, financial condition and cash flows.

***Our preferred equity and mezzanine loan investments may fail to qualify as real estate assets for purposes of the REIT gross income and asset tests, which could jeopardize our ability to qualify as a REIT.***

The IRS has issued Revenue Procedure 2003-65, which provides a safe harbor pursuant to which a mezzanine loan that is secured by interests in a partnership or other pass-through entity will be treated by the IRS as a real estate asset for purposes of the assets tests, and interest derived from such a loan will be treated as qualifying mortgage interest for purposes of the 75% and 95% gross income tests. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We own, and may acquire in the future, certain mezzanine loans and preferred equity investments (which we treat as mezzanine loans for U.S. federal income tax purposes) that do not satisfy all of the requirements for reliance on the safe harbor set forth in the Revenue Procedure. Consequently, there can be no assurance that the IRS will not successfully challenge the tax treatment of such mezzanine loans or preferred equity investments as qualifying real estate assets. To the extent that such mezzanine loans or preferred equity investments do not qualify as real estate assets, the interest income from such mezzanine loans or preferred equity investments would be qualifying income for the 95% gross income test, but not

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for the 75% gross income test, and such mezzanine loans or preferred equity investments would not be qualifying assets for the 75% asset test and would be subject to the 5% and 10% asset tests, which could jeopardize our ability to qualify as a REIT.

***The IRS may successfully challenge the treatment of our preferred equity and mezzanine loan investments as debt for U.S. federal income tax purposes.***

We invest in certain real estate-related investments, including mezzanine loans, first mortgage loans, and preferred equity investments. There is limited case law and administrative guidance addressing whether certain preferred equity investments or mezzanine loans will be treated as equity or debt for U.S. federal income tax purposes. Our Manager received an opinion of prior tax counsel regarding the treatment of one of our fixed return preferred equity investments and future similarly structured investments as debt for U.S. federal income tax purposes. We treat preferred equity investments which we currently hold as debt for U.S. federal income tax purposes and as mezzanine loans that qualify as real estate assets, as discussed above. No private letter rulings have been obtained on the characterization of these investments for U.S. federal income tax purposes and an opinion of counsel is not binding on the IRS; therefore, no assurance can be given that the IRS will not successfully challenge the treatment of such preferred equity investments as debt and as qualifying real estate assets. If a preferred equity investment or mezzanine loan owned by us was treated as equity for U.S. federal income tax purposes, we would be treated as owning a proportionate share of the assets and earning a proportionate share of the gross income of the partnership or limited liability company that issued the preferred equity interest. Certain of these partnerships and limited liability companies are engaged in activities that could cause us to be considered as earning significant nonqualifying income, which would likely cause us to fail to qualify as a REIT or pay a significant penalty tax to maintain our REIT qualification.

***The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to qualify as a REIT.***

We have entered into, and may in the future enter into additional, financing arrangements that are structured as sale and repurchase agreements pursuant to which we nominally sell certain of our assets to a counterparty and simultaneously enter into an agreement to repurchase such assets at a later date in exchange for a purchase price. Economically, these agreements are financings that are secured by the assets sold pursuant thereto. We believe that we will be treated for REIT asset and gross income test purposes as the owner of the assets that are the subject of such sale and repurchase agreements notwithstanding that such agreements may transfer record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could assert that we are not the owner of the assets during the term of the sale and repurchase agreement, in which case we could fail to qualify as a REIT.

***We may be required to report taxable income from certain investments in excess of the economic income we ultimately realize from them.***

We may acquire or originate loans that will be treated as having "original issue discount" for U.S. federal income tax purposes because interest on such securities will not be payable currently, but rather will be added to the outstanding loan balance as it accrues. We will be required to accrue such interest income based on a constant yield method notwithstanding the fact that such interest income is not yet payable, and we will therefore be taxed based on the assumption that all future projected interest payments due on such securities will be made. If such securities turn out not to be fully collectible, an offsetting loss deduction will become available only in the later year that uncollectability is provable. While we would in general ultimately have an offsetting loss deduction available to us when such interest was determined to be uncollectible, the utility of that deduction could depend on our having taxable income in that later year or thereafter.

***Complying with REIT requirements may limit our ability to hedge effectively.***

The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate and currency risks will generally be excluded from gross income for purposes of the 75% and 95% gross income tests if (i) the instrument (A) hedges interest rate risk or foreign currency exposure on liabilities used to carry or acquire real estate assets, (B) hedges risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% gross income tests or (C) hedges an instrument described in clause (A) or (B) for a period following the extinguishment of the liability or the disposition of the asset that was previously hedged by the hedged instrument, and (ii) such instrument is properly identified under the applicable Treasury Regulations.

As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous or implement those hedges through a TRS. This could increase the cost of our hedging activities because a TRS would be subject to corporate tax on its income. Moreover, the limits on our use of hedging techniques could expose us to greater risks associated

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with changes in interest rates than we would otherwise want to bear. In addition, losses in a TRS would generally not provide any tax benefit to us since such losses may not be used to offset our taxable income, although such losses may be carried forward to offset future taxable income of the TRS.

***The tax on prohibited transactions will limit our ability to engage in transactions, including sales of participation interests in loans and securitizations, that would be treated as sales of dealer property for U.S. federal income tax purposes.***

A REIT's net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, but including loans, held as inventory or primarily for sale to customers in the ordinary course of business. We occasionally sell participation interests in loans which we have originated; however, we do not expect to engage in a significant number of such sales or that such sales will generate significant gains, if any. To the extent that we were to sell loans or participations therein in a manner that we believe could expose us to the prohibited transaction tax, we intend to conduct such activities through a TRS. In addition, we may decide to pursue securitization transactions to finance our real estate-related loans. To the extent that the securitization transactions were structured in a manner that we believe could expose us to the prohibited transactions tax, we intend to conduct such activities through a TRS.

***A failure to comply with the limits on our ownership of and relationship with our TRSs, if any, would jeopardize our REIT qualification and may result in the application of a 100% excise tax.***

Although our use of TRSs may be able to partially mitigate the impact of meeting the requirements necessary to maintain our qualification as a REIT, our ownership of and relationship with any TRSs is subject to limitations, and a failure to comply with the limits would jeopardize our REIT qualification and our transactions with such TRSs may result in the application of a 100% excise tax if such transactions are not conducted on arm's-length terms.

A REIT may own up to 100% of the stock of one or more TRSs. Subject to certain exceptions, a TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Both the subsidiary corporation and the REIT must jointly elect to treat the subsidiary corporation as a TRS. Any TRS that we form will pay U.S. federal, state and local income tax on its taxable income, and its after-tax net income will be available for distribution to us but is not required to be distributed 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). Furthermore, we will monitor the value of our respective investments in our TRSs for the purpose of ensuring compliance with TRS ownership limitations.

In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm's-length basis. 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.

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. 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.***

The U.S. federal income tax laws and regulations governing REITs and their investors, as well as the administrative interpretations of those laws and regulations, are constantly under review and may be changed at any time, possibly with retroactive effect. No assurance can be given as to whether, when, or in what form, the U.S. federal income tax laws applicable to us and our investors may be enacted. Changes to the U.S. federal income tax laws and interpretations of U.S. federal income tax laws could adversely affect an investment in us.

Prospective investors are urged to consult with their tax advisors regarding the potential effects of legislative, regulatory or administrative developments on an investment in our company.

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***Your investment has various U.S. federal income tax risks.***

An investment in us involves complex U.S. federal, state and local income tax considerations that will differ for each investor. Prospective investors should consult with their tax advisors regarding the U.S. federal, state, local and foreign income and other tax consequences applicable to an investment in us.

**General Risk Factors**

***The effects of the ongoing COVID-19 pandemic, as well as any future pandemics or similar events, and the actions taken in response thereto, may adversely affect our investments and operations.***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March 2020, the World Health Organization publicly characterized the outbreak of COVID-19 as a global pandemic. The COVID-19 pandemic has caused, and may continue to cause, significant disruptions to the U.S. and global economy and cause significant volatility and negative pressure in the financial markets. During the early part of the pandemic, the U.S. and global economy came under severe pressure due to numerous factors, including measures taken by governing authorities to prevent the spread of COVID-19, such as instituting quarantines, restrictions on travel, school closures, bans on public events and on public gatherings, "shelter in place" or "stay at home" rules, restrictions on types of business that may continue to operate, and/or restrictions on types of construction projects that may continue. Many of such restrictions have long since been lifted, and the unprecedented global impact of the COVID-19 pandemic appears to have largely subsided. Nevertheless, the negative impacts of COVID-19 on the U.S. and global economy were quite severe and recovery is still in progress.

As a result of a significant portion of our investments being in preferred equity of entities that own mezzanine loans and first mortgages secured by office, multifamily and hospitality properties located in the United States, the ongoing COVID-19 pandemic will impact our investments and operating results to the extent that it reduces occupancy, increases the cost of operation or results in limited hours or necessitates the closure of such properties. The borrowers under the first mortgages, mezzanine loans or preferred equity in which we invest may fail to make timely and required payments under the terms of such instruments. In addition, quarantines, states of emergencies and other measures taken to curb the spread of the COVID-19 pandemic may negatively impact the ability of such properties to continue to obtain necessary goods and services or provide adequate staffing, which may also adversely affect our investments and operating results.

The world-wide economic downturn resulting from the COVID-19 pandemic could negatively impact our investments and operations, as well as our ability to make distributions to our stockholders and principal and interest payments on our indebtedness. The extent to which the COVID-19 pandemic impacts our investments and operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the future rate of occurrence or mutation of COVID-19, continuation of or changes in governmental responses to the ongoing COVID-19 pandemic, and the effectiveness of responsive actions taken in the United States and other countries to contain and manage the disease. Public and private responses to the pandemic may lead to deterioration of economic conditions, an economic downturn or a recession at a global scale, which could materially affect our performance, financial condition, results of operations and cash flows. Any other pandemics or similar events in the future could also similarly have a material adverse effect on our investments and operations, as well as our ability to make distributions to our stockholders and principal and interest payments on our indebtedness.

***Future recessions, downturns, disruptions or instability could have a materially adverse effect on our results of operations, financial condition and cash flows.***

From time to time, the global capital markets may experience periods of disruption and instability, which could cause disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major financial institutions. Despite actions of U.S. and foreign governments, these events could contribute to worsening general economic conditions that materially and adversely impact the broader financial and credit markets and reduce the availability of debt and equity capital for the market as a whole and financial services firms in particular.

Deterioration of economic and market conditions in the future could negatively impact credit spreads as well as our ability to obtain financing, particularly from the debt markets, which in turn may have a material adverse effect on our results of operations, financial condition and cash flows.

***Returns on our real estate-related loans may be limited by regulations.***

Our loan investments may be subject to regulation by federal, state and local authorities and subject to various laws and judicial and administrative decisions. We may determine not to make or invest in real estate-related loans in any jurisdiction in

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which we believe we have not complied in all material respects with applicable requirements, which reduce the amount of income we would otherwise receive.

**Item 1B. Unresolved Staff Comments.**

None.

**Item 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.

**Item 3. Legal Proceedings.**

From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Additionally, as of December 31, 2022, we owned a multi-tenant office building that is subject to a ground lease. The ground lease provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9% of the fair market value of the land. The next rent reset on the ground lease is scheduled for November 1, 2025. We are currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v. Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No. 20STCV34217. We believe this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. Our position has prevailed in all three of the prior arbitrations to reset the ground rent. We intend vigorously to pursue the litigation. While we believe our arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty. If the landlord prevails, the future rent reset determinations could result in significantly higher ground rent, which would likely result in a significant diminution in the value of our interest in the ground lease and the office building.

**Item 4. Mine Safety Disclosures.**

Not applicable.

**PART II** 

**Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.**

**Market Information**

&nbsp;&nbsp;&nbsp;&nbsp;There is no established trading market for our Class B Common Stock. As of March 10, 2023, we had 24,335,379 shares of Class B Common Stock outstanding held by 2,121 investors. As of March 10, 2023, 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, 2022.

**Issuer Purchases of Equity Securities**

There were no issuer purchases of equity securities during the year ended December 31, 2022.

**Item 6. [Reserved].**

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**Item 7. Management**'**s Discussion and Analysis of Financial Condition and Results of Operations.**

&nbsp;&nbsp;&nbsp;&nbsp;

The information contained in this section should be read in conjunction with our audited consolidated financial statements and related notes thereto and other financial information included elsewhere in this annual report on Form 10-K.

**Overview**

&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;We are a real estate credit focused company that originates, structures, funds and manages commercial real estate credit investments, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments throughout the United States, which we collectively refer to as our targeted assets. Our loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. We focus on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties primarily in primary and secondary markets. We believe loans in this size range are subject to less competition, offer higher risk adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. Our investment objective is to provide attractive risk-adjusted returns to our stockholders, primarily through regular distributions. There can be no assurances that we will be successful in meeting our investment objective.

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of 31 loans in 10 states with an aggregate net principal balance of $633.2 million, a weighted average coupon rate of 11.5%, a weighted average loan-to-value ratio of 70.1% and a weighted average remaining term to maturity of 1.1 years.

&nbsp;&nbsp;&nbsp;&nbsp;Each of our loans was originated by Terra Capital Partners or its affiliates. Our portfolio is diversified based on location of the underlying properties, loan structure and property type. As of December 31, 2022, our portfolio included underlying properties located in 31 markets, across 10 states and includes property types such as multifamily housing, student housing, commercial offices, medical offices, mixed-use and industrial properties. The profile of these properties ranges from stabilized and value-added properties to pre-development and construction. Our loans are structured across mezzanine debt, first mortgages, preferred equity investments and credit facilities.

&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated under the Maryland General Corporation Law on December 31, 2015. Through December 31, 2015, our business was conducted through a series of predecessor private partnerships. At the beginning of 2016, we completed the merger of these private partnerships into a single entity as part of our plan to reorganize our business as a REIT for federal income tax purposes. Following the REIT formation transaction, Terra Fund 5 contributed the consolidated portfolio of net assets of certain Terra Funds to our company in exchange for all of the shares of our common stock. On March 2, 2020, we engaged in a series of transactions pursuant to which we issued an aggregate of 4,574,470.35 shares of common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by us, cash of $25.5 million and other working capital. Following the consummation of the BDC Merger and as of December 31, 2022, former Terra BDC stockholders owned approximately 19.9% of our common equity, Terra JV held 70.0% of the issued and outstanding shares of our common stock with the remainder of 10.1% held by Terra Offshore REIT; and Terra Fund 5 and Terra Fund 7 owned an 87.6% and 12.4% interest, respectively, in Terra JV.

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

**Recent Developments**&nbsp;&nbsp;&nbsp;&nbsp;

***BDC Merger***

On October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022, 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. 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 SDAT, respectively, at the Effective Time.

At the Effective Time, except for any shares of Terra BDC Common Stock held by us or any of our wholly owned subsidiaries or Terra BDC, which shares were automatically retired and ceased to exist with no consideration paid therefor, each issued and outstanding share of Terra BDC Common Stock was automatically cancelled and retired and converted into the right to receive (i) 0.595 shares of our newly designated Class B Common Stock, 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

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multiplying (x) the fraction of a share of Class B Common Stock to which such holder would otherwise be entitled by (y) $14.38.

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

On the Closing Date, we filed with the SDAT the Charter Amendment. 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, 450,000,000 shares of Class B Common Stock, and 50,000,000 shares of 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.

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 as set forth below with respect to conversion.

On the First Conversion Date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date as approved by our Board, one-third of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. On the Second Conversion Date, one-half of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. On the Third Conversion Date, all of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock.

**Portfolio Summary**

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

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| | **Fixed Rate** | **Floating <br>Rate** <sup>(1)(2)(3)</sup> | **Total Gross Loans** | **Obligations under Participation Agreements** | **Total Net Loans** |
| Number of loans | 8 | 23 | 31 | 1 | 31 |
| Principal balance | $90990183 | $554805276 | $645795459 | $12584958 | $633210501 |
| Amortized cost | 92274998 | 534215769 | 626490767 | 12680594 | 613810173 |
| Fair value | 90729098 | 532416656 | 623145754 | 12680595 | 610465159 |
| Weighted average coupon rate | 13.82% | 11.23% | 11.59% | 16.36% | 11.50% |
| Weighted-average remaining term (years) | 1.35 | 1.10 | 1.14 | 1.69 | 1.13 |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| | **Fixed Rate** | **Floating <br>Rate** <sup>(1)(2)(3)</sup> | **Total Gross Loans** | **Obligations under Participation Agreements and Secured Borrowing** | **Total Net Loans** |
| Number of loans | 6 | 15 | 21 | 4 | 21 |
| Principal balance | $74880728 | $405270423 | $480151151 | $76569398 | $403581753 |
| Amortized cost | 75520212 | 394153102 | 469673314 | 76818156 | 392855158 |
| Fair value | 75449410 | 391752209 | 467201619 | 75900089 | 391301530 |
| Weighted average coupon rate | 12.39% | 7.01% | 7.85% | 10.40% | 7.37% |
| Weighted-average remaining term (years) | 1.93 | 1.45 | 1.53 | 0.82 | 1.66 |

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(1)These loans pay a coupon rate of LIBOR or SOFR plus a fixed spread. Coupon rate shown was determined using LIBOR of 4.39%, average SOFR of 4.06% and Term SOFR of 4.36% as of December 31, 2022, and LIBOR of 0.10% as of December 31, 2021.

(2)As of December 31, 2022 and 2021, amount included $413.1 million and $163.1 million of senior mortgages used as collateral for $261.0 million and $93.8 million of borrowings under credit facilities, respectively.

(3)As of December 31, 2022 and 2021, twenty-one and thirteen of these loans, respectively, are subject to a LIBOR or SOFR floor, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;In addition to our net loan portfolio, as of December 31, 2022, we owned a multi-tenant office building acquired pursuant to a foreclosure and as of December 31, 2021, we owned 4.9 acres of land acquired pursuant to a deed in lieu of foreclosure and the aforementioned multi-tenant office building. The parcel of land was sold in the second quarter of 2022. The real estate and related lease intangible assets and liabilities had a net carrying value of $40.6 million and $56.1 million as of December 31, 2022 and 2021, respectively. The mortgage loan payable encumbering the multi-tenant office building had an outstanding principal amount of $29.3 million and $32.0 million as of December 31, 2022 and 2021, respectively.

Additionally, as of December 31, 2022 and 2021, we owned 27.9% and 50.0%, respectively, of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. We also beneficially owned equity interests in three joint ventures that invest in real estate properties. In 2022, in connection with a mezzanine loan we originated, we entered into a residual profit sharing arrangement with the borrower. We accounted for this arrangement as an equity investment. As of December 31, 2022 and 2021, these equity investments had total carrying value of $62.5 million and $69.7 million, respectively.

**Book Value Per Share**

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

**Portfolio Investment Activity**

For the years ended December 31, 2022 and 2021, we invested $126.9 million and $117.3 million in new and add-on investments and had $33.3 million and $85.1 million of repayments, resulting in net investments of $93.6 million and $32.2 million, respectively. Amounts are net of obligations under participation agreements, secured borrowing, borrowings under the master repurchase agreement, the term loan, the repurchase agreements and the revolving line of credit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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**Net Loan Portfolio Information**

&nbsp;&nbsp;&nbsp;&nbsp;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:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|<br>**Loan Structure** | **Principal Balance** | **Carrying <br>Value** | **% of Total** | **Principal Balance** | **Carrying <br>Value** | **% of Total** |
| First mortgages | $456408889 | $461299182 | 75.1% | $310933350 | $313515326 | 79.8% |
| Preferred equity investments | 121231434 | 122132177 | 19.9% | 63441546 | 63515633 | 16.2% |
| Credit facility | 28802833 | 29080183 | 4.7% | 11762500 | 11859876 | 3.0% |
| Mezzanine loans | 26767345 | 26770521 | 4.4% | 17444357 | 17622804 | 4.5% |
| Allowance for loan losses |  | (25471890) | (4.1)% |  | (13658481) | (3.5)% |
| Total | $633210501 | $613810173 | 100.0% | $403581753 | $392855158 | 100.0% |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|<br>**Property Type** | **Principal Balance** | **Carrying <br>Value** | **% of Total** | **Principal Balance** | **Carrying <br>Value** | **% of Total** |
| Office | $171611750 | $172042063 | 27.9% | $166071342 | $166836320 | 42.5% |
| Industrial | 147796164 | 148891742 | 24.3% | 18762500 | 18859876 | 4.8% |
| Multifamily | 104589464 | 105570432 | 17.2% | 72999417 | 73955240 | 18.8% |
| Mixed-use | 64880450 | 65838965 | 10.7% | 28940658 | 28977024 | 7.4% |
| Infill land | 48860291 | 49565437 | 8.1% | 28960455 | 28923827 | 7.4% |
| Hotel - full/select service | 43222382 | 43758804 | 7.1% | 56847381 | 57395682 | 14.6% |
| Student housing | 31000000 | 31774261 | 5.2% | 31000000 | 31565670 | 8.0% |
| Infrastructure | 21250000 | 21840359 | 3.6% |  |  | —% |
| Allowance for loan losses |  | (25471890) | (4.1)% |  | (13658481) | (3.5)% |
| Total | $633210501 | $613810173 | 100.0% | $403581753 | $392855158 | 100.0% |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|<br>**Geographic Location** | **Principal Balance** | **Carrying <br>Value** | **% of Total** | **Principal Balance** | **Carrying <br>Value** | **% of Total** |
| **United States** | | | | | | |
| California | $151668387 | $153158967 | 24.9% | $187209547 | $189082380 | 48.1% |
| New York | 91845479 | 91877084 | 14.9% | 63441546 | 63515633 | 16.2% |
| Georgia | 72401718 | 73101964 | 11.9% | 53289288 | 53536884 | 13.6% |
| Texas | 67625000 | 68142046 | 11.1% | 13625000 | 13725690 | 3.5% |
| New Jersey | 62228622 | 62958482 | 10.3% |  |  | —% |
| Washington | 56671267 | 57027639 | 9.3% | 3523401 | 3382683 | 0.9% |
| Utah | 49250000 | 50698251 | 8.3% | 28000000 | 28420056 | 7.2% |
| North Carolina | 43520028 | 44041162 | 7.2% | 44492971 | 44704699 | 11.4% |
| Arizona | 31000000 | 31276468 | 5.1% |  |  | —% |
| Massachusetts | 7000000 | 7000000 | 1.1% | 7000000 | 7000000 | 1.8% |
| South Carolina |  |  | —% | 3000000 | 3145614 | 0.8% |
| Allowance for loan losses |  | (25471890) | (4.1)% |  | (13658481) | (3.5)% |
| Total | $633210501 | $613810173 | 100.0% | $403581753 | $392855158 | 100.0% |

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**Factors Impacting Operating Results**

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

***Credit Risk***

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

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

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

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

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

***Concentration Risk***

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

***Interest Rate Risk***

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

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

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***Prepayment Risk***

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

***Extension Risk***

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

***Real Estate Risk***

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

***Use of Leverage***

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

***Market Risk***

&nbsp;&nbsp;&nbsp;&nbsp;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.

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**Results of Operations**

&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the comparative results of our operations:

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| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **Change** |
| **Revenues** |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | $42591972 | $36743470 | $5848502 |
| &nbsp;&nbsp;&nbsp;Real estate operating revenue | 11451914 | 8894991 | 2556923 |
| &nbsp;&nbsp;&nbsp;Prepayment fee income | 1984061 | 190997 | 1793064 |
| &nbsp;&nbsp;&nbsp;Other operating income | 586499 | 855799 | (269300) |
|  | 56614446 | 46685257 | 9929189 |
| **Operating expenses** |  |  |  |
| &nbsp;&nbsp;&nbsp;Operating expenses reimbursed to Manager | 8076321 | 6916371 | 1159950 |
| &nbsp;&nbsp;&nbsp;Asset management fee | 6556492 | 5134149 | 1422343 |
| &nbsp;&nbsp;&nbsp;Asset servicing fee | 1560044 | 1181924 | 378120 |
| &nbsp;&nbsp;&nbsp;Provision for loan losses | 11813409 | 10904163 | 909246 |
| &nbsp;&nbsp;&nbsp;Real estate operating expenses | 5005551 | 5003893 | 1658 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 6530595 | 3989114 | 2541481 |
| &nbsp;&nbsp;&nbsp;Impairment charge | 1604989 | 3395430 | (1790441) |
| &nbsp;&nbsp;&nbsp;Professional fees | 3697792 | 1795856 | 1901936 |
| &nbsp;&nbsp;&nbsp;Directors fees | 192497 | 145000 | 47497 |
| &nbsp;&nbsp;&nbsp;Other | 747535 | 448503 | 299032 |
|  | 45785225 | 38914403 | 6870822 |
| **Operating income** | 10829221 | 7770854 | 3058367 |
| **Other income and expenses** |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense from obligations under participation agreements | (3180771) | (10596545) | 7415774 |
| &nbsp;&nbsp;&nbsp;Interest expense on repurchase agreement payable | (7913942) | (142495) | (7771447) |
| &nbsp;&nbsp;&nbsp;Interest expense on mortgage loan payable | (2173114) | (2449239) | 276125 |
| &nbsp;&nbsp;&nbsp;Interest expense on revolving line of credit | (2674568) | (911811) | (1762757) |
| &nbsp;&nbsp;&nbsp;Interest expense on term loan payable | (524344) | (6835877) | 6311533 |
| &nbsp;&nbsp;&nbsp;Interest expense on unsecured notes payable | (6682937) | (3173673) | (3509264) |
| &nbsp;&nbsp;&nbsp;Interest expense on secured borrowing | (1507572) | (1576502) | 68930 |
| &nbsp;&nbsp;&nbsp;Net unrealized (losses) gains on marketable securities | (122299) | 22500 | (144799) |
| &nbsp;&nbsp;&nbsp;Loss on sale of real estate | (51984) |  | (51984) |
| &nbsp;&nbsp;&nbsp;Income from equity investment in unconsolidated investments | 2731477 | 5925802 | (3194325) |
| &nbsp;&nbsp;&nbsp;Gain on sale of interests in unconsolidated investments | 799827 |  | 799827 |
| &nbsp;&nbsp;&nbsp;Realized loss on loan repayments |  | (517989) | 517989 |
| &nbsp;&nbsp;Gain on extinguishment of obligations under participation <br> agreements | 3435902 |  | 3435902 |
| &nbsp;&nbsp;Realized gains on marketable securities | 83411 | 129248 | (45837) |
|  | (17780914) | (20126581) | 2345667 |
| **Net loss** | $(6951693) | $(12355727) | $5404034 |

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***Net Loan Portfolio***

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

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

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** |
| | **Weighted Average Principal Amount** <sup>(1)</sup> | **Weighted Average Coupon Rate** <sup>(2)</sup> | **Weighted Average Principal Amount** <sup>(1)</sup> | **Weighted Average Coupon Rate** <sup>(2)</sup> |
| **<u>Total portfolio</u>** | | | | |
| Gross loans | $550062087 | 10.7% | $456344152 | 8.5% |
| Obligations under participation agreements <br> and secured borrowing | (59931021) | 12.1% | (114437021) | 11.0% |
| Repurchase agreement payable | (167507961) | 6.2% | (6349642) | 2.6% |
| Term loan payable | (10303678) | 5.3% | (103433296) | 5.3% |
| Revolving line of credit | (47383467) | 7.6% | (16721744) | 4.0% |
| Net loans <sup>(3)</sup> | $264935960 | 14.0% | $215402449 | 9.2% |
| **<u>Senior loans</u>** |  |  |  |  |
| Gross loans | 408607321 | 9.7% | 272577220 | 6.5% |
| Obligations under participation agreements <br> and secured borrowing | (24800580) | 8.1% | (51693824) | 8.9% |
| Repurchase agreement payable | (167507961) | 6.2% | (6349642) | 2.6% |
| Term loan payable | (10303678) | 5.3% | (103433296) | 5.3% |
| Revolving line of credit | (47383467) | 7.6% | (16721744) | 4.0% |
| Net loans <sup>(3)</sup> | $158611635 | 14.6% | $94378714 | 7.2% |
| **<u>Subordinated loans</u>** <sup>(4)</sup> |  |  |  |  |
| Gross loans | 141454766 | 13.6% | 183766932 | 11.4% |
| Obligations under participation agreements | (35130441) | 13.7% | (62743197) | 12.8% |
| Net loans <sup>(3)</sup> | $106324325 | 13.6% | $121023735 | 10.7% |

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_______________

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

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

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

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

***Interest Income***

&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31, 2022 as compared to the same period in 2021, interest income increased by $5.8 million, primarily due to an increase in contractual interest income as a result of an increase in the weighted average principal balance of gross loans due to new loans we originated in 2022 and loans we acquired in connection with the BDC Merger, as well as an increase in the weighted average coupon rate due to increases in the underlying index rates.

***Real Estate Operating Revenue***

For the year ended December 31, 2022 as compared to the same period in 2021, real estate operating revenue increased by $2.6 million, as a result of lease termination income recognized in 2022 in connection with a termination notice received in November 2021.

***Prepayment Fee Income***

Prepayment fee income represents prepayment fees charged to borrowers for the early repayment of loans.

For the year ended December 31, 2022 as compared to the same period in 2021, prepayment fee income increased by $1.8 million, as a result of an increase in loans with minimum yield provisions repaid before maturity.

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***Other Operating Income***

For the year ended December 31, 2022 as compared to the same period in 2021, other operating income decreased by $0.3 million, as a result of a decrease in dividend income earned on the marketable securities resulting from a decrease in the weighted average balance of the marketable securities.

***Operating Expenses Reimbursed to Manager***

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

For the year ended December 31, 2022 as compared to the same period in 2021, operating expenses reimbursed to our Manager increased by $1.2 million, as a result of an increase in the allocation ratio resulting from an increase in total assets under management due to new loans we originated as well as loans acquired in connection with the BDC Merger.

***Asset Management Fee***

&nbsp;&nbsp;&nbsp;&nbsp;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.

&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31, 2022 as compared to the same period in 2021, asset management fees increased by $1.4 million, primarily due to an increase in total assets under management resulting from new loans we originated as well as loans acquired in connection with the BDC Merger.

***Asset Servicing Fee***

&nbsp;&nbsp;&nbsp;&nbsp;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.

&nbsp;&nbsp;&nbsp;&nbsp;For each of the year ended December 31, 2022 as compared to the same period in 2021, asset servicing fees increased by $0.4 million, primarily due to an increase in total assets under management resulting from new loans we originated as well as loans acquired in connection with the BDC Merger.

***Provision for Loan Losses***

&nbsp;&nbsp;&nbsp;&nbsp;Our Manager performs a quarterly evaluation for possible impairment of our portfolio of loans. We record an allowance for loan losses equal to (i) 1.5% of the aggregate carrying amount of loans rated as a "4", plus (ii) 5% of the aggregate carrying amount of loans rated as a "5", plus (iii) impaired loan reserves, if any.

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022, we did not have any loans with a loan risk rating of "4" or "5", and did not record any general allowance for loan losses for the year ended December 31, 2022. As of December 31, 2022, we had four loans deemed impaired and recorded specific allowance for loan losses of $11.8 million for the year ended December 31, 2022. As of December 31, 2021, we had one loan with a loan risk rating of "4" and no loans with a loan risk rating of "5", and recorded general allowance for loan losses of $0.6 million for the year ended December 31, 2021. Additionally, as of December 31, 2021, we had three loans deemed impaired and recorded specific allowance for loan losses of $10.3 million for the year ended December 31, 2021.

***Depreciation and Amortization***

For the year ended December 31, 2022 as compared to the same period in 2021, depreciation and amortization increased by $2.5 million, primarily due to a lease termination notice received in November 2021, at which time we accelerated the amortization of lease intangibles.

***Impairment Charge***

For the years ended December 31, 2022 and 2021, we recorded an impairment charge of $1.6 million and $3.4 million, respectively, on 4.9 acres of the development land located in Pennsylvania in order to reduce the carrying value of the land to

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its estimated fair value, which is the estimated selling price less the cost of sale. The development land was sold in the second quarter of 2022.

***Professional Fees***

&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31, 2022 as compared to the same period in 2021, professional fees increased by $1.9 million, primarily due to legal fees incurred in connection with litigation related to the ground rent described above as well as a loan refinancing in 2022 which we accounted for as a loan modification.

***Other***

For the year ended December 31, 2022 as compared to the same period in 2021, other expense increased by $0.3 million, as a result of a fee paid to a third-party in connection with the sale of a parcel of land.

***Interest Expense from Obligations under Participation Agreements***

&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31, 2022 as compared to the same period in 2021, interest expense from obligations under participation agreements decreased by $7.4 million, as a result of a decrease in the weighted average principal amount outstanding on obligations under participation agreements, partly due to the release of obligations under participation agreements with Terra BDC in connection with the BDC Merger.

***Interest Expense on Repurchase Agreement Payable***

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

&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31, 2022, interest expense on repurchase agreement payable increased by $7.8 million, as a result of an increase in the weighted average principal amount outstanding on repurchase agreement payable.

***Interest Expense on Mortgage Loan Payable***

For the year ended December 31, 2022 as compared to the same period in 2021, interest expense on mortgage loan payable decreased by $0.3 million, as a result of a decrease in the weighted average principal amount outstanding on mortgage loan payable.

***Interest Expense on Revolving Line of Credit***

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

*&nbsp;&nbsp;&nbsp;&nbsp;*For the year ended December 31, 2022 as compared to the same period in 2021, interest expense on revolving line of credit increased by $1.8 million, due to an increase in weighted average principal amount outstanding on the revolving line of credit.

***Interest Expense on Term Loan Payable***

On September 3, 2020, we entered into an indenture and credit agreement that provided for a floating rate loan of $103.0 million, $3.6 million of additional future advances, and up to $11.6 million of additional future discretionary advances, in connection with certain outstanding funding commitments under the mortgage assets owned by us and financed under the indenture and credit agreement. The loan bore interest at LIBOR plus 4.25% with a LIBOR floor of 1.0%. On February 18, 2022, we refinanced this loan with a new repurchase agreement. In connection with the BDC Merger, we assumed a delayed

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draw term loan of $25.0 million. The delayed draw term loan bears interest at an annual rate of 5.625% and matures on July 1, 2023.

For the year ended December 31, 2022 as compared to the same period in 2021, interest expense on term loan payable decreased by $6.3 million, as a result of a decrease in the weighted average principal amount outstanding on term loan payable. Additionally, in connection with the refinancing, we reversed the previously accrued step-up interest of $0.4 million during the first quarter of 2022.

***Interest Expense on Secured Borrowing***

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

For the year ended December 31, 2022 as compared to the same period in 2021, interest expense on secured borrowing decreased by $0.1 million as a result of a decrease in the weighted average principal amount outstanding.

***Interest Expense on Unsecured Notes Payable***

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

For the year ended December 31, 2022 as compared to the same periods in 2021, interest expense on unsecured notes payable increased by $3.5 million, as a result of an increase in the weighted average principal amount outstanding.

***Income from Equity Investment in Unconsolidated Investments***

In August 2020, we entered into a subscription agreement with RESOF, an affiliate managed by our Manager, whereby we committed to fund up to $50.0 million to purchase partnership interest in RESOF. RESOF's primary investment objective is to generate attractive risk-adjusted returns by purchasing performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). As of December 31, 2022 and 2021, we owned 27.9% and 50.0% of the equity interest in RESOF, respectively.

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

For the year ended December 31, 2022, we recognized income from equity investment in unconsolidated investments of $2.7 million, which consisted of equity income from RESOF of $5.2 million and equity loss from the joint ventures of $2.5 million. For the year ended December 31, 2021, we recognized income from equity investment in unconsolidated investments of $5.9 million, which consisted of equity income from RESOF of $6.2 million, partially offset by equity loss from two joint ventures of $0.2 million.

***Gain on Sale of Interests in Unconsolidated Investments***

In September 2022, we sold a 53% effective interest in two joint ventures and 59% effective interest in another joint venture for a total of $33.7 million and recognized a gain on sale of $0.8 million for the year ended December 31, 2022. There was no such gain for the year ended December 31, 2021.

***Realized Loss on Repayment of Loans***

For the year ended December 31, 2022, we did not recognize any gain or loss on repayment of loans. For the year ended December 31, 2021, two previously defaulted loans were repaid at a discount and we recognized a net loss on loan repayment of $0.5 million, excluding previously accrued allowance for loan losses of $1.0 million.

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***Gain on Extinguishment of Obligations Under Participation Agreements***

In connection with the BDC Merger, the obligations under participation agreements with Terra BDC totaling $37.0 million were effectively extinguished and we recognized a net gain of $3.4 million for the year ended December 31, 2022, representing the difference between the carrying value of the Company's obligations under participation agreements and the fair value of Terra BDC's investments acquired through participation agreements. The was no such gain for the year ended December 31, 2021.

***Net Loss***

&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31, 2022 as compared to the same period in 2021, net loss decreased by $5.4 million.

&nbsp;&nbsp;&nbsp;&nbsp;

**Financial Condition, Liquidity and Capital Resources**

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

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

&nbsp;&nbsp;&nbsp;&nbsp;We expect to fund approximately $44.1 million of the unfunded commitments to borrowers during the next twelve months. We expect to maintain sufficient cash on hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on our credit facilities. Additionally, we had $29.3 million of borrowings outstanding under a mortgage loan payable that bear interest at an annual rate of LIBOR plus 3.85% with a LIBOR floor of 2.23%, that is collateralized by an office building. The mortgage loan payable matures on May 31, 2023. We expect to refinance the mortgage loan payable before it matures. In connection with the BDC Merger, we assumed a $25.0 million delayed draw term loan. This term loan bears interest at an annual rate of 5.625% and matures on July 1, 2023. We expect to either maintain sufficient cash on hand to repay the facility or refinance the facility.

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***Summary of Financing***

The table below summarizes our debt financing as of December 31, 2022:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Type of Financing** | **Maximum Amount Available** | **Outstanding Balance** | **Amount Remaining Available** | **Interest Rate** | **Maturity Date** |
| **Fixed Rate:** | | | | | |
| &nbsp;&nbsp;Senior unsecured notes | N/A | $85125000 | N/A | 6.00% | 6/30/2026 |
| &nbsp;&nbsp;Senior unsecured notes | N/A | 38375000 | N/A | 7.00% | 3/31/2026 |
| &nbsp;&nbsp;Delayed draw term loan | $25000000 | 25000000 |  | 5.625% | 7/1/2023 |
|  | $25000000 | $148500000 | $— |  |  |
| **Variable Rate:** |  |  |  |  |  |
| &nbsp;&nbsp;Mortgage loan payable | N/A | $29252308 | N/A | LIBOR plus 3.85% with a LIBOR floor of 2.23% | 5/31/2023 |
| &nbsp;&nbsp;Line of credit | $125000000 | 90135865 | $34864135 | LIBOR plus 3.25% with a combined floor of 4.00% | 3/12/2024 |
| &nbsp;&nbsp;UBS repurchase agreement | 195000000 | 51050000 | 143950000 | LIBOR or Term SOFR depending on repurchased asset index plus a spread ranging from 1.60% to 2.25% | 11/7/2024 |
| &nbsp;&nbsp;GS repurchase agreement | 200000000 | 119826606 | 80173394 | Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 1.75% to 3.00%) | 2/18/2024 |
|  | $520000000 | $290264779 | $258987529 |  |  |

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*Cash Flows Provided by Operating Activities*

&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31, 2022 as compared to the same period in 2021, cash flows provided by operating activities decreased by $3.7 million, primarily due to payment for a deposit for a potential investment partially offset by an increase in net contractual interest income.

*Cash Flows Used in Investing Activities*

*&nbsp;&nbsp;&nbsp;&nbsp;*For the year ended December 31, 2022, cash flows used in investing activities were $49.1 million, primarily related to origination and purchase of loans of $290.0 million and purchase of equity interests in unconsolidated investments of $25.5 million, partially offset by proceeds from repayments of loans of $197.5 million, proceeds from sale of interests in joint ventures of $33.7 million, cash and restricted cash acquired in connection with the BDC Merger of $24.6 million, proceeds from sale of real estate of $8.6 million and proceeds from sale of marketable securities of $1.3 million.

*&nbsp;&nbsp;&nbsp;&nbsp;*For the year ended December 31, 2021, cash flows used in investing activities were $87.7 million, primarily related to origination and purchase of loans of $252.4 million, purchase of partnership interest in a limited partnership of $32.2 million and purchase of marketable securities of $6.5 million, partially offset by proceeds from repayments of loans of $196.8 million and proceeds from sale of marketable securities of $6.6 million.

*Cash Flows Provided by Financing Activities*

*&nbsp;&nbsp;&nbsp;&nbsp;*For the year ended December 31, 2022, cash flows provided by financing activities were $34.1 million, primarily due to proceeds from borrowings under the repurchase agreements of $151.9 million, proceeds from borrowings under the revolving line of credit of $130.5 million, and proceeds from obligations under participation agreements of $29.6 million, partially offset by repayments of borrowings under the term loan of $93.8 million, repayments on borrowings under the revolving line of credit of $79.0 million, repayment of secured borrowing of $38.7 million, repayments of borrowings under repurchase agreements of $25.6 million, repayments of obligations under participation agreements of $22.2 million and distributions paid of $16.1 million.

*&nbsp;&nbsp;&nbsp;&nbsp;*For the year ended December 31, 2021, cash flows provided by financing activities were $101.8 million, primarily due to proceeds from issuance of unsecured notes payable, net of discount, of $82.5 million, proceeds from obligations under participation agreements and secured borrowing of $87.9 million and proceeds from borrowings under the term loan, revolving line of credit and repurchase agreement of $85.9 million. These cash inflows were partially offset by repayments on obligations under participation agreements of $101.7 million, distributions paid of $17.1 million, payment of mortgage principal of $12.1 million, repayment on borrowings under the term loan of $16.6 million, a decrease in interest reserve and other deposits hold on

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investments of $4.7 million and payment for deferred financing costs of $2.3 million.

**Distribution Reinvestment Plan**

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

**Critical Accounting Policies and Use of Estimates**

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

***Allowance for Loan Losses***

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

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

&nbsp;&nbsp;&nbsp;&nbsp;In conjunction with the quarterly evaluation of loans not considered impaired, our Manager assesses the risk factors of each loan and assigns each loan a risk rating between 1 (very low risk) and 5 (highest risk), which is an average of the numerical ratings in the following categories: (i) sponsor capability and financial conditions; (ii) loan and collateral performance relative to underwriting; (iii) quality and stability of collateral cash flows and/or reserve balances; and (iv) loan to value. We record an allowance for loan losses equal to (i) 1.5% of the aggregate carrying amount of loans rated as a "4," (Higher risk), plus (ii) 5% of the aggregate carrying amount of loans rated as a "5," (Highest risk) plus (iii) impaired loan reserves, if any.

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

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**Management Agreement with Terra REIT Advisors**

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

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

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

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

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

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

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

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

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| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| Origination and extension fee expense <sup>(1)(2)</sup> | $2967291 | $2729598 |
| Asset management fee | 6556492 | 5134149 |
| Asset servicing fee | 1560044 | 1181924 |
| Operating expenses reimbursed to Manager | 8076321 | 6916371 |
| Disposition fee <sup>(3)</sup> | 890194 | 1006302 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $20050342 | $16968344 |

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

(2)Amounts for the years ended December 31, 2022 and 2021, excluded $0.2 million and $0.3 million, respectively, of origination fees paid to our Manager in connection with our equity investment in an unconsolidated investment. These origination fees were capitalized to the carrying value of the unconsolidated investment as a transaction cost.

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

**Cost Sharing and Reimbursement Agreement with Terra LLC**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into a cost sharing and reimbursement agreement with Terra LLC, effective October 1, 2022 pursuant to which Terra LLC will be responsible for its allocable share of our expenses, including fees paid by us to our Manager based on

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relative assets under management. These fees are eliminated in consolidation and therefore have no impact on our consolidated financial statements.

**Participation Agreements** 

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

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022, the principal balance of our participation obligation was $12.6 million, which was a participation obligation to a third party.

&nbsp;&nbsp;&nbsp;&nbsp;The loans that are subject to participation agreements are held in our name, but each of the participant's rights and obligations, including with respect to interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon their respective pro rata participation interest in such participated investments, as specified in the respective participation agreements. We do not have direct liability to a participant with respect to the underlying loan and the participants' share of the investments is repayable only from the proceeds received from the related borrower/issuer of the investments and, therefore, the participants also are subject to credit risk (i.e., risk of default by the underlying borrower/issuer).

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

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

&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31, 2022, the weighted average outstanding principal balance on obligations under participation agreements and secured borrowing was approximately $59.9 million, and the weighted average interest rate was approximately 12.1%, compared to weighted average outstanding principal balance of approximately $114.4 million, and weighted average interest rate of approximately 11.0% for the year ended December 31, 2021.

**Item 7A. Quantitative and Qualitative Disclosures About Market Risk.**

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

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022, we had 10 investments with an aggregate principal balance of $295.0 million, net of obligations under participation agreements, that provide for interest income at an annual rate of LIBOR plus a spread, eight of which are subject to a LIBOR floor. A decrease of 100 basis points in LIBOR would decrease our annual interest income, net of interest expense on participation agreements, by approximately $2.9 million, and an increase of 100 basis points in LIBOR would increase our annual interest income, net of interest expense on participation agreements, by approximately $2.9 million. Additionally, we had 13 investments with an aggregate principal balance of $247.2 million that provide for interest income at an annual rate of SOFR or Term SOFR, plus a spread, all of which were subject to a SOFR or Term SOFR floor. A decrease of 100 basis points in SOFR or Term SOFR would decrease our annual interest income by $2.5 million, and an increase of 100 basis points in SOFR or Term SOFR would increase our annual interest income by $2.5 million.

&nbsp;&nbsp;&nbsp;&nbsp;Additionally, as of December 31, 2022, we had $29.3 million of borrowings outstanding under a mortgage loan payable that bear interest at an annual rate of LIBOR plus a spread that is collateralized by an office building; a revolving line of credit with an outstanding balance of $90.1 million that bears interest at an annual rate of LIBOR plus a spread that is collateralized

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by $177.4 million of first mortgages; a repurchase agreement with an outstanding balance of $51.1 million that bears interest at an annual rate of LIBOR or Term SOFR, as applicable, plus a spread that is collateralized by $68.1 million of first mortgages; and another repurchase agreement with an outstanding balance of $119.8 million that bears interest at an annual rate of Term SOFR plus a spread that is collateralized by $167.5 million of first mortgages. A decrease of 100 basis points in LIBOR and Term SOFR would decrease our annual interest expense by approximately $2.9 million, and an increase of 100 basis points in LIBOR and Term SOFR would increase our annual interest expense by approximately $2.9 million.

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

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

&nbsp;&nbsp;&nbsp;&nbsp;We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts, subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. For the years ended December 31, 2022 and 2021, we did not engage in interest rate hedging activities.

***Prepayment Risks***

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

***Extension Risk***

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

***Real Estate Risk***

&nbsp;&nbsp;&nbsp;&nbsp;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;

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pandemics; natural disasters; and other acts of god. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.

***Credit Risk***

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

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

**Item 8. Financial Statements and Supplementary Data.**

&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements are annexed to this Annual Report on Form 10-K beginning on page F-1.

**Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.**

&nbsp;&nbsp;&nbsp;&nbsp;None.

**Item 9A. Controls and Procedures.**

***Evaluation of Disclosure Controls and Procedures***

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.

***Evaluation of Internal Controls over Financial Reporting***

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our Manager, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including the chief executive officer and chief financial officer of our Manager (performing functions equivalent to those a principal executive officer and principal financial officer of our company would perform if we had any officers), we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on its evaluation, our management concluded that our internal control over financial reporting was effective as of the end of the fiscal year covered by this Annual Report on Form 10-K.

------

This Annual Report on Form 10-K does not include an attestation report of our independent registered accounting firm due to a transition period established by the rules of the SEC for "emerging growth companies."

***Changes in Internal Control Over Financial Reporting***

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

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

**Item 9B. Other Information.**

None

**Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections**

Not applicable.

**PART III**

**Item 10. Directors, Executive Officers and Corporate Governance.**

&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;The information regarding our executive officers required by Item 401 of Regulation S-K is located under Part I, Item 1 within the caption "Information About our Executive Officers" of this annual report on Form 10-K.

The information regarding our directors and certain other matters required by Item 401 of Regulation S-K is incorporated herein by reference to our definitive proxy statement relating to our 2022 annual meeting of stockholders (the "Proxy Statement"), to be filed with the SEC within 120 days after December 31, 2022.

The information regarding compliance with Section 16(a) of the Exchange Act required by Item 405 of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2022.

The information regarding our Code of Business Conduct and Ethics required by Item 406 of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2022.

The information regarding certain matters pertaining to our corporate governance required by Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is incorporated by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2022.

**Item 11. Executive Compensation.**

&nbsp;&nbsp;&nbsp;&nbsp;The information regarding executive compensation and other compensation related matters required by Items 402 and 407(e)(4) and(e)(5) of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2022.

**Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.** 

&nbsp;&nbsp;&nbsp;&nbsp;The tables on our equity compensation plan information and beneficial ownership required by Items 201(d) and 403 of Regulation S-K are incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2022.&nbsp;&nbsp;&nbsp;&nbsp;

**Item 13. Certain Relationships and Related Transactions, and Director Independence.**

The information regarding transactions with related persons, promoters and certain control persons and director independence required by Items 404 and 407(a) of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2022.

------

**Item 14. Principal Accounting Fees and Services.** 

The information concerning principal accounting fees and services and the Audit Committee's pre-approval policies and procedures required by Item 14 is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2022.

**PART IV**

**Item 15. Exhibits and Financial Statement Schedules.**

The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(1) Financial Statements**

The index to our financial statements is on page F-1 of this Annual Report on Form 10-K.

&nbsp;&nbsp;&nbsp;&nbsp;**(2) Financial Statement Schedule**

The index to our financial schedules is on page F-1 of this Annual Report on Form 10-K.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(3) Exhibits**

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

---

| | |
|:---|:---|
| **Exhibit No.** | **Description and Method of Filing** |
| 2.1 | <u>[Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated January 1, 2016 (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019).](http://www.sec.gov/Archives/edgar/data/1674356/000110465919060558/tm1921364d1_ex2-1.htm)</u> |
| 2.2 | <u>[Amendment No. 1 to the Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated December 31, 2016 (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019).](http://www.sec.gov/Archives/edgar/data/1674356/000110465919060558/tm1921364d1_ex2-2.htm)</u> |
| 2.3 | <u>[Agreement and Plan of Merger, dated February 28, 2020, by and among Terra Property Trust, Inc., Terra Property Trust 2, Inc. and Terra Secured Income Fund 7, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 000-56117) filed with the SEC on March 5, 2020).](http://www.sec.gov/Archives/edgar/data/1674356/000110465920029772/tm2011803d1_ex2-1.htm)</u> |
| 2.4 | <u>[Agreement and Plan of Merger, dated as of May 2, 2022, by and among Terra Property Trust, Inc., Terra Income Fund 6, Inc., Terra Merger Sub, LLC, Terra Income Advisors, LLC and Terra REIT Advisors, LLC (incorporated by reference to Exhibit 2.1 to the](http://www.sec.gov/Archives/edgar/data/1577134/000110465922056455/tm2214495d1_ex2-1.htm)[C](http://www.sec.gov/Archives/edgar/data/1577134/000110465922056455/tm2214495d1_ex2-1.htm)[urrent Report on Form 8-K filed by Terra Income Fund 6, Inc. with the SEC on May 5, 2022).](http://www.sec.gov/Archives/edgar/data/1577134/000110465922056455/tm2214495d1_ex2-1.htm)</u> |
| 3.1 | <u>[Amended and Restated Bylaws of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).](http://www.sec.gov/Archives/edgar/data/1674356/000110465919072997/tm1924432d1_ex3-1.htm)</u> |
| 3.2 | <u>[Articles of Amendment and Restatement of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).](http://www.sec.gov/Archives/edgar/data/1674356/000110465919072997/tm1924432d1_ex3-2.htm)</u> |
| 3.3 | <u>[Articles of Supplementary of Terra Property Trust, Inc. Designating 12.5% Services A Redeemable Cumulative Preferred Stock (incorporated by reference to Exhibit 3.3 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).](http://www.sec.gov/Archives/edgar/data/1674356/000110465919072997/tm1924432d1_ex3-3.htm)</u> |
| 4.1\* | <u>[Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934.](tpt-descriptionofsecuritie.htm)</u> |
| 4.2 | <u>[Indenture, dated June 10, 2021, by and between Terra Property Trust, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form 8-A (File No. 001-40496) filed with the SEC on June 14, 2021).](http://www.sec.gov/Archives/edgar/data/1674356/000110465921080631/tm2119618d1_ex4-1.htm)</u> |

---

------

---

| | |
|:---|:---|
| **Exhibit No.** | **Description and Method of Filing** |
| 4.3 | <u>[First Supplemental Indenture, dated June 10, 2021, by and between Terra Property Trust, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form 8-A (File No. 001-40496) filed with the SEC on June 14, 2021).](http://www.sec.gov/Archives/edgar/data/1674356/000110465921080631/tm2119618d1_ex4-2.htm)</u> |
| 4.4 | <u>[Form of Global Note representing the notes (included in Exhibit 4.2).](http://www.sec.gov/Archives/edgar/data/1674356/000110465921080631/tm2119618d1_ex4-2.htm)</u> |
| 4.5 | <u>[Indenture, dated February 10, 2021, by and between Terra Income Fund 6, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on February 10, 2021.)](http://www.sec.gov/Archives/edgar/data/1577134/000110465921019542/tm216056d1_ex4-1.htm)</u> |
| 4.6 | <u>[First Supplemental Indenture, dated February 10, 2021, by and between Terra Income Fund 6, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 of Terra Income Fund 6, Inc.'s Current Report on Form 8-K filed with the SEC on February 10, 2021).](http://www.sec.gov/Archives/edgar/data/1577134/000110465921019542/tm216056d1_ex4-2.htm)</u> |
| 4.7 | <u>[Second Supplemental Indenture, dated October 1, 2022, by and among Terra Income Fund 6, Inc., Terra Merger Sub, LLC and U.S. Bank National Association, as trustee (incorporated by reference to exhibit 4.4 of Terra Income Fund 6, LLC's Current Report on Form 8-K filed with the SEC on October 3, 2022).](http://www.sec.gov/Archives/edgar/data/1577134/000119312522256631/d365765dex44.htm)</u> |
| 10.1 | <u>[Amended and Restated Management Agreement between Terra Property Trust, Inc., and Terra REIT Advisors, LLC, dated February 8, 2018 (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019).](http://www.sec.gov/Archives/edgar/data/1674356/000110465919060558/tm1921364d1_ex10-1.htm)</u> |
| 10.2 | <u>[Amended and Restated Voting Agreement by and among Terra Property Trust, Inc., Terra Secured Income Fund 5, LLC, Terra JV, LLC and Terra REIT Advisors, LLC, dated March 2, 2020 (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed with the SEC on May 15, 2020).](http://www.sec.gov/Archives/edgar/data/1674356/000167435620000007/tptexhibit101.htm)</u> |
| 10.3 | <u>[Stockholder Rights Agreement among Terra JV, LLC and Terra Property Trust, Inc., dated March 2, 2020 (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q (File No. 000-56117) filed with the SEC on May 15, 2020).](http://www.sec.gov/Archives/edgar/data/1674356/000167435620000007/tptexhibit102.htm)</u> |
| 10.4 | <u>[Contribution Agreement by and among Terra Property Trust, Terra International Fund 3 REIT, LLC and Terra Income Fund International, dated March 2, 2020 (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q (File No. 000-56117) filed with the SEC on May 15, 2020).](http://www.sec.gov/Archives/edgar/data/1674356/000167435620000007/tptexhibit103.htm)</u> |
| 10.5 | <u>[Contribution Agreement by and among Terra Property Trust, Terra International Fund 3 REIT, LLC and Terra Secured Income Fund 5 International, dated March 2, 2020 (incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q (File No. 000-56117) filed with the SEC on May 15, 2020).](http://www.sec.gov/Archives/edgar/data/1674356/000167435620000007/tptexhibit104.htm)</u> |
| 10.6 | <u>[Indenture and Credit Agreement, dated as of September 3, 2020, by and among Terra Mortgage Capital I, LLC, as Issuer, Goldman Sachs Bank USA, as initial Class A lender, and Wells Fargo Bank, National Association, as trustee, custodian, collateral agent, loan agent and note administrator (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-56117) filed with the SEC on September 17, 2020).](http://www.sec.gov/Archives/edgar/data/1674356/000110465920106138/tm2031163d1_ex10-1.htm)</u> |
| 10.7 | <u>[Guaranty, dated as of September 3, 2020, by and among Terra Property Trust, Inc., as guarantor, for the benefit of Goldman Sachs Bank USA (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 000-56117) filed with the SEC on September 17, 2020).](http://www.sec.gov/Archives/edgar/data/1674356/000110465920106138/tm2031163d1_ex10-2.htm)</u> |
| 10.8 | <u>[Business Loan and Security Agreement, dated as of March 12, 2021, by and among Terra Mortgage Portfolio II, LLC, as the Borrower, and Western Alliance Bank, as the Lender (incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K filed with the SEC on March 18, 2021).](http://www.sec.gov/Archives/edgar/data/1581874/000158187421000005/tmplldraftblsa031221final1.htm)</u> |
| 10.9 | <u>[Limited Guaranty, dated as of March 12, 2021, by and among Terra Property Trust, Inc., as Guarantor, for the benefit of Western Alliance Bank (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 18, 2021).](http://www.sec.gov/Archives/edgar/data/1581874/000158187421000005/tptincdraftlimitedguaranty.htm)</u> |
| 10.10 | <u>[First Amendment to Loan Documents dated as of June 9, 2021, by and amount Terra Mortgage Portfolio II, LLC, as Borrower, Terra Property Trust, Inc., as Guarantor, and Western Alliance Bank, as Lender](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/tmpiiexecuted1stamendmente.htm)[(incorporated by reference to Exhibit](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/tmpiiexecuted1stamendmente.htm)[10.1](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/tmpiiexecuted1stamendmente.htm)[0](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/tmpiiexecuted1stamendmente.htm)[to the Annual Report on Form 10-K filed with the SEC on March 11, 2022)](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/tmpiiexecuted1stamendmente.htm)[.](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/tmpiiexecuted1stamendmente.htm)</u> |
| 10.11 | <u>[Uncommitted Master Repurchase Agreement dated as of November 8, 2021, by and amount Terra Mortgage Capital III, LLC, as Seller, UBS AG, as Buyer (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/ubs-terraxuncommittedmaste.htm)</u> |
| 10.12 | <u>[Guarantee Agreement dated as of November 8, 2021, by and amount Terra Property Trust, Inc., as Guarantor, in favor of UBS AG, as Buyer (incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/ubs-terraxguaranteeagreeme.htm)</u> |

---

------

---

| | |
|:---|:---|
| **Exhibit No.** | **Description and Method of Filing** |
| 10.13 | <u>[Second Amendment to Loan Documents dated as of January 4, 2022, by and amount Terra Mortgage Portfolio II, LLC, as Borrower, Terra Property Trust, Inc., as Guarantor, and Western Alliance Bank, as Lender (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/tmpiiexecuted2ndamendmente.htm)</u> |
| 10.14 | <u>[Uncommitted Master Repurchase and Securities Contract Agreement dated as of February 18, 2022, by and amount Terra Mortgage Capital I, LLC, as Seller, Goldman Sach](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/gsmavik-uncommitedmraex1014.htm)[s Bank USA, as Buyer (incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/gsmavik-uncommitedmraex1014.htm)</u> |
| 10.15 | <u>[Guarantee Agreement dated as of February 18, 2022, by and amount Terra Property Trust, Inc., as Guarantor, in favor of Goldman Sach](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/gsmavik-guaranteeagreement.htm)[s Bank USA, as Buyer (incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K filed with the SEC on March 11, 2022).](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000008/gsmavik-guaranteeagreement.htm)</u> |
| 10.16 | <u>[Voting Support Agreement, dated](http://www.sec.gov/Archives/edgar/data/1674356/000119312522256629/d404297dex101.htm)[October 1](http://www.sec.gov/Archives/edgar/data/1674356/000119312522256629/d404297dex101.htm)[, 2022, by and among Terra Property Trust, Inc., Terra JV, LLC and Terra Offshore Funds REIT, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-40496) filed with the SEC on October 3, 2022).](http://www.sec.gov/Archives/edgar/data/1674356/000119312522256629/d404297dex101.htm)</u> |
| 10.17 | <u>[Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-40496) filed with the SEC on October 3, 2022).](http://www.sec.gov/Archives/edgar/data/1674356/000119312522256629/d404297dex102.htm)</u> |
| 10.18 | <u>[Consent and Amendment Letter, dated as of September 27, 2022, by and among Terra Income Fund 6, Inc., Terra Merger Sub, LLC, Eagle Point Credit Management LLC, and certain lenders on the signature pages thereto (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed with the SEC on November 14, 2022).](http://www.sec.gov/Archives/edgar/data/1674356/000167435622000024/exhibit103eaglepoint-conse.htm)</u> |
| 21.1 \* | <u>[Subsidiaries](tpt2022ex211subsidiaries.htm)</u> |
| 31.1\* | <u>[Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.](tpt123122ex311.htm)</u> |
| 31.2\* | <u>[Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.](tpt123122ex312.htm)</u> |
| 32\*\* | <u>[Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](tpt123122ex32.htm)</u> |
| 101.INS\*\* | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| 101.SCH\*\* | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL\*\* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.LAB\*\* | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE\*\* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 101.DEF\*\* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 104 | Cover Page Interactive Data File Included as Exhibit 101 (embedded within the Inline XBRL document) |

---

______________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;\* Filed herewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;\*\* Furnished herewith.

**Item 16. Form 10-K Summary.**

**&nbsp;&nbsp;&nbsp;&nbsp;**None.

------

**Terra Property Trust, Inc.**

**Index to Consolidated Financial Statements**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | | | | **Page** |
| <u>[Report of Independent Registered Public Accounting Firm](#i8c55800180e74ade95e69ecdac0328fb_16)</u>  | KPMG LLP | New York, NY | PCAOB ID: | 185 | <u>F-[2](#i8c55800180e74ade95e69ecdac0328fb_16)</u> |
| **Consolidated Financial Statements:** |  |  |  |  |  |
| <u>[Consolidated Balance Sheets as of December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_19)</u> | <u>[Consolidated Balance Sheets as of December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_19)</u> | <u>[Consolidated Balance Sheets as of December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_19)</u> | <u>[Consolidated Balance Sheets as of December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_19)</u> |  | <u>F-[3](#i8c55800180e74ade95e69ecdac0328fb_19)</u> |
| <u>[Consolidated Statements of Operations for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_25)</u> | <u>[Consolidated Statements of Operations for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_25)</u> | <u>[Consolidated Statements of Operations for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_25)</u> | <u>[Consolidated Statements of Operations for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_25)</u> |  | <u>F-[4](#i8c55800180e74ade95e69ecdac0328fb_25)</u> |
| <u>[Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_34)</u> | <u>[Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_34)</u> | <u>[Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_34)</u> | <u>[Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_34)</u> |  | <u>F-[5](#i8c55800180e74ade95e69ecdac0328fb_28)</u> |
| <u>[Consolidated Statements of Changes in Equity for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_28)</u> | <u>[Consolidated Statements of Changes in Equity for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_28)</u> | <u>[Consolidated Statements of Changes in Equity for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_28)</u> | <u>[Consolidated Statements of Changes in Equity for the years ended December 31, 2022 and 2021](#i8c55800180e74ade95e69ecdac0328fb_28)</u> |  | <u>F-[6](#i8c55800180e74ade95e69ecdac0328fb_34)</u> |
| <u>[Notes to Consolidated Financial Statements](#i8c55800180e74ade95e69ecdac0328fb_37)</u> | <u>[Notes to Consolidated Financial Statements](#i8c55800180e74ade95e69ecdac0328fb_37)</u> | <u>[Notes to Consolidated Financial Statements](#i8c55800180e74ade95e69ecdac0328fb_37)</u> | <u>[Notes to Consolidated Financial Statements](#i8c55800180e74ade95e69ecdac0328fb_37)</u> |  | <u>F-[9](#i8c55800180e74ade95e69ecdac0328fb_37)</u> |
| <u>[Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2022](#i8c55800180e74ade95e69ecdac0328fb_88)</u> | <u>[Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2022](#i8c55800180e74ade95e69ecdac0328fb_88)</u> | <u>[Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2022](#i8c55800180e74ade95e69ecdac0328fb_88)</u> | <u>[Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2022](#i8c55800180e74ade95e69ecdac0328fb_88)</u> |  | <u>F-[44](#i8c55800180e74ade95e69ecdac0328fb_88)</u> |
| <u>[Schedule IV — Mortgage Loans on Real Estate as of December 31, 2022](#i8c55800180e74ade95e69ecdac0328fb_97)</u> | <u>[Schedule IV — Mortgage Loans on Real Estate as of December 31, 2022](#i8c55800180e74ade95e69ecdac0328fb_97)</u> | <u>[Schedule IV — Mortgage Loans on Real Estate as of December 31, 2022](#i8c55800180e74ade95e69ecdac0328fb_97)</u> | <u>[Schedule IV — Mortgage Loans on Real Estate as of December 31, 2022](#i8c55800180e74ade95e69ecdac0328fb_97)</u> |  | <u>F-[45](#i8c55800180e74ade95e69ecdac0328fb_91)</u> |

---

Schedules other than those listed are omitted as they are not applicable for the required or equivalent information has been included in the consolidated financial statements or notes thereto.

------

**Report of Independent Registered Public Accounting Firm**

To the Stockholders and Board of Directors

Terra Property Trust, Inc.:

*Opinion on the Consolidated Financial Statements*

We have audited the accompanying consolidated balance sheets of Terra Property Trust, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in equity, and cash flows for the years then ended, and the related notes and financial statement schedules III and IV (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

*Basis for Opinion*

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company's auditor since 2016.

New York, New York

March 10, 2023

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**Terra Property Trust, Inc.** 

**Consolidated Balance Sheets**

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| **Assets** |  |  |
| Cash and cash equivalents | $28567825 | $35783956 |
| Restricted cash | 4633204 | 7411811 |
| Cash held in escrow by lender | 3268563 | 7902880 |
| Marketable securities | 147960 | 1310000 |
| Loans held for investment, net | 584417939 | 457329582 |
| Loans held for investment acquired through participation, net | 42072828 | 12343732 |
| Equity investment in unconsolidated investments | 62498340 | 69713793 |
| Real estate owned, net (<u>[Note 6](#i8c55800180e74ade95e69ecdac0328fb_61)</u>) |  |  |
| &nbsp;&nbsp;&nbsp;Land, building and building improvements, net | 46660226 | 58325068 |
| &nbsp;&nbsp;&nbsp;Lease intangible assets, net | 2568461 | 7451771 |
| Operating lease right-of-use asset | 27378786 | 27394936 |
| Deal deposit | 4241892 |  |
| Interest receivable | 4100501 | 2463037 |
| Due from related party |  | 2605639 |
| Other assets | 2780367 | 3505953 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total assets** | $813336892 | $693542158 |
| **Liabilities and Equity** |  |  |
| **Liabilities:** |  |  |
| Term loan payable | $25000000 | $91940062 |
| Unsecured notes payable, net of debt issuance cost | 116530673 | 81856799 |
| Repurchase agreements payable, net of deferred financing fees | 169304710 | 43974608 |
| Obligations under participation agreements (<u>[Note 8](#i8c55800180e74ade95e69ecdac0328fb_67)</u>) | 12680594 | 42232027 |
| Mortgage loan payable, net of deferred financing fees and other | 29488326 | 32134295 |
| Revolving line of credit payable, net of deferred financing fees | 89807448 | 38186472 |
| Secured borrowing |  | 34586129 |
| Interest reserve and other deposits held on investments | 4633204 | 7411811 |
| Operating lease liability | 27378786 | 27394936 |
| Lease intangible liabilities, net (<u>[Note 6](#i8c55800180e74ade95e69ecdac0328fb_61)</u>) | 8646840 | 9709710 |
| Due to Manager (<u>[Note 8](#i8c55800180e74ade95e69ecdac0328fb_67)</u>) | 3935997 | 2388317 |
| Interest payable | 1058001 | 1879626 |
| Accounts payable and accrued expenses | 1452236 | 1264131 |
| Unearned income | 378018 | 449690 |
| Other liabilities | 1159885 | 4289967 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities** | 491454718 | 419698580 |
| **Commitments and contingencies (<u>[Note 10](#i8c55800180e74ade95e69ecdac0328fb_76)</u>)** |  |  |
| **Equity:** |  |  |
| Preferred stock, $0.01 par value, 50,000,000 shares authorized and none issued |  |  |
| 12.5% Series A Cumulative Non-Voting Preferred Stock at liquidation preference, <br>&nbsp;&nbsp;&nbsp;&nbsp;125 shares authorized and 125 shares issued and outstanding at December 31,<br>&nbsp;&nbsp;&nbsp;&nbsp;2022 and 2021 | 125000 | 125000 |
| Common stock, $0.01 par value, no and 450,000,000 shares authorized and no <br>&nbsp;&nbsp;&nbsp;&nbsp;and 19,487,460 shares issued and outstanding, at December 31, 2022 and 2021, <br>&nbsp;&nbsp;&nbsp;&nbsp;respectively |  | 194875 |
| Class A common stock, $0.01 par value, 450,000,000 and no shares authorized and no shares issued, at both December 31, 2022 and 2021, respectively |  |  |
| Class B Common stock, $0.01 par value, 450,000,000 and no shares authorized <br>&nbsp;&nbsp;&nbsp;&nbsp;and 24,335,370 and no shares issued and outstanding at December 31, 2022 <br>&nbsp;&nbsp;&nbsp;&nbsp;and 2021, respectively | 243354 |  |
| Additional paid-in capital | 444449813 | 373443672 |
| Accumulated deficit | (122935993) | (99919969) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total equity** | 321882174 | 273843578 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities and equity** | $813336892 | $693542158 |

---

*See notes to consolidated financial statements*.

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**Terra Property Trust, Inc.**

**Consolidated Statements of Operations**

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| **Revenues** |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | $42591972 | $36743470 |
| &nbsp;&nbsp;&nbsp;Real estate operating revenue | 11451914 | 8894991 |
| &nbsp;&nbsp;&nbsp;Prepayment fee income | 1984061 | 190997 |
| &nbsp;&nbsp;&nbsp;Other operating income | 586499 | 855799 |
|  | 56614446 | 46685257 |
| **Operating expenses** |  |  |
| &nbsp;&nbsp;&nbsp;Operating expenses reimbursed to Manager | 8076321 | 6916371 |
| &nbsp;&nbsp;&nbsp;Asset management fee | 6556492 | 5134149 |
| &nbsp;&nbsp;&nbsp;Asset servicing fee | 1560044 | 1181924 |
| &nbsp;&nbsp;&nbsp;Provision for loan losses | 11813409 | 10904163 |
| &nbsp;&nbsp;&nbsp;Real estate operating expenses | 5005551 | 5003893 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 6530595 | 3989114 |
| &nbsp;&nbsp;&nbsp;Impairment charge | 1604989 | 3395430 |
| &nbsp;&nbsp;&nbsp;Professional fees | 3697792 | 1795856 |
| &nbsp;&nbsp;&nbsp;Directors fees | 192497 | 145000 |
| &nbsp;&nbsp;&nbsp;Other | 747535 | 448503 |
|  | 45785225 | 38914403 |
| **Operating income** | 10829221 | 7770854 |
| **Other income and expenses** |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense from obligations under participation agreements | (3180771) | (10596545) |
| &nbsp;&nbsp;&nbsp;Interest expense on repurchase agreement payable | (7913942) | (142495) |
| &nbsp;&nbsp;&nbsp;Interest expense on mortgage loan payable | (2173114) | (2449239) |
| &nbsp;&nbsp;&nbsp;Interest expense on revolving line of credit | (2674568) | (911811) |
| &nbsp;&nbsp;&nbsp;Interest expense on term loan payable | (524344) | (6835877) |
| &nbsp;&nbsp;&nbsp;Interest expense on unsecured notes payable | (6682937) | (3173673) |
| &nbsp;&nbsp;&nbsp;Interest expense on secured borrowing | (1507572) | (1576502) |
| &nbsp;&nbsp;&nbsp;Net unrealized (losses) gains on marketable securities | (122299) | 22500 |
| &nbsp;&nbsp;&nbsp;Loss on sale of real estate | (51984) |  |
| &nbsp;&nbsp;Income from equity investment in unconsolidated investments | 2731477 | 5925802 |
| &nbsp;&nbsp;&nbsp;Gain on sale of interests in unconsolidated investments | 799827 |  |
| &nbsp;&nbsp;&nbsp;Realized loss on loan repayments |  | (517989) |
| &nbsp;&nbsp;&nbsp;Gain on extinguishment of obligations under participation agreements | 3435902 |  |
| &nbsp;&nbsp;&nbsp;Realized gains on marketable securities | 83411 | 129248 |
|  | (17780914) | (20126581) |
| **Net loss** | $(6951693) | $(12355727) |
| Series A preferred stock dividend declared | $(15624) | $(15624) |
| **Net loss allocable to common stock** | $(6967317) | $(12371351) |
| **Loss per share — basic and diluted** | $(0.34) | $(0.63) |
| **Weighted-average shares — basic and diluted** | 20709400 | 19487460 |
| **Distributions declared per common share** | $0.78 | $0.88 |

---

*See notes to consolidated financial statements.*

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**Terra Property Trust, Inc.**

**Consolidated Statements of Changes in Equity**

---

| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Preferred Stock** | **12.5% Series A Cumulative Non-Voting Preferred Stock** | **12.5% Series A Cumulative Non-Voting Preferred Stock** | **Common Stock** | **Common Stock** | **Class A Common Stock** | **Class A Common Stock** | **Class B Common Stock** | **Class B Common Stock** | **Additional <br>Paid-in <br>Capital** | **Accumulated Deficit** | |
| | **Preferred Stock** | **12.5% Series A Cumulative Non-Voting Preferred Stock** | **12.5% Series A Cumulative Non-Voting Preferred Stock** | **$0.01 Par Value** | **$0.01 Par Value** | **$0.01 Par Value** | **$0.01 Par Value** | **$0.01 Par Value** | **$0.01 Par Value** | **Additional <br>Paid-in <br>Capital** | **Accumulated Deficit** | |
| | **Preferred Stock** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Additional <br>Paid-in <br>Capital** | **Accumulated Deficit** |<br>**Total equity** |
| **Balance at January 1, 2022** | $— | 125 | $125000 | 19487460 | $194875 |  | $— |  | $— | $373443672 | $(99919969) | $273843578 |
| Common stock converted into newly <br>&nbsp;&nbsp;&nbsp;&nbsp;authorized Class B Common Stock <br>&nbsp;&nbsp;&nbsp;&nbsp;prior to the BDC Merger (<u>[Note 11](#i8c55800180e74ade95e69ecdac0328fb_79)</u>) |  |  |  | (19487460) | (194875) |  |  | 19487460 | 194875 |  |  |  |
| Shares issued in connection with the <br>&nbsp;&nbsp;&nbsp;&nbsp;BDC Merger (<u>[Note 3](#i8c55800180e74ade95e69ecdac0328fb_1852)</u>) |  |  |  |  |  |  |  | 4847910 | 48479 | 71006141 |  | 71054620 |
| Distributions declared on common <br>&nbsp;&nbsp;&nbsp;&nbsp;shares ($0.78 per share) |  |  |  |  |  |  |  |  |  |  | (16048707) | (16048707) |
| Distributions declared on preferred <br> shares |  |  |  |  |  |  |  |  |  |  | (15624) | (15624) |
| Net loss |  |  |  |  |  |  |  |  |  |  | (6951693) | (6951693) |
| **Balance at December 31, 2022** | $— | 125 | $125000 |  | $— |  | $— | 24335370 | $243354 | $444449813 | $(122935993) | $321882174 |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Preferred Stock** | **12.5% Series A Cumulative Non-Voting Preferred Stock** | **12.5% Series A Cumulative Non-Voting Preferred Stock** | **Common Stock** | **Common Stock** | **Additional <br>Paid-in <br>Capital** | **Accumulated Deficit** | |
| | **Preferred Stock** | **12.5% Series A Cumulative Non-Voting Preferred Stock** | **12.5% Series A Cumulative Non-Voting Preferred Stock** | **$0.01 Par Value** | **$0.01 Par Value** | **Additional <br>Paid-in <br>Capital** | **Accumulated Deficit** | |
| | **Preferred Stock** | **Shares** | **Amount** | **Shares** | **Amount** | **Additional <br>Paid-in <br>Capital** | **Accumulated Deficit** |<br>**Total equity** |
| **Balance at January 1, 2021** | $— | 125 | $125000 | 19487460 | $194875 | $373443672 | $(70438482) | $303325065 |
| Distributions declared on common shares ($0.88 per share) |  |  |  |  |  |  | (17110136) | (17110136) |
| Distributions declared on preferred shares |  |  |  |  |  |  | (15624) | (15624) |
| Net loss |  |  |  |  |  |  | (12355727) | (12355727) |
| **Balance at December 31, 2021** | $— | 125 | $125000 | 19487460 | $194875 | $373443672 | $(99919969) | $273843578 |

---

*See notes to consolidated financial statements*.

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**Terra Property Trust, Inc.**

**Consolidated Statements of Cash Flows** 

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| **Cash flows from operating activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Net loss | $(6951693) | $(12355727) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Paid-in-kind interest income, net |  | (1000028) |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 6530595 | 3989114 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for loan losses | 11813409 | 10904163 |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment charge | 1604989 | 3395430 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of net purchase premiums on loans | 557012 | 61390 |
| &nbsp;&nbsp;&nbsp;&nbsp;Straight-line rent adjustments | 1357247 | (146317) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred financing costs | 2271556 | 963986 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of discount on unsecured notes payable | 738583 | 248108 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of above- and below-market rent intangibles | (914965) | (392161) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization and accretion of investment-related fees, net | (1210524) | (264697) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of above-market rent ground lease | (130348) | (130349) |
| &nbsp;&nbsp;&nbsp;&nbsp;Realized gain on marketable securities | (83411) | (129248) |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized losses (gains) on marketable securities | 122299 | (22500) |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on sale of real estate | 51984 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Realized loss on loan repayments |  | 517989 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on extinguishment of obligations under participation agreements | (3435902) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Income from equity investment in excess of distributions received | (1091372) | (1276726) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of interests in unconsolidated investments | (799827) |  |
| &nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Deal deposits | (4241892) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest receivable | (323606) | 46552 |
| &nbsp;&nbsp;&nbsp;&nbsp;Due from related party | 2421388 | (2605639) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other assets | (2918189) | 574832 |
| &nbsp;&nbsp;&nbsp;&nbsp;Due to Manager |  | 93226 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unearned income | (71672) | (215075) |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest payable | (821625) | 694124 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | (552728) | (2704472) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other liabilities | (3517540) | 3860844 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by operating activities** | 403768 | 4106819 |
| **Cash flows from investing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Origination and purchase of loans | (290005676) | (252437733) |
| &nbsp;&nbsp;&nbsp;Proceeds from repayments of loans | 197484239 | 196780456 |
| &nbsp;&nbsp;&nbsp;Purchase of equity interests in unconsolidated investments | (25504979) | (32177108) |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of interests in unconsolidated investments | 33688430 |  |
| &nbsp;&nbsp;&nbsp;Cash and restricted cash acquired in connection with the BDC Merger | 24582565 |  |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of real estate | 8585500 |  |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of marketable securities | 1259417 | 6608396 |
| &nbsp;&nbsp;Distributions in excess of net income | 923200 |  |
| &nbsp;&nbsp;Repayments of promissory note receivable | (386395) |  |
| &nbsp;&nbsp;Proceeds from promissory note receivable | 386395 |  |
| &nbsp;&nbsp;Purchase of marketable securities | (136265) | (6479148) |
| &nbsp;&nbsp;Cash paid to stockholders of Terra BDC in connection with the BDC Merger | (12920) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash used in investing activities** | (49136489) | (87705137) |

---

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**Terra Property Trust, Inc.**

**Consolidated Statements of Cash Flows (Continued)**

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| **Cash flows from financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from borrowings under repurchase agreements | 151906606 | 44569600 |
| &nbsp;&nbsp;&nbsp;Proceeds from borrowings under revolving line of credit | 130519295 | 38575895 |
| &nbsp;&nbsp;&nbsp;Repayment of borrowings under the term loan | (93763471) | (16585001) |
| &nbsp;&nbsp;&nbsp;Repayments of borrowings under revolving line of credit | (78959325) |  |
| &nbsp;&nbsp;&nbsp;Repayment of secured borrowing | (38672291) |  |
| &nbsp;&nbsp;&nbsp;Proceeds from obligations under participation agreements | 29607969 | 71682634 |
| &nbsp;&nbsp;&nbsp;Repayments of borrowings under repurchase agreements | (25599600) |  |
| &nbsp;&nbsp;&nbsp;Repayments of obligations under participation agreements | (22239670) | (101722161) |
| &nbsp;&nbsp;&nbsp;Distributions paid | (16064331) | (17125760) |
| &nbsp;&nbsp;&nbsp;Proceeds from secured borrowing | 4151186 | 16239256 |
| &nbsp;&nbsp;&nbsp;Change in interest reserve and other deposits held on investments | (3039221) | (4733805) |
| &nbsp;&nbsp;&nbsp;Repayment of mortgage principal | (2710384) | (12057533) |
| &nbsp;&nbsp;&nbsp;Payment of financing costs | (1033097) | (2295347) |
| &nbsp;&nbsp;&nbsp;Proceeds from issuance of unsecured notes payable, net of discount |  | 82464844 |
| &nbsp;&nbsp;&nbsp;Proceeds from borrowings under the term loan |  | 2764020 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by financing activities** | 34103666 | 101776642 |
| **Net (decrease) increase in cash, cash equivalents and restricted cash** | (14629055) | 18178324 |
| **Cash, cash equivalents and restricted cash at beginning of year** | 51098647 | 32920323 |
| **Cash, cash equivalents and restricted cash at end of year (<u>[Note 2](#i8c55800180e74ade95e69ecdac0328fb_46)</u>)** | $36469592 | $51098647 |

---

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| **Supplemental Disclosure of Cash Flows Information:**  |  |  |
| Cash paid for interest | $22569976 | $22219386 |

---

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**Terra Property Trust, Inc.**

**Consolidated Statements of Cash Flows (Continued)**

**Supplemental Non-Cash Investing Activities:**

***BDC Merger***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the "Merger Agreement"), Terra Income Fund 6, Inc. ("Terra BDC"), merged with and into Terra Income Fund 6, LLC (formerly Terra Merger Sub, LLC) ("Terra LLC"), a wholly owned subsidiary of Terra Property Trust, Inc. (the "Company" or Terra Property Trust"), with Terra LLC continuing as the surviving entity of the merger (the "BDC Merger") and as a wholly owned subsidiary of the Company (<u>[Note](#i8c55800180e74ade95e69ecdac0328fb_1852)[3](#i8c55800180e74ade95e69ecdac0328fb_1852)</u>). The following table presents a summary of the consideration exchanged and assets acquired and liabilities assumed as a result of the BDC Merger:

---

| | |
|:---|:---|
| **Total Consideration** | |
| &nbsp;&nbsp;Fair value of Terra Property Trust shares of common stock issued | $71054620 |
| &nbsp;&nbsp;Cash paid for fractional shares | 12920 |
| &nbsp;&nbsp;Transaction costs | 2283785 |
|  | 73351325 |
| **Assets Acquired and Liabilities Assumed at Fair Value** |  |
| &nbsp;&nbsp;Loans held for investment | 77562528 |
| &nbsp;&nbsp;Loans held for investment acquired through participation | 36793313 |
| &nbsp;&nbsp;Interest receivable | 1367044 |
| &nbsp;&nbsp;Other assets | 55465 |
| &nbsp;&nbsp;Term loan payable | (25000000) |
| &nbsp;&nbsp;Unsecured notes payable | (33770000) |
| &nbsp;&nbsp;Obligations under participation agreements | (6114979) |
| &nbsp;&nbsp;Interest reserve and other deposits held on investments | (260614) |
| &nbsp;&nbsp;Due to manager | (682541) |
| &nbsp;&nbsp;Interest payable | (53186) |
| &nbsp;&nbsp;Accounts payable and accrued expenses | (740824) |
| &nbsp;&nbsp;Other liabilities | (387446) |
| Net assets acquired excluding cash and restricted cash | 48768760 |
| Cash and restricted cash acquired | $24582565 |

---

*See notes to consolidated financial statements*.

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**Terra Property Trust, Inc.** 

**Notes to Consolidated Financial Statements**

**December 31, 2022** 

**Note 1. Business**

&nbsp;&nbsp;&nbsp;&nbsp;Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the "Company" or "Terra Property Trust") was incorporated under the Maryland General Corporation Law on December 31, 2015. Terra Property Trust is a real estate credit focused company that originates, structures, funds and manages commercial real estate investments, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments. The Company's loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. The Company focuses on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties in primary and secondary markets.

&nbsp;&nbsp;&nbsp;&nbsp;On January 1, 2016, Terra Secured Income Fund 5, LLC ("Terra Fund 5"), the Company's then parent, contributed its consolidated portfolio of net assets to the Company pursuant to a contribution agreement in exchange for shares of the Company's common stock. Upon receipt of the contribution of the consolidated portfolio of net assets from Terra Fund 5, the Company commenced its operations on January 1, 2016. On March 2, 2020, the Company engaged in a series of transactions pursuant to which the Company issued an aggregate of 4,574,470.35 shares of its common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by the Company, cash of $25.5 million and other working capital.

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

&nbsp;&nbsp;&nbsp;&nbsp;The Company's investment activities are externally managed by Terra REIT Advisors, LLC ("Terra REIT Advisors" or the "Manager"), a subsidiary of the Company's sponsor, Terra Capital Partners, LLC ("Terra Capital Partners"), pursuant to a management agreement (the "Management Agreement"), under the oversight of the Company's board of directors (the "Board") (<u>[Note 8](#i8c55800180e74ade95e69ecdac0328fb_67)</u>). The Company does not currently have any employees and does not expect to have any employees. Services necessary for the Company's business are provided by individuals who are employees of the Manager or by individuals who were contracted by the Company or by the Manager to work on behalf of the Company pursuant to the terms of the Management Agreement. On April 1, 2021, Mavik Capital Management, LP ("Mavik"), an entity controlled by Vikram S. Uppal, the Chief Executive Officer of the Company, completed a series of related transactions that resulted in all of the outstanding interests in Terra Capital Partners, being acquired by Mavik for a combination of cash and interests in Mavik (the "Recapitalization"). No amendments or other modifications were made to the Management Agreement in connection with the Recapitalization, and the Manager and its personnel continue to serve as the external manager of the Company pursuant to the terms of the Management Agreement.

On October 1, 2022, pursuant to the Merger Agreement, Terra BDC, merged with and into Terra LLC, a wholly owned subsidiary of the Company, with Terra LLC continuing as the surviving entity of the BDC Merger and as a wholly owned subsidiary of the Company (<u>[Note 3](#i8c55800180e74ade95e69ecdac0328fb_1852)</u>).

As of December 31, 2022, Terra JV, LLC ("Terra JV"), former shareholders of Terra BDC and Terra Offshore Funds REIT, LLC ("Terra Offshore REIT") held 70.0%, 19.9% and 10.1% of the issued and outstanding shares of the Company's common stock, respectively.

**Note 2. Summary of Significant Accounting Policies**

***Principles of Consolidation***

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

------

**Notes to Consolidated Financial Statements** 

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

The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting (see <u>[Note 5](#i8c55800180e74ade95e69ecdac0328fb_52)</u>).

*VIE Model* 

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

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

***Loans Held for Investment***

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

***Allowance for Loan Losses***

&nbsp;&nbsp;&nbsp;&nbsp;

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

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

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

------

**Notes to Consolidated Financial Statements** 

---

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

---

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

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

***Equity Investment in Unconsolidated Investments***

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

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

***Marketable Securities***

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

***&nbsp;&nbsp;&nbsp;&nbsp;***

***Real Estate Owned, Net***

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;Management reviews the Company's real estate for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are

------

**Notes to Consolidated Financial Statements** 

insufficient to recover the carrying amount of the real estate assets. If impaired, the real estate asset will be written down to its estimated fair value.

***Leases***

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

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

***Revenue Recognition***

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

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

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

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

*&nbsp;&nbsp;&nbsp;&nbsp;*

*&nbsp;&nbsp;&nbsp;&nbsp;Other Revenues:* Prepayment fee income is recognized as prepayments occur. All other income is recognized when earned.

***Cash, Cash Equivalents and Restricted Cash*** 

The Company considers all highly liquid investments, with original maturities of ninety days or less when purchased, as cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains all of its cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;Restricted cash represents cash held as additional collateral by the Company on behalf of the borrowers related to the investments in loans or preferred equity instruments for the purpose of such borrowers making interest and property-related operating payments. Restricted cash is not available for general corporate purposes. The related liability is recorded in "*Interest reserve and other deposits held on investments*" on the consolidated balance sheets.

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

------

**Notes to Consolidated Financial Statements** 

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

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Cash and cash equivalents | $28567825 | $35783956 |
| Restricted cash | 4633204 | 7411811 |
| Cash held in escrow by lender | 3268563 | 7902880 |
| Total cash, cash equivalents and restricted cash shown in the consolidated <br> statements of cash flows | $36469592 | $51098647 |

---

***Participation Interests***

Loan participations from the Company which do not qualify for sale treatment remain on the Company's consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. For the investments for which participation has been granted, the interest earned on the entire loan balance is recorded within "*Interest income*" and the interest related to the participation interest is recorded within "*Interest expense from obligations under participation agreements*" in the consolidated statements of operations. Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes doubtful. See "*Obligations under Participation Agreements*" in <u>[Note 9](#i8c55800180e74ade95e69ecdac0328fb_70)</u> for additional information.

***Term Loan***

&nbsp;&nbsp;&nbsp;&nbsp;The Company previously financed certain of its senior loans through borrowings under an indenture and credit agreement. The Company accounted for the borrowings as a term loan, which was carried at the contractual amount (cost), net of unamortized deferred financing fees. On February 18, 2022, the Company refinanced the Term Loan (as defined below) with a new repurchase agreement. See "Term Loan" in <u>[Note 9](#i8c55800180e74ade95e69ecdac0328fb_70)</u> for additional information. In connection with the BDC Merger, the Company assumed a $25.0 million delayed draw term loan. The Company classified this delayed draw term loan as term loan payable on the consolidated balance sheets.

***Repurchase Agreements***

The Company finances certain of its senior loans held for investment through repurchase transactions under master repurchase agreements. The Company accounts for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. See "Repurchase Agreements" in <u>[Note 9](#i8c55800180e74ade95e69ecdac0328fb_70)</u> for additional information.

***Fair Value Measurements***

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

***Deferred Financing Costs***

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

***Income Taxes*** 

&nbsp;&nbsp;&nbsp;&nbsp;The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2016. In order to qualify as a REIT, the Company is required, among other things, to distribute dividends equal

------

**Notes to Consolidated Financial Statements** 

to at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax) beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company's four subsequent taxable years. Any gains from the sale of foreclosed properties within two years are subject to U.S. federal and state income taxes at regular corporate rates. As of December 31, 2022, the Company has satisfied all the requirements for a REIT.

The Company did not have any uncertain tax positions that met the recognition or measurement criteria of Accounting Standards Codification ("ASC") 740-10-25, *Income Taxes*, nor did the Company have any unrecognized tax benefits as of the periods presented herein. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its consolidated statements of operations. For the years ended December 31, 2022 and 2021, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company's 2019-2022 federal tax returns remain subject to examination by the Internal Revenue Service.

***Earnings Per Share***

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

***Use of Estimates***

&nbsp;&nbsp;&nbsp;&nbsp;The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates, and those differences could be material.

***Segment Information***

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

&nbsp;&nbsp;&nbsp;&nbsp;

***Recent Accounting Pronouncements***

&nbsp;&nbsp;&nbsp;&nbsp;In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. In April 2019, the FASB issued additional amendments to clarify the scope of ASU 2016-13 and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. In May 2019, the FASB issued ASU 2019-05 — Targeted Transition Relief, which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In October 2019, the FASB decided that for smaller reporting companies, ASU 2016-13 and related amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company meets the definition of a smaller reporting company under the regulation of the Securities and Exchange Commission. The Company adopted this ASU and related amendments on January 1, 2023. The adoption of ASU 2016-13 resulted in an incremental reserve of approximately $4.6 million, which included reserve on future loan funding commitments. The Company will record the cumulative effect of initially applying this guidance as an adjustment to Accumulated deficit using the modified retrospective method of adoption.

&nbsp;&nbsp;&nbsp;&nbsp;London Interbank Offered Rate ("LIBOR") is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. In July 2017, the U.K. Financial Conduct Authority, which regulates the LIBOR administrator, ICE Benchmark Administration Limited ("IBA"), announced that it would cease to compel banks to participate in setting LIBOR as

------

**Notes to Consolidated Financial Statements** 

a benchmark by the end of 2021, which has subsequently been delayed to June 30, 2023. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition ("ASU 2021-01"). In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) — Deferral of the Sunset Date of Topic 848 ("ASU 2022-06"). ASU 2022-06 deferred the sunset date of ASU 2020-04 to December 31, 2024. In the event LIBOR is unavailable, the Company's investment documents provide for a substitute index, on a basis generally consistent with market practice, intended to put the Company in substantially the same economic position as LIBOR. As a result, the Company does not expect the reference rate reform and the adoption of ASU 2020-04 and ASU 2021-01 to have a material impact on its consolidated financial statements and disclosures.

**Note 3. BDC Merger**

***BDC Merger***

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

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

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

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

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

------

**Notes to Consolidated Financial Statements** 

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

---

| | |
|:---|:---|
| **Total Consideration** | |
| &nbsp;&nbsp;Fair value of Terra Property Trust shares of common stock issued  | $71054620 |
| &nbsp;&nbsp;Cash paid for fractional shares | 12920 |
| &nbsp;&nbsp;Transaction costs | 2283785 |
|  | $73351325 |
| **Assets Acquired and Liabilities Assumed at Fair Value** |  |
| &nbsp;&nbsp;Cash and cash equivalents | $24321951 |
| &nbsp;&nbsp;Restricted cash | 260614 |
| &nbsp;&nbsp;Loans held for investment | 77562528 |
| &nbsp;&nbsp;Loans held for investment acquired through participation | 36793313 |
| &nbsp;&nbsp;Interest receivable | 1367044 |
| &nbsp;&nbsp;Other assets | 55465 |
| &nbsp;&nbsp;Term loan payable | (25000000) |
| &nbsp;&nbsp;Unsecured notes payable | (33770000) |
| &nbsp;&nbsp;Obligations under participation agreements | (6114979) |
| &nbsp;&nbsp;Interest reserve and other deposits held on investments | (260614) |
| &nbsp;&nbsp;Due to manager | (682541) |
| &nbsp;&nbsp;Interest payable | (53186) |
| &nbsp;&nbsp;Accounts payable and accrued expenses | (740824) |
| &nbsp;&nbsp;Other liabilities | (387446) |
| Net assets acquired | $73351325 |

---

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

***Net Gain on Extinguishment of Obligations Under Participation Agreements***

As discussed in <u>[Note](#i8c55800180e74ade95e69ecdac0328fb_67)[8](#i8c55800180e74ade95e69ecdac0328fb_67)</u>, in the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties. As a result of the BDC Merger, the obligations under participation agreements with Terra BDC totaling $37.0 million were effectively extinguished and the Company recognized a net gain of $3.4 million, representing the difference between the carrying value of the Company's obligations under participation agreements and the fair value of Terra BDC's investments acquired through participation agreements.

***Appointment of Directors***

***Voting Support Agreement***

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

------

**Notes to Consolidated Financial Statements** 

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

***Indemnification Agreements***

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

**Note 4. Loans Held for Investment**

***Portfolio Summary***

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

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| | **Fixed Rate** | **Floating <br>Rate** <sup>(1)(2)(3)</sup> | **Total** | **Fixed Rate** | **Floating <br>Rate** <sup>(1)(2)(3)</sup> | **Total** |
| Number of loans | 8 | 23 | 31 | 6 | 15 | 21 |
| Principal balance | $90990183 | $554805276 | $645795459 | $74880728 | $405270423 | $480151151 |
| Carrying value | $92274998 | $534215769 | $626490767 | $75520212 | $394153102 | $469673314 |
| Fair value | $90729098 | $532416656 | $623145754 | $75449410 | $391752209 | $467201619 |
| Weighted-average coupon rate | 13.82% | 11.23% | 11.59% | 12.39% | 7.01% | 7.85% |
| Weighted-average remaining <br> term (years) | 1.35 | 1.10 | 1.14 | 1.93 | 1.45 | 1.53 |

---

_______________

(1)These loans pay a coupon rate of LIBOR or Secured Overnight Financing Rate ("SOFR"), as applicable, plus a fixed spread. Coupon rate shown was determined using LIBOR of 4.39%, average SOFR of 4.06% and forward-looking term rate based on SOFR ("Term SOFR") of 4.36% as of December 31, 2022 and LIBOR of 0.10% as of December 31, 2021.

(2)As of December 31, 2022 and 2021, amount included $413.1 million and $163.1 million of senior mortgages used as collateral for $261.0 million and $93.8 million of borrowings under credit facilities, respectively (<u>[Note 9](#i8c55800180e74ade95e69ecdac0328fb_70)</u>).

(3)As of December 31, 2022 and 2021, twenty-one and thirteen of these loans, respectively, are subject to a LIBOR or SOFR floor, as applicable.

***Lending Activities***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Loans Held for Investment** | **Loans Held for Investment through Participation Interests** | **Total** |
| Balance, January 1, 2022 | $457329582 | $12343732 | $469673314 |
| New loans made | 257780401 | 32225275 | 290005676 |
| Principal repayments received | (197484239) |  | (197484239) |
| Loans acquired and contributed in connection with the BDC Merger | 77562529 | (2744091) | 74818438 |
| Net amortization of premiums on loans | (469563) | (87449) | (557012) |
| Accrual, payment and accretion of investment-related fees and other, <br> net | 1512638 | 335361 | 1847999 |
| Provision for loan losses | (11813409) |  | (11813409) |
| Balance, December 31, 2022 | $584417939 | $42072828 | $626490767 |

---

------

**Notes to Consolidated Financial Statements** 

---

| | | | |
|:---|:---|:---|:---|
| | **Loans Held for Investment** | **Loans Held for Investment through Participation Interests** | **Total** |
| Balance, January 1, 2021 | $417986462 | $4294053 | $422280515 |
| New loans made | 240130367 | 12307366 | 252437733 |
| Principal repayments received | (192530456) | (4250000) | (196780456) |
| PIK interest <sup>(1)</sup> | 1955109 |  | 1955109 |
| Net amortization of premiums on loans | (61390) |  | (61390) |
| Accrual, payment and accretion of investment-related fees and other, <br> net | 1405206 | (7687) | 1397519 |
| Realized loss on loan repayments <sup>(2)(3)</sup> | (651553) |  | (651553) |
| Provision for loan losses | (10904163) |  | (10904163) |
| Balance, December 31, 2021 | $457329582 | $12343732 | $469673314 |

---

_______________

(1)Certain loans in the Company's portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted $1.0 million for the year ended December 31, 2021.

(2)On September 2, 2021, the Company foreclosed on a hotel property encumbered by a first mortgage and the related subordinated mezzanine loan, both of which were held by the Company, with an aggregate principal balance $14.6 million. On September 23, 2021, the hotel property was sold to a third party for $13.8 million. The net proceeds from the sale, together with a payment under a contractual guarantee of $0.8 million from the borrower, were used to pay off both loans in full. In connection with the loan repayment, the related obligation under participation agreement of $6.4 million was simultaneously satisfied. In connection with the loan repayment, the Company recorded a loss of $0.4 million related to the write-off of the interest accrued but uncollected in the third quarter of 2021, excluding the amount attributable to obligations under participation agreements of $0.1 million.

(3)Amount also included realized loss of $0.3 million related to the TDR transaction described below.

***Portfolio Information***

&nbsp;&nbsp;&nbsp;&nbsp;The tables below detail the types of loans in the Company's loan portfolio, as well as the property type and geographic location of the properties securing these loans as of:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|<br>**Loan Structure** | **Principal Balance** | **Carrying Value** | **% of Total** | **Principal Balance** | **Carrying Value** | **% of Total** |
| First mortgages | $456408889 | $461299182 | 73.7% | $345454454 | $348101455 | 74.0% |
| Preferred equity investments | 121231434 | 122132177 | 19.5% | 92252340 | 92400572 | 19.7% |
| Mezzanine loans | 39352303 | 39451115 | 6.3% | 17444357 | 17622804 | 3.8% |
| Credit facility | 28802833 | 29080183 | 4.6% | 25000000 | 25206964 | 5.4% |
| Allowance for loan losses |  | (25471890) | (4.1)% |  | (13658481) | (2.9)% |
| Total | $645795459 | $626490767 | 100.0% | $480151151 | $469673314 | 100.0% |

---

------

**Notes to Consolidated Financial Statements** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|<br>**Property Type** | **Principal Balance** | **Carrying Value** | **% of Total** | **Principal Balance** | **Carrying Value** | **% of Total** |
| Office | $184196708 | $184722657 | 29.4% | $221596870 | $222426872 | 47.3% |
| Industrial | 147796164 | 148891742 | 23.8% | 32000000 | 32206964 | 6.9% |
| Multifamily | 104589464 | 105570432 | 16.9% | 80805787 | 81835756 | 17.4% |
| Mixed-use | 64880450 | 65838965 | 10.5% | 28940658 | 28977024 | 6.2% |
| Infill land | 48860291 | 49565437 | 7.9% | 28960455 | 28923827 | 6.2% |
| Hotel - full/select service | 43222382 | 43758804 | 7.0% | 56847381 | 57395682 | 12.2% |
| Student housing | 31000000 | 31774261 | 5.1% | 31000000 | 31565670 | 6.7% |
| Infrastructure | 21250000 | 21840359 | 3.5% |  |  | —% |
| Allowance for loan losses |  | (25471890) | (4.1)% |  | (13658481) | (2.9)% |
| Total | $645795459 | $626490767 | 100.0% | $480151151 | $469673314 | 100.0% |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|<br>**Geographic Location** | **Principal Balance** | **Carrying Value** | **% of Total** | **Principal Balance** | **Carrying Value** | **% of Total** |
| **United States** | | | | | | |
| California | $164253345 | $165839561 | 26.5% | $234968151 | $237015597 | 50.4% |
| New York | 91845479 | 91877084 | 14.7% | 92252340 | 92400572 | 19.7% |
| Georgia | 72401718 | 73101964 | 11.7% | 53289288 | 53536884 | 11.4% |
| Texas | 67625000 | 68142046 | 10.9% | 13625000 | 13725690 | 2.9% |
| New Jersey | 62228622 | 62958482 | 10.0% |  |  | —% |
| Washington | 56671267 | 57027639 | 9.1% | 3523401 | 3382683 | 0.7% |
| Utah | 49250000 | 50698251 | 8.1% | 28000000 | 28420056 | 6.1% |
| North Carolina | 43520028 | 44041162 | 7.0% | 44492971 | 44704699 | 9.5% |
| Arizona | 31000000 | 31276468 | 5.0% |  |  | —% |
| Massachusetts | 7000000 | 7000000 | 1.1% | 7000000 | 7000000 | 1.5% |
| South Carolina |  |  | —% | 3000000 | 3145614 | 0.7% |
| Allowance for loan losses |  | (25471890) | (4.1)% |  | (13658481) | (2.9)% |
| Total | $645795459 | $626490767 | 100.0% | $480151151 | $469673314 | 100.0% |

---

***Loan Risk Rating***

&nbsp;&nbsp;&nbsp;&nbsp;As described in <u>[Note 2](#i8c55800180e74ade95e69ecdac0328fb_46)</u>, the Manager evaluates the Company's loan portfolio on a quarterly basis or more frequently as needed. In conjunction with the quarterly review of the Company's loan portfolio, the Manager assesses the risk factors of each loan, and assigns a risk rating based on a five-point scale with "1" being the lowest risk and "5" being the greatest risk.

------

**Notes to Consolidated Financial Statements** 

&nbsp;&nbsp;&nbsp;&nbsp;The following table allocates the principal balance and the carrying value of the Company's loans based on the loan risk rating as of:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|<br>**Loan Risk Rating** | **Number of Loans** | **Principal Balance** | **Carrying Value** | **% of Total** | **Number of Loans** | **Principal Balance** | **Carrying Value** | **% of Total** |
| 1 |  | $— | $— | —% |  | $— | $— | —% |
| 2 | 2 | 25000000 | 25041782 | 3.8% | 2 | 25000000 | 25041124 | 5.2% |
| 3 | 25 | 530867244 | 536992660 | 82.4% | 15 | 349273811 | 352164409 | 72.9% |
| 4 |  |  |  | —% | 1 | 60012639 | 60012639 | 12.4% |
| 5 |  |  |  | —% |  |  |  | —% |
| Other <sup>(1)</sup> | 4 | 89928215 | 89928215 | 13.8% | 3 | 45864701 | 46113623 | 9.5% |
|  | 31 | $645795459 | 651962657 | 100.0% | 21 | $480151151 | 483331795 | 100.0% |
| Allowance for loan losses | Allowance for loan losses | Allowance for loan losses | (25471890) |  |  |  | (13658481) |  |
| Total, net of allowance for loan losses | Total, net of allowance for loan losses | Total, net of allowance for loan losses | $626490767 |  |  |  | $469673314 |  |

---

_______________

(1)Because these loans have an event of default, they are removed from the pool of loans on which a general allowance is calculated and are evaluated for collectability individually. As of December 31, 2022 and 2021, the specific allowance for loan losses on these loans were $25.5 million and $12.8 million, respectively, as a result of a decline in the fair value of the respective collateral.

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022, the Company did not have any loans with a loan risk rating of "4" or "5", and did not record any general allowance for loan losses for the year ended December 31, 2022. As of December 31, 2022, the Company had four loans deemed impaired and recorded specific allowance for loan losses of $11.8 million for the year ended December 31, 2022. As of December 31, 2021, the Company had one loan with a loan risk rating of "4" and no loans with a loan risk rating of "5", and recorded general allowance for loan losses of $0.6 million for the year ended December 31, 2021. Additionally, as of December 31, 2021, the Company had three loans deemed impaired and recorded specific allowance for loan losses of $10.3 million for the year ended December 31, 2021.

The following table presents the activity in the Company's allowance for loan losses:

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| Allowance for loan losses, beginning of year | $13658481 | $3738758 |
| Provision for loan losses | 11813409 | 10904163 |
| Charge-offs <sup>(1)</sup> |  | (984440) |
| Allowance for loan losses, end of year | $25471890 | $13658481 |

---

_______________

(1)Amount related to the TDR below.

As of December 31, 2022 and 2021, the Company had two loans and one loan that were in default, respectively. Additionally, for the years ended December 31, 2022 and 2021, the Company suspended interest income accrual of $8.5 million and $3.6 million, respectively, on three loans because recovery of such income was doubtful.

***Troubled Debt Restructuring***

As of December 31, 2022, there was one investment that qualified as troubled debt restructuring. As of December 31, 2021, the Company had a recorded investment in troubled debt restructuring of $13.7 million.

*2022 —* In December 2022, the borrower of a $40.1 million senior loan experienced financial difficulty and offered to repay the loan for $38.7 million. The remaining $1.4 million was converted to subordinated equity that accrues dividends at 8.0% and the Company is entitled to receive waterfall profit upon a sale. The Company does not anticipate a full recovery of the equity position and does not expect to receive any additional income. As a result, the remaining $1.4 million is reflected as a loan

------

**Notes to Consolidated Financial Statements** 

receivable and it is fully reserved for as of December 31, 2022. The Company classified this loan modification as a TDR as it met all the conditions to be considered a TDR pursuant to ASC 310-40.

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

---

| | |
|:---|:---|
| Number of loans modified | 1 |
| Pre-modified recorded carrying value | $40837901 |
| Post-modified recorded carrying value <sup>(1)</sup> | $1364944 |

---

_______________

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

*2021 —* Due to financial difficulty resulting from the COVID-19 pandemic, a borrower defaulted on interest payments in May 2020 on a $3.5 million mezzanine loan, and the Company subsequently suspended the interest accrual. The Company purchased the senior loan from a third-party lender on September 3, 2021 in order to facilitate a refinancing. Subsequently on September 23, 2021, the senior and mezzanine loans were refinanced and the Company issued a new senior loan with a committed amount of $14.7 million, of which $13.6 million was funded at closing. The concession granted in the refinancing was the forgiveness of principal and accrued interest of $1.3 million on the mezzanine loan, of which $1.0 million was previously recorded as an allowance for loan losses, in addition to $0.4 million of nonaccrual interest. The Company classified the refinancing as a TDR as it met all the conditions to be considered a TDR pursuant to ASC 310-40. This investment was repaid in full in April 2022.

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

---

| | |
|:---|:---|
| Number of loans modified | 1 |
| Pre-modified recorded carrying value | $18503470 |
| Post-modified recorded carrying value <sup>(1)</sup> | $13625000 |

---

_______________

(1) As of December 31, 2021, the principal balance of this loan was $13.6 million and the carrying value of this loan, which includes the present value of the exit fee, was $13.7 million. There is no allowance for loan losses recorded for this new senior loan.

Once classified as a TDR, the new senior loan was classified as an impaired loan until it was extinguished and the carrying value was evaluated at each reporting date for collectability based on the fair value of the underlying collateral. Since the fair value of the collateral was greater than the carrying value of the new senior loan, no specific allowance was recorded as of December 31, 2021. For the period from January 1, 2022 through the date of repayment on April 1, 2022, income from the new senior loan was $0.3 million. For the year ended December 31, 2021, interest income from the new senior loan was $0.3 million.

**Note 5. Equity Investment in Unconsolidated Investments**

The Company owns interests in a limited partnership and three joint ventures. The Company accounts for its interests in these investments under the equity method of accounting (<u>[Note 2](#i8c55800180e74ade95e69ecdac0328fb_46)</u>). The Company classifies distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor's cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.

***Equity Investment in a Limited Partnership***

On August 3, 2020, the Company entered into a subscription agreement with Mavik Real Estate Special Opportunities Fund, LP ("RESOF") whereby the Company committed to fund up to $50.0 million to purchase a limited partnership interest in RESOF. RESOF's primary investment objective is to generate attractive risk-adjusted returns by purchasing performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including

------

**Notes to Consolidated Financial Statements** 

rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). The general partner of RESOF is Mavik Real Estate Special Opportunities Fund GP, LLC, which is a subsidiary of the Company's sponsor, Terra Capital Partners. As of December 31, 2022 and 2021, the unfunded commitment was $22.4 million and $15.1 million, respectively.

The Company evaluated its equity interest in RESOF and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in RESOF is accounted for as an equity method investment. As of December 31, 2022 and 2021, the Company owned 27.9% and 50.0% of the equity interest in RESOF, respectively. As of December 31, 2022 and 2021, the carrying value of the Company's investment in RESOF was $36.8 million and $40.5 million, respectively. For the year ended December 31, 2022, the Company recorded equity income from RESOF of $5.2 million, and did not receive any distributions from RESOF. For the year ended December 31, 2021, the Company recorded equity income from RESOF of $6.2 million and received distributions from RESOF of $3.5 million.

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

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

---

| | | |
|:---|:---|:---|
| | **As of December 31,** | **As of December 31,** |
| | **2022** | **2021** |
| Investments at fair value (cost of $176,035,290 and $107,261,022, respectively) | $178283703 | $108359898 |
| Other assets | 23918841 | 5484087 |
| Total assets | 202202544 | 113843985 |
| Revolving line of credit, net of financing costs | 14795985 | 14909717 |
| Obligations under participation agreement (proceeds of $41,726,565 and <br>&nbsp;&nbsp;&nbsp;&nbsp;$14,252,357, respectively) | 41962861 | 14351617 |
| Other liabilities | 17120804 | 5296603 |
| Total liabilities | 73879650 | 34557937 |
| Partners' capital | $128322894 | $79286048 |

---

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| Total investment income | $31436886 | $11769083 |
| Total expenses | 9042066 | 2381145 |
| Net investment income | 22394820 | 9387938 |
| Unrealized (depreciation) appreciation on investments | (2180632) | 524113 |
| Net increase in partners' capital resulting from operations | $20214188 | $9912051 |

---

***Equity Investment in Joint Ventures***

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

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

------

**Notes to Consolidated Financial Statements** 

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

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
|<br>**Entity** |<br>**Co-owner** <sup>(1)</sup> | **Beneficial Ownership Interest** | **Carrying Value** | **Beneficial Ownership Interest** | **Carrying Value** |
| LEL Arlington JV LLC <sup>(1)</sup> | Affiliate/Third party | 27.2% | $7271603 | 80% | $23949044 |
| LEL NW 49th JV LLC <sup>(1)</sup> | Affiliate/Third party | 27.2% | 1521556 | 80% | 5306467 |
| TCG Corinthian FL Portfolio<br>&nbsp;&nbsp;&nbsp;&nbsp;JV LLV <sup>(1)(2)</sup> | Affiliate/Third Party | 30.6% | 6896816 | —% |  |
| SF-Dallas Industrial, LLC <sup>(3)</sup> | N/A | N/A | 10013691 | —% |  |
|  |  |  | $25703666 |  | $29255511 |

---

_______________

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

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

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

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

---

| | | |
|:---|:---|:---|
| | **As of December 31,** | **As of December 31,** |
| | **2022** | **2021** |
| Net investments in real estate | $192616298 | $115636424 |
| Other assets | 12817388 | 4856249 |
| Total assets | 205433686 | 120492673 |
| Mortgage loan payable | 147740645 | 83445235 |
| Other liabilities | 3104624 | 1305572 |
| Total liabilities | 150845269 | 84750807 |
| Members' capital | $54588417 | $35741866 |

---

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| Revenues | $15071626 | $1448431 |
| Operating expenses | (6710172) | (518904) |
| Depreciation and amortization expense | (9914314) | (541119) |
| Interest expense | (7572790) | (692500) |
| Unrealized gains | 3244813 | 447 |
| Net loss | $(5880837) | $(303645) |

---

For the year ended December 31, 2022, the Company recorded equity loss from the joint ventures of $2.5 million, and received distributions from the joint ventures of $0.9 million. For the year ended December 31, 2021, the Company recorded equity loss from the joint ventures of $0.2 million and received no distributions. In connection with these investments, the Company paid origination fee to the Manager totaling $0.5 million, to be amortized to equity income over the life of the respective joint venture.

------

**Notes to Consolidated Financial Statements** 

**Note 6. Real Estate Owned, Net**

***Real Estate Activities***

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

*2021 —* In September 2021, the Company signed a new lease for the vacant space in an office building. The lease commenced on December 1, 2021 and has term of 10 years with an option to extend the lease for 5 years. Additionally, the lease provides for a fixed rental payment plus a percentage rent that is based on 6% of the gross sales of the tenant's business. The lease also provides a 3% increase in rental payment every year.

In November 2021, the Company received notice from a tenant of their intention to terminate its lease effective November 30, 2022. In connection with the lease termination, the Company received a termination fee of $3.1 million, to be amortized to income over the remaining life of the lease.

In December 2021, the Company recorded an impairment charge of $3.4 million on the 4.9 acres of land in order to reduce the carrying value of the land to its estimated fair value, which is the estimated selling price less the cost of sale.

***Real Estate Owned, Net***

&nbsp;&nbsp;&nbsp;&nbsp;Real estate owned was comprised of 4.9 acres of land located in Pennsylvania and a multi-tenant office building, with lease intangible assets and liabilities, located in California. The following table presents the components of real estate owned, net as of:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| | **Cost** | **Accumulated Depreciation/Amortization** | **Net** | **Cost** | **Accumulated Depreciation/Amortization** | **Net** |
| **Real estate:** | | | | | | |
| Land <sup>(1)</sup> | $— | $— | $— | $10000000 | $— | $10000000 |
| Building and building <br> improvements | 51725969 | (5711468) | 46014501 | 51725969 | (4418305) | 47307664 |
| Tenant improvements | 1854640 | (1224648) | 629992 | 1854640 | (947369) | 907271 |
| Furniture and fixtures | 236000 | (220267) | 15733 | 236000 | (125867) | 110133 |
| Total real estate | 53816609 | (7156383) | 46660226 | 63816609 | (5491541) | 58325068 |
| **Lease intangible assets:** |  |  |  |  |  |  |
| In-place lease | 14982538 | (12493079) | 2489459 | 14982538 | (7627326) | 7355212 |
| Above-market rent | 156542 | (77540) | 79002 | 156542 | (59983) | 96559 |
| Total intangible assets | 15139080 | (12570619) | 2568461 | 15139080 | (7687309) | 7451771 |
| **Lease intangible liabilities:** | **Lease intangible liabilities:** |  |  |  |  |  |
| Below-market rent | (2754922) | 2428647 | (326275) | (2754922) | 1496125 | (1258797) |
| Above-market ground lease | (8896270) | 575705 | (8320565) | (8896270) | 445357 | (8450913) |
| Total intangible liabilities | (11651192) | 3004352 | (8646840) | (11651192) | 1941482 | (9709710) |
| **Total real estate** | $57304497 | $(16722650) | $40581847 | $67304497 | $(11237368) | $56067129 |

---

_______________

(1)The 4.9 acres of land in Pennsylvania was sold by the Company in the second quarter of 2022.

------

**Notes to Consolidated Financial Statements** 

***Real Estate Operating Revenues and Expenses***

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

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| **Real estate operating revenues:** |  |  |
| &nbsp;&nbsp;&nbsp;Lease revenue | $6782778 | $7167049 |
| &nbsp;&nbsp;&nbsp;Other operating income | 4669136 | 1727942 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $11451914 | $8894991 |
| **Real estate operating expenses:** |  |  |
| &nbsp;&nbsp;&nbsp;Utilities | $235403 | $208098 |
| &nbsp;&nbsp;&nbsp;Real estate taxes | 1400519 | 1401279 |
| &nbsp;&nbsp;&nbsp;Repairs and maintenances | 728944 | 645316 |
| &nbsp;&nbsp;&nbsp;Management fees | 267188 | 271303 |
| &nbsp;&nbsp;&nbsp;Lease expense, including amortization of above-market ground lease | 1948652 | 2084402 |
| &nbsp;&nbsp;&nbsp;Other operating expenses | 424845 | 393495 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $5005551 | $5003893 |

---

***Leases***

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022, the Company owned a multi-tenant office building that was leased to four tenants. In addition, the office building is subject to a ground lease whereby the Company is the lessee (or a tenant) to the ground lease. The ground lease had a remaining lease term of 64.6 years as of December 31, 2022, and provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9% of the fair market value of the land. The next rent reset on the ground lease is scheduled for November 1, 2025. The Company is currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v. Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No. 20STCV34217. The Company believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. The Company's position has prevailed in all three of the prior arbitrations to reset the ground rent. Since future rent reset determinations under the ground lease cannot be known at this time, the Company did not include any potential future rent increases in calculating the present value of future rent payments. The Company intends vigorously to pursue the litigation. While the Company believes its arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty. If the landlord prevails, the future rent reset determinations could result in significantly higher ground rent, which would likely result in a significant diminution in the value of the Company's interest in the ground lease and the office building.

***Scheduled Future Minimum Rent Income*** 

&nbsp;&nbsp;&nbsp;&nbsp;Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at December 31, 2022 are as follows:

---

| | |
|:---|:---|
| **Years Ending December 31,** | **Total** |
| 2023 | $4235538 |
| 2024 | 4380043 |
| 2025 | 792925 |
| 2026 | 816724 |
| 2027 | 598943 |
| Thereafter | 1815497 |
| Total | $12639670 |

---

------

**Notes to Consolidated Financial Statements** 

***Scheduled Annual Net Amortization of Intangibles*** 

&nbsp;&nbsp;&nbsp;&nbsp;Based on the intangible assets and liabilities recorded at December 31, 2022, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Years Ending December 31,** | **Net Decrease in Real Estate Operating Revenue** <sup>(1)</sup> | **Increase in Depreciation and Amortization** <sup>(1)</sup> | **Decrease in Rent Expense** <sup>(1)</sup> | **Total** |
| 2023 | $(139056) | $1093878 | $(130348) | $824474 |
| 2024 | (152107) | 1177775 | (130348) | 895320 |
| 2025 | 17556 | 87121 | (130348) | (25671) |
| 2026 | 17556 | 87121 | (130348) | (25671) |
| 2027 | 8778 | 43564 | (130348) | (78006) |
| Thereafter |  |  | (7668825) | (7668825) |
| Total | $(247273) | $2489459 | $(8320565) | $(6078379) |

---

_______________

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

***Supplemental Ground Lease Disclosures***

&nbsp;&nbsp;&nbsp;&nbsp;

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

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| **Operating lease** |  |  |
| Operating lease right-of-use asset | $27378786 | $27394936 |
| Operating lease liability | $27378786 | $27394936 |
| Weighted average remaining lease term — operating lease (years) | 63.8 | 64.8 |
| Weighted average discount rate — operating lease | 7.6% | 7.6% |

---

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

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| Operating lease cost | $2079000 | $2214750 |

---

&nbsp;&nbsp;&nbsp;&nbsp;

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

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| Amounts included in the measurement of lease liability: |  |  |
| &nbsp;&nbsp;&nbsp;Operating cash flows from an operating lease | $2079000 | $2214750 |
| Right-of-use asset obtained in exchange for lease obligations: |  |  |
| &nbsp;&nbsp;&nbsp;Operating lease | $2079000 | $2214750 |

---

------

**Notes to Consolidated Financial Statements** 

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

---

| | |
|:---|:---|
| **Years Ending December 31,** | **Operating Lease** |
| 2023 | $2079000 |
| 2024 | 2079000 |
| 2025 | 2079000 |
| 2026 | 2079000 |
| 2027 | 2079000 |
| Thereafter | 122227875 |
| Total lease payments | 132622875 |
| Less: Imputed interest | (105244089) |
| Total | $27378786 |

---

**Note 7. Fair Value Measurements**

&nbsp;&nbsp;&nbsp;&nbsp;The Company follows the provisions of ASC 820, *Fair Value Measurement* ("ASC 820"), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;

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

As of December 31, 2022 and 2021, the Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, term loan payable, repurchase agreement payable, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities are financial instruments that are reported at fair value.

------

**Notes to Consolidated Financial Statements** 

***Financial Instruments Carried at Fair Value on a Recurring Basis***

***&nbsp;&nbsp;&nbsp;&nbsp;***From time to time, the Company may invest in short-term debt and equity securities which are classified as available-for-sale securities, which are presented at fair value on the consolidated balance sheet. Changes in the fair value of equity securities are recognized in earnings. Changes in the fair value of debt securities are reported in other comprehensive income until the securities are realized.

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| | **Fair Value Measurements** | **Fair Value Measurements** | **Fair Value Measurements** | **Fair Value Measurements** |
| | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Marketable Securities: |  |  |  |  |
| Debt securities | $147960 | $— | $— | $147960 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $147960 | $— | $— | $147960 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| | **Fair Value Measurements** | **Fair Value Measurements** | **Fair Value Measurements** | **Fair Value Measurements** |
| | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Marketable Securities: |  |  |  |  |
| Equity securities | $1310000 | $— | $— | $1310000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $1310000 | $— | $— | $1310000 |

---

&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the activities of the marketable securities:

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| Beginning balance | $1310000 | $1287500 |
| Purchases | 136265 | 6479148 |
| Proceeds from sale | (1259417) | (6608396) |
| Reclassification of net realized gains on marketable securities into earnings | 83411 | 129248 |
| Unrealized (losses) gains on marketable securities | (122299) | 22500 |
| Ending balance | $147960 | $1310000 |

---

***Financial Instruments Not Carried at Fair Value***

The following table presents the carrying value, which represents the principal amount outstanding, adjusted for the accretion of purchase discounts on loans and exit fees, and the amortization of purchase premiums on loans and origination

------

**Notes to Consolidated Financial Statements** 

fees, and estimated fair value of the Company's financial instruments that are not carried at fair value on the consolidated balance sheets as of:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| |<br>**Level** | **Principal Amount** | **Carrying Value** | **Fair Value** | **Principal Amount** | **Carrying Value** | **Fair Value** |
| **Loans:** | | | | | | | |
| Loans held for investment | 3 | $604068894 | $609889829 | $581182892 | $467843785 | $470988063 | $454840551 |
| Loans held for investment <br> acquired through <br> participation | 3 | 41726565 | 42072828 | 41962862 | 12307366 | 12343732 | 12361068 |
| Allowance for loan losses |  |  | (25471890) |  |  | (13658481) |  |
| Total loans |  | $645795459 | $626490767 | $623145754 | $480151151 | $469673314 | $467201619 |
| **Liabilities:** |  |  |  |  |  |  |  |
| Term loan payable | 3 | $25000000 | $25000000 | $25000000 | $93763470 | $91940062 | $94344595 |
| Unsecured notes payable | 1 | 123500000 | 116530673 | 103481748 | 85125000 | 81856799 | 85210125 |
| Repurchase agreement payable | 3 | 170876606 | 169304710 | 170876606 | 44569600 | 43974608 | 44569600 |
| Obligations under participation <br> agreements | 3 | 12584958 | 12680594 | 12680595 | 42048294 | 42232027 | 41475060 |
| Mortgage loan payable | 3 | 29252308 | 29488326 | 29394870 | 31962692 | 32134295 | 32192785 |
| Secured borrowing | 3 |  |  |  | 34521104 | 34586129 | 34425029 |
| Revolving line of credit <br> payable | 3 | 90135865 | 89807448 | 90135865 | 38575895 | 38186472 | 38575895 |
| Total liabilities |  | $451349737 | $442811751 | $431569684 | $370566055 | $364910392 | $370793089 |

---

&nbsp;&nbsp;&nbsp;&nbsp;The Company estimated that its other financial assets and liabilities, not included in the tables above, had fair values that approximated their carrying values at both December 31, 2022 and 2021 due to their short-term nature.

***Valuation Process for Fair Value Measurement***

&nbsp;&nbsp;&nbsp;&nbsp;The fair value of the Company's investment in equity securities and its unsecured notes payable is determined based on quoted prices in an active market and is classified as Level 1 of the fair value hierarchy.

&nbsp;&nbsp;&nbsp;&nbsp;

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

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

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

------

**Notes to Consolidated Financial Statements** 

The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of December 31, 2022 and 2021. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Fair Value at December 31, 2022** | **Primary Valuation Technique** | **Unobservable Inputs** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|<br>**Asset Category** | **Fair Value at December 31, 2022** | **Primary Valuation Technique** | **Unobservable Inputs** | **Minimum** | **Maximum** | **Weighted Average** |
| **Assets:** | | | | | | |
| Loans held for investment, net | $581182892 | Discounted cash flow | Discount rate | 8.71% | 19.36% | 11.46% |
| Loans held for investment acquired through <br> participation, net | 41962862 | Discounted cash flow | Discount rate | 15.25% | 17.06% | 16.67% |
| **Total Level 3 Assets** | $623145754 |  |  |  |  |  |
| **Liabilities:** |  |  |  |  |  |  |
| Repurchase agreement payable | 170876606 | Discounted cash flow | Discount rate | 5.22% | 6.17% | 6.82% |
| Obligations under participation agreements | 12680595 | Discounted cash flow | Discount rate | 16.36% | 16.36% | 16.36% |
| Mortgage loan payable | 29394870 | Discounted cash flow | Discount rate | 8.24% | 8.24% | 8.24% |
| Term loan payable | 25000000 | Discounted cash flow | Discount rate | 5.63% | 5.63% | 5.63% |
| Revolving line of credit | 90135865 | Discounted cash flow | Discount rate | 7.64% | 7.64% | 7.64% |
| **Total Level 3 Liabilities** | $328087936 |  |  |  |  |  |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Fair Value at December 31, 2021** | **Primary Valuation Technique** | **Unobservable Inputs** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|<br>**Asset Category** | **Fair Value at December 31, 2021** | **Primary Valuation Technique** | **Unobservable Inputs** | **Minimum** | **Maximum** | **Weighted Average** |
| **Assets:** | | | | | | |
| Loans held for investment, net | $454840551 | Discounted cash flow | Discount rate | 3.89% | 15.00% | 8.11% |
| Loans held for investment acquired through <br> participation, net | 12361068 | Discounted cash flow | Discount rate | 8.25% | 15.00% | 12.33% |
| **Total Level 3 Assets** | $467201619 |  |  |  |  |  |
| **Liabilities:** |  |  |  |  |  |  |
| Term loan payable | $94344595 | Discounted cash flow | Discount rate | 4.00% | 4.00% | 4.00% |
| Repurchase agreement payable | 44569600 | Discounted cash flow | Discount rate | 2.45% | 2.74% | 2.57% |
| Obligations under participation agreements | 41475060 | Discounted cash flow | Discount rate | 12.37% | 15.00% | 14.31% |
| Mortgage loan payable | 32192785 | Discounted cash flow | Discount rate | 6.08% | 6.08% | 6.08% |
| Secured borrowing | 34425029 | Discounted cash flow | Discount rate | 6.64% | 6.64% | 6.64% |
| Revolving line of credit | 38575895 | Discounted cash flow | Discount rate | 4.00% | 4.00% | 4.00% |
| **Total Level 3 Liabilities** | $285582964 |  |  |  |  |  |

---

**Note 8. Related Party Transactions**

***Management Agreement***

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

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| Origination and extension fee expense <sup>(1)(2)</sup> | $2967291 | $2729598 |
| Asset management fee | 6556492 | 5134149 |
| Asset servicing fee | 1560044 | 1181924 |
| Operating expenses reimbursed to Manager | 8076321 | 6916371 |
| Disposition fee <sup>(3)</sup> | 890194 | 1006302 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $20050342 | $16968344 |

---

------

**Notes to Consolidated Financial Statements** 

_______________

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

(2)Amount for the years ended December 31, 2022 and 2021 excluded $0.2 million and $0.3 million of origination fee, respectively, paid to the Manager in connection with the Company's equity investment in an unconsolidated investment. This origination fee was capitalized to the carrying value of the unconsolidated investment as a transaction cost.

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

*Origination and Extension Fee Expense*

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

*Asset Management Fee*

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

*Asset Servicing Fee*

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

*Transaction Breakup Fee*

&nbsp;&nbsp;&nbsp;&nbsp;In the event that the Company receives any "breakup fees," "busted-deal fees," termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of December 31, 2022 and 2021, the Company has not received any breakup fees.

*Operating Expenses*

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

*Disposition Fee*

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

***Cost Sharing and Reimbursement Agreement***

The Company and Terra LLC have entered into a cost sharing and reimbursement agreement effective October 1, 2022, pursuant to which Terra LLC is responsible for its allocable share of the Company's expenses, including fees paid by the

------

**Notes to Consolidated Financial Statements** 

Company to the Manager based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on the Company's consolidated financial statements.

***Distributions Paid***

For the years ended December 31, 2022 and 2021, the Company made distributions to investors totaling $16.0 million and $17.1 million, respectively, of which $6.5 million and $14.6 million were returns of capital, respectively (<u>[Note 11](#i8c55800180e74ade95e69ecdac0328fb_79)</u>).

***Due to Manager***

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022 and 2021, approximately $3.9 million and $2.4 million was due to the Manager, respectively, as reflected on the consolidated balance sheets, primarily related to the present value of the disposition fees on individual loans due to the Manager.

***Due from Related Party***

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022, there was no amount due from related party. As of December 31, 2021, amount due from a related party was $2.6 million, primarily related to the reserve funding on a loan that was held by an affiliate. The reserve funding was transferred to the Company in February 2022.

***Mavik Real Estate Special Opportunities Fund, LP***

On August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. For more information on this investment, please see <u>[Note 5](#i8c55800180e74ade95e69ecdac0328fb_52)</u>.

***Participation Agreements***

In the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the "Participants"). The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity.

ASC 860, *Transfers and Servicing* ("ASC 860")*,* establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (See "*Participation interests*" in <u>[Note 2](#i8c55800180e74ade95e69ecdac0328fb_46)</u> and "*Obligations under Participation Agreements* ***a****nd Secured Borrowing*" in (<u>[Note 9](#i8c55800180e74ade95e69ecdac0328fb_70)</u>).

*Participation Interests Purchased by the Company*

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

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

---

| | | | |
|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| | **Participating Interests** | **Principal Balance** | **Carrying Value** |
| | **Participating Interests** | **Principal Balance** | **Carrying Value** |
| Havemeyer TSM LLC <sup>(1)(2)</sup> | 23.00% | $3282208 | $3313813 |
| Mesa AZ Industrial Owner, LLC <sup>(1)(3)</sup> | 38.27% | 31000000 | 31276468 |
| UNJ Sole Member, LLC <sup>(1)</sup> | 40.80% | 7444357 | 7482547 |
|  |  | $41726565 | $42072828 |

---

------

**Notes to Consolidated Financial Statements** 

---

| | | | |
|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| | **Participating Interests** | **Principal Balance** | **Carrying Value** |
| | **Participating Interests** | **Principal Balance** | **Carrying Value** |
| Hillsborough Owners LLC <sup>(4)</sup> | 30.00% | $4863009 | $4866542 |
| UNJ Sole Member, LLC <sup>(1)</sup> | 40.80% | 7444357 | 7477190 |
|  |  | $12307366 | $12343732 |

---

________________

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

(2)The Company acquired its interest in this investment in connection with the BDC Merger

(3)The Company acquired its interest in this investment in September 2022.

(4)The loan was held in the name of Terra BDC, a formerly affiliated fund that was advised by Terra Income Advisors, LLC, an affiliate of the Company's sponsor and Manager. In connection with the BDC Merger, the Company contributed the loan to Terra BDC and the related obligation under participation agreement was released.

*Transfers of Participation Interest by the Company*

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

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | | **Transfers Treated as Obligations Under Participation Agreements as of <br>December 31, 2022** | **Transfers Treated as Obligations Under Participation Agreements as of <br>December 31, 2022** | **Transfers Treated as Obligations Under Participation Agreements as of <br>December 31, 2022** |
| |<br>**Principal Balance** |<br>**Carrying Value** | **% Transferred** | **Principal Balance** | **Carrying Value** |
| 610 Walnut Investors LLC <sup>(1)</sup> | $18625738 | $18738386 | 67.57% | $12584958 | $12680594 |
|  | $18625738 | $18738386 |  | $12584958 | $12680594 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | | **Transfers Treated as Obligations Under Participation Agreements as of <br>December 31, 2021** | **Transfers Treated as Obligations Under Participation Agreements as of <br>December 31, 2021** | **Transfers Treated as Obligations Under Participation Agreements as of <br>December 31, 2021** |
| |<br>**Principal Balance** |<br>**Carrying Value** | **% Transferred** | **Principal Balance** | **Carrying Value** |
| 370 Lex Part Deux, LLC <sup>(2)(3)</sup> | $60012639 | $60012639 | 35.00% | $21004424 | $21004423 |
| RS JZ Driggs, LLC <sup>(2)(3)</sup> | 15606409 | 15754641 | 50.00% | 7806370 | 7880516 |
| William A. Shopoff & Cindy I. Shopoff <sup>(2)(3)</sup> | 25000000 | 25206964 | 52.95% | 13237500 | 13347088 |
|  | $100619048 | $100974244 |  | $42048294 | $42232027 |

---

________________

(1)Participant was a third party.

(2)Participant was Terra BDC and now Terra LLC.

(3)In connection with the BDC Merger, the obligations under participation agreements were effectively extinguished and the Company recognized a gain on extinguishment of obligations under participation agreements of $3.4 million (<u>[Note 3](#i8c55800180e74ade95e69ecdac0328fb_1852)</u>).

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

------

**Notes to Consolidated Financial Statements** 

***Secured Borrowing***

In March 2020, the Company entered into a financing transaction where a third-party purchased an A-note position. However, the sale of the A-note position did not qualify for sale accounting under ASC 860 and therefore, the gross amount of the loan remains in the consolidated balance sheets and the proceeds from the sale on the portion transferred are recorded as secured borrowing. Interest earned on the entire loan balance is recorded within "*Interest income*" and the interest related to the transferred interest is recorded within "*Interest expense on secured borrowing*" in the consolidated statements of operations. In August 2022, the secured borrowing was repaid in full.

The following table summarizes the loan that was transferred to a third-party that was accounted for as secured borrowing as of:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | | **Transfers Treated as Secured Borrowing as of December 31, 2021** | **Transfers Treated as Secured Borrowing as of December 31, 2021** | **Transfers Treated as Secured Borrowing as of December 31, 2021** |
| |<br>**Principal Balance** |<br>**Carrying Value** | **% Transferred** | **Principal Balance** | **Carrying Value** |
| Windy Hill PV Five CM, LLC | $49954068 | $50264568 | 69.11% | $34521104 | $34586129 |
|  | $49954068 | $50264568 |  | $34521104 | $34586129 |

---

**Note 9. Debt**

***Unsecured Notes Payable***

*The 6.00% Senior Notes Due 2026*

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

In connection with the issuance of the 6.00% Senior Notes Due 2026, the Company entered into (i) an Indenture, dated June 10, 2021 (the "Base Indenture"), by and between the Company and U.S. Bank National Association, as trustee (the "Trustee"), and (ii) the First Supplemental Indenture thereto, dated June 10, 2021 (the "Supplemental Indenture" and, collectively with the Base Indenture, the "Indenture"), by and between the Company and the Trustee. The Indenture contains certain covenants that, among other things, limit the ability of the Company, subject to exceptions, to make distributions in excess of 90% of the Company's taxable income, incur indebtedness (as defined in the Indenture) or purchase shares of the Company's capital stock unless the Company has an asset coverage ratio (as defined in the Indenture) of at least 150% after giving effect to such transaction. The Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the notes to become or to be declared due and payable. As of December 31, 2022 and 2021, the Company was in compliance with the covenants included in the Indenture.

*The 7.00% Senior Notes Due 2026*

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

Pursuant to the Merger Agreement, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the 7.00% Senior Notes Due 2026 outstanding as of the Effective Time and the performance of every covenant of the Indenture, dated February 10, 2021 (the "TIF6 Indenture"), between Terra BDC and the Trustee, as supplemented by the First Supplemental Indenture, dated February 10, 2021, by and between Terra BDC and the Trustee (the

------

**Notes to Consolidated Financial Statements** 

"First Supplemental Indenture"), to be performed or observed by Terra BDC, including, without limitation, the execution and delivery to the Trustee of a supplement to the TIF6 Indenture in form satisfactory to the Trustee.

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

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

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

*Summarized Information*

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

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| | **Principal Balance** | **Carrying Value** | **Fair Value** | **Principal Balance** | **Carrying Value** | **Fair Value** |
| 6.00% Senior Notes Due 2026 <sup>(1)</sup> | $85125000 | $82487769 | $68100000 | $85125000 | $81856799 | $85210125 |
| 7.00% Senior Notes Due 2026 <sup>(2)</sup> | 38375000 | 34042904 | 35381748 |  |  |  |
|  | $123500000 | $116530673 | $103481748 | $85125000 | $81856799 | $85210125 |

---

_______________

(1)Carrying value is net of unamortized issue discount of $1.9 million and $2.4 million, and unamortized deferred financing costs of $0.7 million and $0.9 million as of December 31, 2022 and 2021, respectively.

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

***Revolving Line of Credit***

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

In connection with the Revolving Line of Credit, the Company entered into a limited guaranty (the "Guaranty") in favor of WAB, pursuant to which the Company guarantees the payment of up to 25% of the amount outstanding under the Revolving Line of Credit. Under the Revolving Line of Credit and the Guaranty, the Company is required to maintain (i) a minimum total net worth of $250.0 million; (ii) a $3.5 million quarterly operating profit, as defined within the agreement; and (iii) a ratio of

------

**Notes to Consolidated Financial Statements** 

total debt to total net worth of no more than 2.50 to 1.00. As of December 31, 2022 and 2021, the Company was in compliance with these covenants.

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

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

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

As of December 31, 2022 and 2021, borrowings under the Revolving Line of Credit were $90.1 million and $38.6 million, respectively, collateralized by $177.4 million and $60.1 million of eligible assets, respectively. For the years ended December 31, 2022 and 2021, the Company received proceeds from the Revolving Line of Credit of $130.5 million and $38.6 million, respectively, and made repayments of $79.0 million and none, respectively.

***Term Loan***

On September 3, 2020, Terra Mortgage Capital I, LLC (the "Issuer"), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Indenture and Credit Agreement (the "Indenture and Credit Agreement") with Goldman Sachs Bank USA, as initial lender ("Goldman") and Wells Fargo Bank, National Association, as the trustee, custodian, collateral agent, loan agent and note administrator ("Wells Fargo"). The Indenture and Credit Agreement provided for (A) the borrowing by the Issuer from Goldman of approximately $103.0 million under a floating rate loan (the "Term Loan") and (B) the issuance by the Issuer to Terra Mortgage Portfolio I, LLC (the "Class B Holder") of an aggregate of approximately $76.7 million principal amount of Class B Income Notes due 2025 (the "Class B Notes" and, together with the Term Loan, the "Debt"). The stated maturity date of the Debt was March 14, 2025. On February 18, 2022, the Company refinanced the Term Loan with a new repurchase agreement (see "*Goldman Master Repurchase Agreement*" below). The Term Loan bore interest at a variable rate initially equal to LIBOR (the "Benchmark Rate") (but not less than 1.0% per annum), plus a margin of 4.25% per annum (plus 0.50% on and after the payment date in October 2022, plus 0.25% on and after the payment date in October 2023), payable each month, on the day specified in the Indenture and Credit Agreement beginning in September 2020 (each a "Payment Date"). The Company accounted for the step-up in interest rate using the effective interest rate method. In connection with the refinancing, the Company reversed the previously accrued step-up interest of $0.4 million.

In connection with the Indenture and Credit Agreement, the Company entered into a non-recourse carveout Guaranty (the "Guaranty") in favor of Goldman, pursuant to which the Company guaranteed the payment of certain losses, damages, costs, expenses, and other obligations incurred by Goldman in connection with the occurrence of fraud, intentional misrepresentation, or willful misconduct by the Issuer, Class B Holder or the Company, and certain other occurrences including breaches of certain provisions under the Indenture and Credit Agreement. The Company also guaranteed the payment of the aggregate outstanding amount of the Term Loan upon the occurrence of certain bankruptcy events. Under the Guaranty, the Company was required to maintain (a) a minimum tangible net worth in an amount not less than seventy-five percent (75%) of its tangible net worth as of September 3, 2020, (b) a minimum liquidity of $10 million, and (c) an EBITDA to interest expense ratio of not less than 1.5 to 1.0. Failure to satisfy such maintenance covenants would constitute an event of default under the Indenture and Credit Agreement. On February 18, 2022, the Company refinanced the Term Loan with a new repurchase agreement and expects continued covenant compliance under the terms of the new repurchase agreement.

------

**Notes to Consolidated Financial Statements** 

The following table presents detailed information with respect to each borrowing under the Term Loan as of:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| | **Mortgage Assets** | **Mortgage Assets** | **Mortgage Assets** | **Borrowings Under the Term Loan** <sup>(1)(2)</sup> |
| | **Principal Amount** | **Carrying Value** | **Fair <br>Value** | **Borrowings Under the Term Loan** <sup>(1)(2)</sup> |
| 330 Tryon DE LLC | $22800000 | $22902354 | $22594654 | $13680000 |
| 1389 Peachtree St, LP; 1401 Peachtree St, LP; and<br> 1409 Peachtree St, LP | 53289288 | 53536884 | 52031363 | 31283661 |
| AGRE DCP Palm Springs, LLC | 43222381 | 43669992 | 43829842 | 23146265 |
| Patrick Henry Recovery Acquisition, LLC | 18000000 | 18041124 | 18055377 | 10800000 |
| University Park Berkeley, LLC | 25815378 | 25991962 | 26015500 | 14853544 |
|  | $163127047 | $164142316 | $162526736 | $93763470 |

---

For the years ended December 31, 2022 and 2021, the Company made repayments on borrowings under the Term Loan of $93.8 million and $16.6 million, respectively, and received proceeds from borrowings under the Term Loan of none and $2.8 million, respectively.

***Repurchase Agreements***

*UBS Master Repurchase Agreement* 

&nbsp;&nbsp;&nbsp;&nbsp;

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

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

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

In connection with the UBS Master Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of the Buyer (the "UBS Guarantee Agreement"), pursuant to which the Company will guarantee the payment of up to 25% of the amount outstanding under the UBS Master Repurchase Agreement. The UBS Master Repurchase Agreement and the UBS Guarantee Agreement contain various representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types. In addition, the UBS Guarantee Agreement contains financial covenants, which require the Company to maintain: (i) cash liquidity of at least the greater of $5 million or 5% of the then-current outstanding amount under the UBS Master Repurchase Agreement; (ii) total liquidity of at least the greater of $15 million or 10% of the then-current outstanding amount under the UBS Master Repurchase Agreement (iii) tangible net worth at an amount equal to or greater than $215.7 million plus 75% of new capital contributions thereafter; (iv) an EBITDA to interest expense ratio of not less than 1.50 to 1.00; and (v) a total indebtedness to tangible net worth ratio of not more than 3.50 to 1.00. In March 2022, the Company amended the UBS Guarantee Agreement to reduce the EBITDA to interest expense ratio of not less than 1.25 to 1.00, and as of December 31, 2022 and 2021, the Company was in compliance with these covenants.

------

**Notes to Consolidated Financial Statements** 

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

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| | **Collateral** | **Collateral** | **Collateral** | **Borrowings Under Master Repurchase Agreement** | **Borrowings Under Master Repurchase Agreement** | **Borrowings Under Master Repurchase Agreement** |
| | **Principal Amount** | **Carrying Value** | **Fair <br>Value** | **Borrowing Date** | **Principal Amount** | **Interest <br>Rate** |
| NB Factory TIC 1, LLC | $28000000 | $28857892 | $28902234 | 11/8/2021 | $18970000 | LIBOR+1.74% (LIBOR floor of 0.1%) |
| Grandview's Madison Place, LLC | 17000000 | 17105928 | 17105928 | 3/7/2022 | 13600000 | Term SOFR + 1.965% |
| Grandview's Remington Place, <br> LLC | 23100000 | 23199620 | 23203343 | 5/6/2022 | 18480000 | Term SOFR + 1.965% |
|  | $68100000 | $69163440 | $69211505 |  | $51050000 |  |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| | **Collateral** | **Collateral** | **Collateral** | **Borrowings Under Master Repurchase Agreement** | **Borrowings Under Master Repurchase Agreement** | **Borrowings Under Master Repurchase Agreement** |
| | **Principal Amount** | **Carrying Value** | **Fair <br>Value** | **Borrowing Date** | **Principal Amount** | **Interest <br>Rate** |
| 14th & Alice Street Owner, LLC | $39384000 | $40089153 | $40130448 | 11/8/2021 | $25599600 | LIBOR+1.45% (LIBOR floor of 0.1%) |
| NB Factory TIC 1, LLC | 28000000 | 28420056 | 28851547 | 11/8/2021 | 18970000 | LIBOR+1.74% (LIBOR floor of 0.1%) |
|  | $67384000 | $68509209 | $68981995 |  | $44569600 |  |

---

For the years ended December 31, 2022 and 2021, the Company borrowed $32.1 million and $44.6 million, respectively, under the UBS Master Repurchase Agreement for the financing of new investments, and made repayments of $25.6 million and $0.0 million, respectively.

*Goldman Master Repurchase Agreement* &nbsp;&nbsp;&nbsp;&nbsp;

On February 18, 2022, Terra Mortgage Capital I, LLC (the "GS Seller"), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Uncommitted Master Repurchase and Securities Contract Agreement (the "Repurchase Agreement") with Goldman Sachs Bank USA (the "GS Buyer"). The Repurchase Agreement provides for advances of up to $200.0 million in the aggregate, which the Company expects to use to finance the originations of certain secured performing commercial real estate loans and the acquisitions of certain secured non-performing commercial real estate loans. The Repurchase Agreement replaced the Term Loan, at which time all Mortgage Assets under the Term Loan were assigned as purchased assets under the Repurchase Agreement.

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

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

In connection with the Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of the GS Buyer (the "Guarantee Agreement"), pursuant to which the Company will guarantee the obligations of the GS Seller under the Repurchase Agreement. Subject to certain exceptions, the maximum liability under the Repurchase Agreement will not exceed

------

**Notes to Consolidated Financial Statements** 

25% of the then currently outstanding repurchase obligations for performing loans and 50% of the then currently outstanding repurchase obligations for non-performing loans under the Repurchase Agreement.

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

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

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| | **Collateral** | **Collateral** | **Collateral** | **Borrowings Under Repurchase Agreement** | **Borrowings Under Repurchase Agreement** | **Borrowings Under Repurchase Agreement** |
| | **Principal Amount** | **Carrying Value** | **Fair <br>Value** | **Borrowing Date** | **Principal Amount** | **Interest <br>Rate** |
| 330 Tryon DE LLC | $22800000 | $22902215 | $22687235 | 2/18/2022 | $18240000 | Term SOFR + 2.015% (0.01% floor) |
| 1389 Peachtree St, LP; 1401 Peachtree St, LP; and<br> 1409 Peachtree St, LP | 57184178 | 57453482 | 56844322 | 2/18/2022 | 41587275 | Term SOFR + 2.465% |
| AGRE DCP Palm Springs, LLC | 43222382 | 43758804 | 43062933 | 2/18/2022 | 28094548 | Term SOFR + 1.315% (1.8% floor) |
| Patrick Henry Recovery Acquisition, LLC | 18000000 | 18041782 | 17824300 | 2/18/2022 | 14400000 | Term SOFR +0.865% (1.5% floor) |
| University Park Berkeley, LLC | 26342468 | 26536122 | 26472938 | 2/18/2022 | 17504783 | Term SOFR + 1.365% (1.5% floor) |
|  | $167549028 | $168692405 | $166891728 |  | $119826606 |  |

---

For the year ended December 31, 2022, the Company borrowed $119.8 million under the Repurchase Agreement and did not make any repayments.

***Delayed Draw Term Loan***

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

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

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

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

amount being prepaid of such Loan, plus (2) all remaining required interest payments due on the principal amount being prepaid of such Loan through the maturity date (excluding accrued but unpaid interest to the date on which the make whole premium becomes owed), computed using a discount rate equal to the applicable U.S. Treasury rate (as set forth in the Credit

------

**Notes to Consolidated Financial Statements** 

Agreement) plus 50 basis points, over (B) the principal amount being prepaid of such Loan; provided that the make whole premium may in no event be less than zero.

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

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

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

***Mortgage Loan Payable***

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022, the Company had a $29.3 million mortgage loan payable collateralized by a multi-tenant office building that the Company acquired through foreclosure. The following table presents certain information about the mortgage loan payable as of:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | | | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|<br>**Lender** |<br>**Current <br>Interest Rate** |<br>**Maturity <br>Date** | **Principal Amount** | **Carrying Value** | **Carrying Value of <br>Collateral** | **Principal Amount** | **Carrying Value** | **Carrying Value of <br>Collateral** |
| Centennial Bank | LIBOR + 3.85% <br>(LIBOR Floor of 2.23%) | May 31, 2023 | $29252308 | $29488326 | $40581847 | $31962692 | $32134295 | $46067129 |

---

***Scheduled Debt Principal Payments***

&nbsp;&nbsp;&nbsp;&nbsp;Scheduled debt principal payments for each of the five calendar years following December 31, 2022 are as follows:

---

| | |
|:---|:---|
| **Years Ending December 31,** | **Total** |
| 2023 | $54252308 |
| 2024 | 261012472 |
| 2025 |  |
| 2026 | 123500000 |
| 2027 |  |
| Thereafter |  |
|  | 438764780 |
| Unamortized deferred financing costs | (8633623) |
| Total | $430131157 |

---

&nbsp;&nbsp;&nbsp;&nbsp; At December 31, 2022 and 2021, the unamortized deferred debt issuance costs were $8.6 million and $5.9 million, respectively.

***Obligations Under Participation Agreements and Secured Borrowing***

As discussed in <u>[Note 2](#i8c55800180e74ade95e69ecdac0328fb_46)</u>, the Company follows the guidance in ASC 860 when accounting for loan participations and loans sold. Such guidance requires the transferred interests meet certain criteria in order for the transaction to be recorded as a sale. Loan participations and loans transferred from the Company which do not qualify for sale treatment remain on the Company's consolidated balance sheets and the proceeds are recorded as obligations under participation agreements or secured borrowing,

------

**Notes to Consolidated Financial Statements** 

as applicable. As of December 31, 2022 and 2021, obligations under participation agreements had a carrying value of approximately $12.7 million and $42.2 million, respectively, and the carrying value of the loans that are associated with these obligations under participation agreements was approximately $18.7 million and $101.0 million, respectively, (see "*Participation Agreements*" in <u>[Note 8](#i8c55800180e74ade95e69ecdac0328fb_67)</u>). Additionally, as of December 31, 2021, secured borrowing had a carrying value of approximately $34.6 million, and the carrying value of the loan that is associated with the secured borrowing was $50.3 million. The weighted-average interest rate on the obligations under participation agreements and secured borrowing was approximately 16.4% and 10.4% as of December 31, 2022 and 2021, respectively. The secured borrowing was repaid in August 2022.

**Note 10. Commitments and Contingencies**

***Unfunded Commitments on Loans Held for Investment***

Certain of the Company's loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These fundings amounted to approximately $47.3 million and $71.8 million as of December 31, 2022 and 2021, respectively. The Company expects to maintain sufficient cash on hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on credit facilities.

***Unfunded Investment Commitment***

As discussed in <u>[Note 5](#i8c55800180e74ade95e69ecdac0328fb_52)</u>, on August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. As of December 31, 2022 and 2021, the unfunded investment commitment was $22.4 million and $15.1 million, respectively.

***Other***

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

From time to time, the Company and the Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company's rights under contracts with its portfolio companies. Additionally, as described above under "<u>[Note 6](#i8c55800180e74ade95e69ecdac0328fb_61)</u>. Real Estate Owned, Net—Real Estate Operating Revenue and Expenses," as of December 31, 2022, the Company owned a multi-tenant office building that is subject to a ground lease. The ground lease provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9% of the fair market value of the land. The next rent reset on the ground lease is scheduled for November 1, 2025. The Company is currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v. Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No. 20STCV34217. The Company believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. The Company's position has prevailed in all three of the prior arbitrations to reset the ground rent. Since future rent reset determinations under the ground lease cannot be known at this time, the Company did not include any potential future rent increases in calculating the present value of future rent payments. The Company intends vigorously to pursue the litigation. While the Company believes its arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty. If the landlord prevails, the future rent reset determinations could result in significantly higher ground rent, which would likely result in a significant diminution in the value of the Company's interest in the ground lease and the office building.

See <u>[Note 8](#i8c55800180e74ade95e69ecdac0328fb_67)</u> for a discussion of the Company's commitments to the Manager.

------

**Notes to Consolidated Financial Statements** 

**Note 11. Equity** 

***Earnings Per Share***

The following table presents earnings per share:

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| Net loss | $(6951693) | $(12355727) |
| Series A preferred stock dividend declared | (15624) | (15624) |
| Net loss allocable to common stock | $(6967317) | $(12371351) |
| Weighted-average shares outstanding - basic and diluted | 20709400 | 19487460 |
| Loss per share - basic and diluted | $(0.34) | $(0.63) |

---

***Preferred Stock Classes***

*Preferred Stock*

&nbsp;&nbsp;&nbsp;&nbsp;The Company's charter gives it authority to issue 50,000,000 shares of preferred stock, $0.01 par value per share ("Preferred Stock"). The Board may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, into one or more classes or series of stock. As of December 31, 2022 and 2021, there were no Preferred Stock issued or outstanding other than the Series A Preferred Stock (defined below).

&nbsp;&nbsp;&nbsp;&nbsp;

*Series A Preferred Stock*

&nbsp;&nbsp;&nbsp;&nbsp;

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

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

***Common Stock***

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

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

On the date that is 180 calendar days (or, if such date is not a business day, the next business day) after the date (the "First Conversion Date") of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such

------

**Notes to Consolidated Financial Statements** 

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

***Distributions***

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

For the years ended December 31, 2022 and 2021, the Company made distributions to investors totaling $16.0 million and $17.1 million, respectively, of which $6.5 million and $14.6 million were returns of capital, respectively. Additionally, for each of the years ended December 31, 2022 and 2021, the Company made distributions to preferred stockholders of $15,624.

Distributions paid to stockholders consist of ordinary income, capital gains, return of capital or a combination thereof for income tax purposes. The following table presents distributions per share, declared and paid during the years ended December 31, 2022 and 2021, reported for federal tax purposes and serves as a designation of capital gain distributions, if applicable, pursuant to Section 857(b)(3)(C) of the Internal Revenue Code and Treasury Regulation § 1.857-6(e):

---

| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| Ordinary income | $0.47 | $0.07 |
| Capital gain |  | 0.06 |
| Return of capital | 0.31 | 0.75 |
|  | $0.78 | $0.88 |

---

**Note 12. Subsequent Events**

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

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

------

**Terra Property Trust, Inc.**

**Schedule III – Real Estate and Accumulated Depreciation**

**As of December 31, 2022** 

---

| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | | **Initial Costs** | **Initial Costs** | **Cost Capitalized Subsequent to Acquisition** | **Decrease in Net Investment** <sup>(1)</sup> | **Gross Amount at Period End** | **Gross Amount at Period End** | **Gross Amount at Period End** | | | | |
|<br>**Description** |<br>**Encumbrance** | **Land** | **Building and Building Improvements** | **Cost Capitalized Subsequent to Acquisition** | **Decrease in Net Investment** <sup>(1)</sup> | **Land** | **Building and Building Improvements** | **Total** |<br>**Accumulated Depreciation** |<br>**Date of Construction** |<br>**Date Acquired** |<br>**Life Used for Depreciation** |
| Office building <br> in Santa <br> Monica, CA | $29252308 | $— | $51308076 | $2508533 | $— | $— | $53816609 | $53816609 | $7156383 | 2002-2004 | July 30, 2018 | 40 years |
| Land in <br> Conshohocken, PA |  | 14703359 |  | 242071 | (14945430) |  |  |  |  | N/A | January 9, 2019 | N/A |
|  | $29252308 | $14703359 | $51308076 | $2750604 | $(14945430) | $— | $53816609 | $53816609 | $7156383 |  |  |  |

---

<sup>___________________________</sup>

(1)For the year ended December 31, 2019, the Company recorded an impairment charge of $1.5 million on the land in order to reduce the carrying value of the land to its estimated fair value, which was the then estimated selling price less the cost of sale. For the year ended December 31, 2021, the Company recorded another impairment charge of $3.4 million to reflect the current estimated selling price less the cost of sale. For the period from January 1, 2022 through the date the land was sold in June 2022, the Company recorded another impairment charge of $1.6 million to reflect the current estimated selling price less the cost of sale. In June 2022, the Company sold land for net proceeds of $8.6 million, and recognized a net loss on sale of $0.1 million.

At December 31, 2022, the aggregate cost of real estate for federal income tax purposes was $57.6 million.

&nbsp;&nbsp;&nbsp;&nbsp;The changes in total real estate assets and accumulated depreciation are as follows:

---

| | | | |
|:---|:---|:---|:---|
| | **Real Estate Asset** | | **Accumulated Depreciation** |
| | **Year Ended <br>December 31, 2022** | | **Year Ended <br>December 31, 2022** |
| Balance, beginning of year | $63816609 | Balance, beginning of year | $5491541 |
| Sale of land | (8395011) | Depreciation for the year | 1664842 |
| Impairment charge | (1604989) | Balance, end of year | $7156383 |
| Balance, end of year | $53816609 |  |  |

---

------

**Terra Property Trust, Inc.**

**Schedule IV – Mortgage Loans on Real Estate**

**As of December 31, 2022** 

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Portfolio Company** <sup>(1)</sup> | **Collateral Location** | **Property Type** | **Interest Payment Rates** | **Maximum Maturity Date** <sup>(2)</sup> | **Periodic Payment Terms** | **Prior Liens** | **Face Amount** | **Carrying Amount** |
| **Mezzanine Loans:** | | | | | | | | |
| 150 Blackstone River Road, LLC | US - MA | Industrial | 8.5% | 9/6/2027 | Interest Only | $— | $7000000 | $7000000 |
| 610 Walnut Investors LLC <sup>(3)(4)</sup> | US - CA | Office | Term SOFR + 12.0% (2.0% Floor) | 9/7/2025 | Interest Only |  | 18625738 | 18738386 |
| Dwight Mezz II, LLC | US - CA | Student <br> housing | 11.0% | 5/6/2027 | Interest Only |  | 3000000 | 2916369 |
| Havemeyer TSM LLC <sup>(5)</sup> | US - NY | Mixed-use | 15.0% | 6/1/2023 | Interest Only |  | 3282208 | 3313813 |
| UNJ Sole Member, LLC <sup>(5)</sup> | US - CA | Mixed-use | 15.0% | 6/1/2027 | Interest Only |  | 7444357 | 7482547 |
|  |  |  |  |  |  |  | 39352303 | 39451115 |
| **First Mortgages:** |  |  |  |  |  |  |  |  |
| 14th & Alice Street Owner, LLC <sup>(6)</sup> | US - CA | Multifamily | LIBOR + 4.0% (0.25% Floor) | 4/15/2024 | Interest Only |  | 1364944 | 1364944 |
| 1389 Peachtree St, LP; 1401 Peachtree St, LP; <br> 1409 Peachtree St, LP | US - GA | Office | LIBOR + 4.5% | 8/10/2024 | Interest Only |  | 57184178 | 57453482 |
| 330 Tryon DE LLC | US - NC | Office | Term SOFR + 4.25% (0.1% Floor) | 3/1/2024 | Interest Only |  | 22800000 | 22902215 |
| AGRE DCP Palm Springs, LLC | US - CA | Hotel - full/select service | LIBOR + 5.0% (1.8% Floor) | 1/1/2025 | Interest Only |  | 43222382 | 43758804 |
| AARSHW Property LLC <sup>(7)</sup> | US - NJ | Industrial | SOFR + 7.5% (0.15% Floor) | 8/17/2025 | Interest Only |  | 44368331 | 44669513 |
| AAESUF Property LLC | US - NJ | Land | SOFR + 11.95% (0.05% Floor) | 3/1/2025 | Interest Only |  | 17860291 | 18288969 |
| American Gilsonite Company | US - UT | Infrastructure | 14.0% | 8/31/2024 | Interest Only |  | 21250000 | 21840359 |
| Dallas - Big Town Owner, LLC | US - TX | Industrial | Term SOFR + 4.5% (2.5% Floor) | 12/27/2027 | Interest Only |  | 26635183 | 26838830 |
| Dallas - Oakland Owner, LLC | US - TX | Industrial | Term SOFR + 4.5% (2.5% Floor) | 12/27/2027 | Interest Only |  | 9673597 | 9747559 |
| Dallas - US HWY 80 Owner, LLC | US - TX | Industrial | Term SOFR + 4.5% (2.5% Floor) | 12/27/2027 | Interest Only |  | 11395169 | 11482294 |
| Dallas - 11333 Pagemill Owner, LLC | US - TX | Industrial | Term SOFR + 4.5% (2.5% Floor) | 12/27/2027 | Interest Only |  | 12296945 | 12390965 |
| Dallas - 11221 Pagemill Owner, LLC | US - TX | Industrial | Term SOFR + 4.5% (2.5% Floor) | 12/27/2027 | Interest Only |  | 7624106 | 7682398 |

---

------

**Terra Property Trust, Inc.**

**Schedule IV – Mortgage Loans on Real Estate (Continued)**

**As of December 31, 2022**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Portfolio Company** <sup>(1)</sup> | **Collateral Location** | **Property Type** | **Interest Payment Rates** | **Maximum Maturity Date** <sup>(2)</sup> | **Periodic Payment Terms** | **Prior Liens** | **Face Amount** | **Carrying Amount** |
| **First Mortgages (Continued):** | | | | | | | | |
| Grandview's Madison Place, LLC | US - WA | Multifamily | Term SOFR + 4.45% (0.05% Floor) | 2/10/2027 | Interest Only | $— | $17000000 | $17105928 |
| Grandview's Remington Place, LLC | US - WA | Multifamily | Term SOFR + 4.45% (0.05% Floor) | 4/22/2026 | Interest Only |  | 23100000 | 23199620 |
| Hillsborough Owners LLC | US - NC | Mixed-use | LIBOR + 8.0% (0.25%% Floor) | 11/1/2024 | Interest Only |  | 20720028 | 21138947 |
| Mesa AZ Industrial Owner, LLC | US - AZ | Land | Term SOFR + 12.7% (2.3% Floor) | 9/14/2024 | Interest Only |  | 31000000 | 31276468 |
| NB Factory TIC 1, LLC | US - UT | Student <br> housing | LIBOR +5.0% (0.25% Floor) | 3/5/2024 | Interest Only |  | 28000000 | 28857892 |
| Patrick Henry Recovery Acquisition, LLC | US - CA | Office | LIBOR + 2.95% (1.5% Floor) | 12/1/2024 | Interest Only |  | 18000000 | 18041782 |
| The Lux Washington, LLC | US - WA | Multifamily | LIBOR +7.0% (0.75% Floor) | 1/22/2026 | Interest Only |  | 16571267 | 16722091 |
| University Park Berkeley, LLC | US - CA | Multifamily | LIBOR + 4.2% (1.5% Floor) | 3/1/2025 | Interest Only |  | 26342468 | 26536122 |
|  |  |  |  |  |  |  | 456408889 | 461299182 |
| **Preferred equity investments:** |  |  |  |  |  |  |  |  |
| 370 Lex Part Deux, LLC <sup>(8)</sup> | US - NY | Office | LIBOR +8.25% (2.44% Floor) | 7/9/2022 | Interest Only |  | 67586792 | 67586792 |
| Ann Street JV LLC | US - GA | Multifamily | 14.0% | 6/27/2026 | Interest Only |  | 15217540 | 15648482 |
| Asano Bankers Hill, LLC | US - CA | Mixed-use | SOFR + 15.0% (0.25% Floor) | 7/31/2025 | Interest Only |  | 17450623 | 17920424 |
| REEC Harlem Holdings Company LLC <sup>(9)</sup> | US - NY | Mixed-use | LIBOR + 12.5% | 3/9/2025 | Interest Only |  | 15983234 | 15983234 |
| RS JZ Driggs, LLC <sup>(10)</sup> | US - NY | Multifamily | 12.3% | 8/1/2021 | Interest Only |  | 4993245 | 4993245 |
|  |  |  |  |  |  |  | 121231434 | 122132177 |
| **Credit facility:** |  |  |  |  |  |  |  |  |
| William A. Shopoff & Cindy I. Shopoff <sup>(11)</sup> | US-CA | Industrial | 15.0% | 4/4/2023 | Interest Only | **—** | 28802833 | 29080183 |
|  |  |  |  |  |  |  | 28802833 | 29080183 |
| Allowance for loan losses |  |  |  |  |  |  |  | (25471890) |
| **Total investments** |  |  |  |  |  |  | $**645795459** | $**626490767** |

---

------

<sup>___________________________</sup>

(1)All of the Company's loans have a prepayment penalty provision.

(2)Maximum maturity date assumes all extension options are exercised.

(3)The Company sold a portion of its interest in this loan through a participation agreement to a third party (<u>[Note 8](#i8c55800180e74ade95e69ecdac0328fb_67)</u>).

(4)The loan participations from the Company do not qualify for sale accounting under ASC 860 and therefore, the gross amount of these loans remain in Schedule IV. See "*Obligations under Participation Agreement and Secured Borrowing*" in <u>[Note 9](#i8c55800180e74ade95e69ecdac0328fb_70)</u> and "*Transfers of Participation Interest by the Company*" in <u>[Note 8](#i8c55800180e74ade95e69ecdac0328fb_67)</u> in the accompanying notes to the consolidated financial statements.

(5)The Company purchased a portion of its interest in this loan through a participation agreement. Participation interest is with RESOF REIT, a related-party real estate investment trust managed by the Manager (<u>[Note 8](#i8c55800180e74ade95e69ecdac0328fb_67)</u>).

(6)This loan is classified as a TDR. The Company does not anticipate a full recovery of the remaining principal balance, as such, the loan is fully reserved.

(7)Amount included $4.0 million of incremental borrowing that bears interest at an annual rate of 20.0% until certain conditions are met, at which time the interest rate will be the same as the original loan.

(8)This loan is currently in maturity default. For the year ended December 31, 2022, the Company suspended interest income accrual of $3.7 million on this loan, because recovery of such income was doubtful. As of December 31, 2022, the Company recorded a specific allowance for loan losses of $11.2 million on the loan as a result of a decline in the fair value of the collateral.

(9)For the year ended December 31, 2022, the Company suspended interest income accrual of $2.9 million on this loan, because recovery of such income was doubtful. As of December 31, 2022, the Company recorded a specific allowance for loan losses of $12.9 million on the loan as a result of a decline in the fair value of the collateral.

(10)This loan is in maturity default. the Company initiated a litigation to seek full repayment of the loan from the sponsor. For the year ended December 31, 2022, the Company suspended interest income accrual of $2.0 million on this loan, because recovery of such income was doubtful.

(11)Amount included $3.0 million of incremental borrowing that bears interest at an annual rate of Term SOFR plus 7.0% with a SOFR floor of 4.30%.

------

**Terra Property Trust, Inc.**

**Notes to Schedule IV - Mortgage Loans on Real Estate**

**December 31, 2022** 

---

| | |
|:---|:---|
| | **Reconciliation of Mortgage Loans <br>on Real Estate** |
| | **Year Ended December 31, 2022** |
| Balance, beginning of year | $469673314 |
| &nbsp;&nbsp;&nbsp;Additions during the period: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;New mortgage loans | 290005676 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans acquired and contributed in the BDC Merger | 74818438 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrual, payment and accretion of investment-related fees and other, net | 1847999 |
| &nbsp;&nbsp;&nbsp;Deductions during the period: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Collections of principal | (197484239) |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for loan losses | (11813409) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of premium | (557012) |
| Balance, end of year | $626490767 |

---

------

**SIGNATURES**

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

Date: March 10, 2023

---

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

---

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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| | | |
|:---|:---|:---|
| **Signature** | **Title** | **Date** |
| /s/ Vikram S. Uppal | Chairman of the Board, Chief Executive Officer and Chief <br> Investment Officer | March 10, 2023 |
| Vikram S. Uppal | *(Principal Executive Officer)* | March 10, 2023 |
| /s/ Gregory M. Pinkus | Chief Financial Officer, Chief Operating Officer, Treasurer <br> and Secretary | March 10, 2023 |
| Gregory M. Pinkus | *(Principal Financial and Accounting Officer)* | March 10, 2023 |
| /s/ Roger H. Beless | Director | March 10, 2023 |
| Roger H. Beless | Director | March 10, 2023 |
| /s/ Michael L. Evans | Director | March 10, 2023 |
| Michael L. Evans | Director | March 10, 2023 |
| /s/ Adrienne M. Everett | Director | March 10, 2023 |
| Adrienne M. Everett |  |  |
| /s/ Spencer E. Goldenberg | Director | March 10, 2023 |
| Spencer E. Goldenberg |  |  |
| /s/ Gaurav Misra | Director | March 10, 2023 |
| Gaurav Misra |  |  |

---

## Exhibit 4.1

Exhibit 4.1

**DESCRIPTION OF SECURITIES<br>REGISTERED UNDER SECTION 12 OF<br>THE SECURITIES EXCHANGE ACT OF 1934**

&nbsp;&nbsp;&nbsp;&nbsp;The following is a brief summary of the material terms of the three classes of securities of Terra Property Trust, Inc. (the "Company," "we," "us" or "our") registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of December 31, 2022: our Class A common stock, $0.01 par value per share ("Class A Common Stock"), our Class B common stock, $0.01 par value per share ("Class B Common Stock"), and our 6.00% notes due 2026 (our "notes"). This summary description is not meant to be complete. The particular terms of each security are subject to and qualified in their entirety by reference to Maryland law and our charter and bylaws, copies of which have been filed by us with the Securities and Exchange Commission (the "SEC").

**Description of Capital Stock**

&nbsp;&nbsp;&nbsp;&nbsp;Our charter provides that we may issue up to 950,000,000 shares of stock, consisting of 450,000,000 shares of 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, of which 125 shares have been designated as 12.5% Series A Cumulative Non-Voting Preferred Stock ("Series A Preferred Stock"). Our charter authorizes our board of directors (our "Board") to amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue with the approval of a majority of our Board and without stockholder approval. Under Maryland law, our stockholders are not generally liable for our debts or obligations.

&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2022, there were (i) no shares of Class A Common Stock outstanding, (ii) 19,487,460 shares of Class B Common Stock outstanding and (iii) 125 shares of Series A Preferred Stock outstanding.

**General**

**Shares of Common Stock**

Subject to the preferential rights, if any, of holders of any other class or series of our stock and to the provisions of our charter regarding the restrictions on ownership and transfer of our stock, holders of outstanding shares of common stock are entitled to receive dividends on such shares of common stock out of assets legally available therefor if, as and when authorized by our Board and declared by us, and the holders of outstanding shares of common stock are entitled to share ratably in our assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up after payment of or adequate provision for all our known debts and liabilities.

Subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock and except as may otherwise be specified in our charter, each outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors and the holders of shares of our common stock will possess the exclusive voting power. A plurality of the votes cast in the election of directors is sufficient to elect a director and there is no cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of stock entitled to vote in the election of directors can elect all of the directors then standing for election, and the holders of the remaining shares will not be able to elect any directors. The shares of common stock held by Terra Secured Income Fund 5, LLC ("Terra Fund 5") are subject to an Amended and Restated Voting Agreement, dated March 2, 2020, and the shares of common stock held by Terra Fund 5

LEGAL02/42669687v3

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and Terra Secured Income Fund 7, LLC are subject to a Voting Support Agreement, dated October 1, 2022, as described in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2022 to which this exhibit is a part of.

On the date that is one hundred eighty (180) calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date as may be approved by our Board and set forth in a Certificate of Notice filed with the State Department of Assessments and Taxation ("SDAT") of Maryland (the "First Conversion Date"), one-third of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. On the date that is three hundred sixty-five (365) calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date following the First Conversion Date as may be approved by our Board and set forth in a Certificate of Notice filed with the SDAT (the "Second Conversion Date"), one-half of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. On the date that is five hundred forty-five (545) calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date following the Second Conversion Date as may be approved by our Board and set forth in a Certificate of Notice filed with the SDAT, all of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock.

Holders of shares of common stock have no preference, exchange, sinking fund, redemption or appraisal rights and have no pre-emptive rights to subscribe for any of our securities. Subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock, shares of common stock will have equal dividend, liquidation and other rights.

Under the Maryland General Corporation Law (the "MGCL"), a Maryland corporation generally cannot dissolve, amend its charter, merge or consolidate with another entity, convert into another entity, sell all or substantially all of its assets or engage in a statutory share exchange unless the action is advised by our Board and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter, unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is specified in the corporation's charter. Our charter provides that these actions may be approved by a majority of all of the votes entitled to be cast on the matter, except that certain amendments to the provisions of our charter related to the removal of directors and the restrictions on ownership and transfer of our stock, and the vote required to amend such provisions or to amend such vote requirement, must be approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the amendment. Maryland law also permits a Maryland corporation to transfer all or substantially all of its assets without the approval of the stockholders of the corporation to an entity if all of the equity interests of the entity are owned, directly or indirectly, by the corporation.

**Preferred Stock**

Our charter authorizes our Board to classify any unissued shares of our preferred stock and to reclassify any previously classified but unissued shares of preferred stock into other classes or series of stock. Before the issuance of shares of each class or series, our Board is required by Maryland law and by our charter to set, subject to our charter restrictions on

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ownership and transfer of stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption for each class or series.

**Series A Preferred Stock**

As of December 31, 2022, we had outstanding 125 shares of Series A Preferred Stock. The holders of the Series A Preferred Stock are entitled to receive cumulative cash dividends at the rate of 12.5% per annum of the liquidation preference. At our election, the Series A Preferred Stock is redeemable, in whole or in part, for an amount equal to its liquidation preference, plus any accrued and unpaid dividends. The Series A Preferred Stock is not convertible into shares of any other class or series of stock. The Series A Preferred Stock is entitled to a liquidation preference of $1,000 per share.

**Power to Reclassify our Unissued Shares of Stock**

Our charter authorizes our Board to classify and reclassify any unissued shares of common or preferred stock into other classes or series of stock, including one or more classes or series of stock that have priority with respect to voting rights, dividends or upon liquidation over our common stock, and authorize us to issue the newly-classified shares. Prior to the issuance of shares of each new class or series, our Board is required by Maryland law and by our charter to set, subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock, the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption for each class or series. Our Board may take these actions without stockholder approval unless stockholder approval is required by the terms of any other class or series of our stock or the rules of any stock exchange or automatic quotation system on which our securities may be listed or traded. Therefore, our Board could authorize the issuance of shares of common or preferred stock with terms and conditions that could have the effect of delaying, deferring or preventing a change in control or other transaction that might involve a premium price for shares of our common stock or otherwise be in the best interest of our stockholders. No shares of preferred stock are presently outstanding other than the Series A Preferred Stock, and we have no present plans to issue any additional shares of preferred stock.

**Power to Increase or Decrease Authorized Shares of Stock and Issue Additional Shares of Common and Preferred Stock**

We believe that the power of our Board to amend our charter from time to time to increase or decrease the number of authorized shares of our stock, to authorize us to issue additional authorized but unissued shares of common or preferred stock and to classify or reclassify unissued shares of common or preferred stock and thereafter to authorize us to issue such classified or reclassified shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise. The additional classes or series, as well as the additional shares of common stock, will be available for issuance without further action by our stockholders, unless such approval is required by the terms of any other class or series of our stock or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Although our Board does not intend to do so, it could authorize us to issue a class or series of stock that could, depending upon the terms of the particular class or series, delay, defer or prevent a change in control or other transaction that might involve a premium price for shares of our common stock or otherwise be in the best interest of our stockholders.

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**Restrictions on Ownership and Transfer**

In order for us to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), shares of our stock must be owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of our stock may be owned, directly or constructively, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made). To qualify as a REIT, we must satisfy other requirements as well.

Our charter contains restrictions on the ownership and transfer of our stock. The relevant sections of our charter provide that, subject to the exceptions described below, no person or entity may own, or be deemed to own, by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% by value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock, the outstanding shares of any class or series of our preferred stock or the aggregate outstanding shares of all classes and series of our capital stock. We refer to this limit as the "ownership limit." A person or entity that becomes subject to the ownership limit by virtue of a violative transfer that results in a transfer to a trust, as described below, is referred to as a "prohibited owner" if, had the violative transfer been effective, the person would beneficially own or constructively own shares of our stock and, if appropriate in the context, shall also mean any person who would have been the record owner of the shares that the prohibited owner would have so owned.

The constructive ownership rules under the Code are complex and may cause shares of stock owned beneficially or constructively by a group of related individuals and/or entities to be owned beneficially or constructively by one individual or entity. As a result, the acquisition of less than 9.8% by value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock, any class or series of our preferred stock or the aggregate outstanding shares of all classes and series of our capital stock (or the acquisition of an interest in an entity that owns, beneficially or constructively, shares of our stock) by an individual or entity, could, nevertheless, cause that individual or entity, or another individual or entity, to own beneficially or constructively in excess of the ownership limit.

Our Board may, in its sole discretion, subject to such conditions as it may determine and the receipt of certain representations and undertakings, prospectively or retroactively, waive all or any component of the ownership limit or establish a different limit on ownership, or excepted holder limit, for a particular stockholder if the stockholder's ownership in excess of the ownership limit would not result in our being "closely held" within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise would not result in our failing to qualify as a REIT. As a condition of its waiver or grant of an excepted holder limit, our Board may, but is not required to, require an opinion of counsel or the Internal Revenue Service ruling satisfactory to our Board with respect to our qualification as a REIT.

In connection with granting a waiver of the ownership limit, creating an excepted holder limit or at any other time, our Board may from time to time increase or decrease the ownership limit or any component thereof for all other persons and entities unless, after giving effect to such increase we would be, "closely held" within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or we would otherwise fail to qualify as a REIT. Prior to the modification of the ownership limit, our Board of directors may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure our qualification as a REIT. A reduced ownership limit will not apply to any person or entity whose

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percentage ownership of our common stock, preferred stock of any class or series or stock of all classes and series, as applicable, is in excess of such decreased ownership limit until such time as such person's or entity's percentage ownership of our common stock or preferred stock of such class or series or stock of all classes and series, as applicable, equals or falls below the decreased ownership limit, but any further acquisition of shares of our common stock, preferred stock of such class or series or stock of all classes and series, as applicable, in excess of such percentage ownership of our common stock, preferred stock or stock of all classes and series will be in violation of the ownership limit.

Our charter further prohibits:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any person from beneficially or constructively owning, applying certain attribution rules of the Code, shares of our capital stock (i) that would result in our being "closely held" under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or (ii) that would otherwise cause us to fail to qualify as a REIT; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any person from transferring shares of our stock if such transfer would result in shares of our stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution).

Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our stock that will or may violate the ownership limit or any of the other foregoing restrictions on ownership and transfer of our stock, or who would have owned shares of our stock transferred to the trust as described below, must immediately give written notice to us of such event or, in the case of an attempted or proposed transaction, must give at least 15 days prior written notice to us and provide us with such other information as we may request in order to determine the effect of such transfer on our qualification as a REIT. The foregoing restrictions on ownership and transfer of our stock will not apply if our Board determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT or that compliance with the restrictions and limitations on ownership and transfer of our stock described above is no longer required in order for us to qualify as a REIT.

If any transfer of shares of our stock would result in shares of our stock being beneficially owned by fewer than 100 persons, such transfer will be null and void and the intended transferee will acquire no rights in such shares. In addition, if any purported transfer of shares of our stock or any other event would otherwise result in any person violating the ownership limit or an excepted holder limit established by our Board, or result in us being "closely held" under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT, then that number of shares (rounded up to the nearest whole share) that would cause us to violate such restrictions will be automatically transferred to, and held by, a trust for the exclusive benefit of one or more charitable organizations selected by us and the intended transferee will acquire no rights in such shares. The automatic transfer will be effective as of the close of business on the business day prior to the date of the violative transfer or other event that results in a transfer to the trust. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable ownership limit or our being "closely held" under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT, then our charter provides that the transfer of the shares will be null and void and the intended transferee will acquire no rights in such shares.

Shares of stock transferred to the trustee are deemed offered for sale to us, or our designee, at a price per share equal to the lesser of (1) the price paid by the prohibited owner for

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the shares (or, if the event that resulted in the transfer to the trust did not involve a purchase of such shares of stock at market price, the market price on the day of the event which resulted in the transfer of such shares of stock to the trust) and (2) the market price on the date we accept, or our designee accepts, such offer. We may reduce the amount payable by the amount of any dividend or other distribution that we have paid to the prohibited owner before we discovered that the shares had been automatically transferred to the trust and that is then owed to the trustee as described above, and we may pay the amount of any such reduction to the trustee for the benefit of the charitable beneficiary. We have the right to accept such offer until the trustee has sold the shares of our stock held in the trust as discussed below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates, the trustee must distribute the net proceeds of the sale to the prohibited owner and any dividends, other distributions or other amounts held by the trustee with respect to such shares of stock must be paid to the charitable beneficiary.

If we do not buy the shares, the trustee must, within 20 days of receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity designated by the trustee who could own the shares without violating the ownership limit or the other restrictions on ownership and transfer of our stock. After the sale of the shares, the interest of the charitable beneficiary in the shares transferred to the trust will terminate and the trustee must distribute to the prohibited owner an amount equal to the lesser of (1) the price paid by the prohibited owner for the shares (or, if the event which resulted in the transfer to the trust did not involve a purchase of such shares at market price, the market price on the day of the event which resulted in the transfer of such shares of stock to the trust) and (2) the sales proceeds (net of commissions and other expenses of sale) received by the trust for the shares. The trustee may reduce the amount payable to the prohibited owner by the amount of any dividend or other distribution that we paid to the prohibited owner before we discovered that the shares had been automatically transferred to the trust and that are then owed to the trustee as described above. Any net sales proceeds in excess of the amount payable to the prohibited owner must be immediately paid to the charitable beneficiary of the trust, together with any other amounts held by the trustee for the beneficiary of the trust with respect to such shares. In addition, if, prior to discovery by us that shares of stock have been transferred to a trust, such shares of stock are sold by a prohibited owner, then such shares will be deemed to have been sold on behalf of the trust and to the extent that the prohibited owner received an amount for or in respect of such shares that exceeds the amount that such prohibited owner was entitled to receive, such excess amount must be paid to the trustee upon demand. The prohibited owner has no rights in the shares held by the trustee.

The trustee will be designated by us and must be unaffiliated with us and with any prohibited owner. Prior to the sale of any shares by the trust, the trustee will receive, in trust for the charitable beneficiary of the trust, all dividends and other distributions paid by us with respect to the shares held in trust and may also exercise all voting rights with respect to the shares held in trust. These rights will be exercised for the exclusive benefit of the charitable beneficiary of the trust. Any dividend or other distribution paid prior to our discovery that shares of stock have been transferred to the trust must be paid by the recipient to the trustee upon demand.

Subject to Maryland law, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority, at the trustee's sole discretion:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• to rescind as void any vote cast by a prohibited owner prior to our discovery that the shares have been transferred to the trust; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• to recast the vote in accordance with the desires of the trustee acting for the benefit of the beneficiary of the trust.

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However, if we have already taken irreversible corporate action, then the trustee may not rescind and recast the vote. In addition, if our board of directors determines that a proposed transfer would violate the restrictions on ownership and transfer of our stock, our Board may take such action as it deems advisable to refuse to give effect to or to prevent such transfer, including, but not limited to, causing us to redeem the shares of stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer.

Every owner of 5% or more (or such lower percentage as required by the Code or the regulations promulgated thereunder) of our stock, within 30 days after the end of each taxable year, must give us written notice, stating the stockholder's name and address, the number of shares of each class and series of our stock that the stockholder beneficially owns and a description of the manner in which the shares are held. Each such owner must provide us in writing with such additional information as we may request in order to determine the effect, if any, of the stockholder's beneficial ownership on our qualification as a REIT and to ensure compliance with the ownership limit. In addition, each stockholder must provide us in writing with such information as we may request in good faith in order to determine our qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance.

Any certificates representing shares of our stock will bear a legend referring to the restrictions described above.

These restrictions on ownership and transfer could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of the stockholders.

**Certain Provisions of the Maryland General Corporation Law and our Charter and Bylaws**

The following description of certain provisions of Maryland law and our charter and bylaws is only a summary. For a complete description, we refer you to the MGCL and to our charter and our bylaws, the forms of which are filed as exhibits to this registration statement.

***Our Board of Directors***

Except as may be provided with respect to any class or series of our stock, at each annual meeting of our stockholders, each of our directors will be elected by our stockholders to serve until the next annual meeting of our stockholders and until his or her successor is duly elected

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and qualifies. Our directors are elected by a plurality of the votes cast in the election of directors. There is no cumulative voting in the election of directors or otherwise, which means that the holders of a majority of the outstanding shares entitled to vote in the election of directors can elect all of the directors then standing for election.

***Removal of Directors***

***Business Combinations***

Under the MGCL, certain "business combinations" (including a merger, consolidation, statutory share exchange or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an interested stockholder (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation's outstanding stock or an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding voting stock of the corporation) or an affiliate of such an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter, any such business combination must generally be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (1) 80% of the votes entitled to be cast by holders of outstanding voting stock of the corporation and (2) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder, unless, among other conditions, the corporation's common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. A Maryland corporation's board of directors may provide that its approval is subject to compliance with any terms and conditions determined by it.

These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a Maryland corporation's board of directors prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our Board of directors has by resolution exempted business combinations between us and (i) any other person, provided, that such business combination is first approved by our Board (including a majority of our directors who are not affiliates or associates of such person), (ii) Terra Fund 5 or its affiliates and associates, and (iii) any person acting in concert with those persons identified in clauses (i) or (ii) of this sentence. As a result, any person described above may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance by us with the 5-year waiting period, the supermajority vote requirements and other provisions of the statute. There is no assurance that our Board will not amend or repeal this resolution in the future.

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The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

***Control Share Acquisitions***

The MGCL provides that a holder of "control shares" of a Maryland corporation acquired in a "control share acquisition" has no voting rights with respect to the control shares except to the extent approved by the affirmative vote of at least two-thirds of the votes entitled to be cast on the matter, excluding shares of stock of the corporation in respect of which any of the following persons is entitled to exercise or direct the exercise of the voting power of such shares in the election of directors: (i) a person who makes or proposes to make a control share acquisition, (ii) an officer of the corporation or (iii) an employee of the corporation who is also a director of the corporation. "Control shares" are voting shares of stock which, if aggregated with all other such shares of stock owned by the acquirer, or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: (i) one-tenth or more but less than one-third; (ii) one-third or more but less than a majority; or (iii) a majority or more of all voting power. Control shares do not include shares that the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation. A "control share acquisition" means the acquisition of issued and outstanding control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses and delivering an "acquiring person statement" as described in the MGCL), may compel the board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an "acquiring person statement" as required by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or as of any meeting of stockholders at which the voting rights of such shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.

The control share acquisition statute does not apply to (i) shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (ii) acquisitions approved or exempted by the charter or bylaws of the corporation.

Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock. There is no assurance that such provision will not be amended or eliminated at any time in the future.

***Subtitle 8***

Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to elect to

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be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions of the MGCL which provide for:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a classified board;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a two-thirds vote requirement for removing a director;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a requirement that the number of directors be fixed only by vote of the directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a requirement that a vacancy on the board be filled only by the remaining directors in office and (if the board is classified) for the remainder of the full term of the class of directors in which the vacancy occurred; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a majority requirement for the calling of a stockholder-requested special meeting of stockholders.

Our charter provides that, at such time as we are able to make a Subtitle 8 election, vacancies on our Board may be filled only by the remaining directors and (if our Board is classified in the future) for the remainder of the full term of the directorship in which the vacancy occurred. Through provisions in our charter and bylaws unrelated to Subtitle 8, we already (i) require the affirmative vote of stockholders entitled to cast not less than two-thirds of all of the votes entitled to be cast generally in the election of directors for the removal of any director from the board, with cause, (ii) vest in the board the exclusive power to fix the number of directorships and (iii) require, unless called by our Chairman, our Chief Executive Officer, our President or our Board, the written request of stockholders entitled to cast not less than a majority of all votes entitled to be cast on any matter that may properly be considered at a meeting of stockholders to call a special meeting of our stockholders to act on such matter.

***Meetings of Stockholders***

Pursuant to our bylaws, a meeting of our stockholders for the election of directors and the transaction of any business will be held annually on a date and at the time and place set by our Board. Our Chairman, our Chief Executive Officer, our President or our Board may call a special meeting of our stockholders. Subject to the procedural requirements specified in our bylaws, a special meeting of our stockholders to act on any matter that may properly be brought before a meeting of our stockholders must also be called by our Secretary upon the written request of the stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting on such matter and containing the information required by our bylaws. Our Secretary will inform the requesting stockholders of the reasonably estimated cost of preparing and delivering the notice of meeting (including our proxy materials), and the requesting stockholder must pay such estimated cost before our Secretary is required to prepare and deliver the notice of the special meeting. Only the matters set forth in the notice of special meeting may be considered and acted upon at such meeting.

***Exclusive Forum for Certain Litigation***

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or if that court does not have jurisdiction, the U.S. District Court for the District of Maryland, Northern Division, will be the sole and exclusive forum for (a) any Internal Corporate Claim, as such term is defined in Section 1-101(p) of the MGCL (b) any derivative action or proceeding brought on our behalf, other than actions arising under the federal securities laws (c) any action asserting a claim of breach of any duty owed by any director or officer or other employee to us or to our stockholders, (d) any action

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asserting a claim against us or any director or officer or other employee arising pursuant to any provision of the MGCL or our charter or bylaws, or (e) any action asserting a claim against us or any director or officer or other employee that is governed by the internal affairs doctrine and no such action may be brought in any court sitting out of the State of Maryland unless we consent in writing to such court.

***Amendments to our Charter and Bylaws***

Except for amendments to the provisions of our charter relating to the removal of directors and the restrictions on ownership and transfer of our stock, and the vote required to amend these provisions or to amend such vote requirement (each of which must be advised by our Board and approved by the affirmative vote of stockholders entitled to cast not less than two-thirds of all the votes entitled to be cast on the matter), our charter generally may be amended only if advised by our Board and approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter.

Our Board has the exclusive power to adopt, alter or repeal any provision of our bylaws and to make new bylaws.

***Dissolution of Our Company***

The dissolution of our company must be advised by a majority of our entire Board and approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter.

***Advance Notice of Director Nomination and New Business***

Our bylaws provide that, with respect to an annual meeting of stockholders, nominations of individuals for election to our Board and the proposal of other business to be considered by stockholders may be made only (i) pursuant to our notice of the meeting, (ii) by or at the direction of our Board or (iii) by a stockholder who was a stockholder of record as of the record date set by our Board for the purpose of determining stockholders entitled to vote at such annual meeting, at the time of giving the notice required by our bylaws and at the time of the meeting, who is entitled to vote at the meeting on such business or in the election of such nominee and who has provided notice to us within the time period, and containing the information and other materials, specified by the advance notice provisions set forth in our bylaws.

With respect to special meetings of stockholders, only the business specified in our notice of meeting may be brought before the meeting. Nominations of individuals for election as directors may be made only (i) by or at the direction of our Board or (ii) provided that the meeting has been called for the purpose of electing directors, by a stockholder who was a stockholder of record as of the record date set by our Board for the purpose of determining stockholders entitled to vote as such special meeting, at the time of giving notice and at the time of the special meeting, who is entitled to vote at the meeting in the election of such nominee and who has provided notice to us within the time period, and containing the information and other materials, specified by the advance notice provisions set forth in our bylaws.

***Anti-Takeover Effect of Certain Provisions of Maryland Law and Our Charter and Bylaws***

Our charter and bylaws and Maryland law contain provisions that may delay, defer or prevent a change in control or other transaction that might involve a premium price for shares of our common stock or otherwise be in the best interests of our stockholders, including supermajority vote requirements and advance notice requirements for director nominations and stockholder proposals. Likewise, if the provision in the bylaws opting out of the control share

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acquisition provisions of the MGCL were rescinded or if we were to repeal the exemption for certain business combinations from the business combination provisions of the MGCL or opt in to the classified board or other provisions of Subtitle 8, these provisions of the MGCL could have similar anti-takeover effects.

***Indemnification and Limitation of Directors' and Officers' Liability***

Maryland law permits a Maryland corporation to include in its charter a provision eliminating the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty that was established by a final judgment and was material to the cause of action. Our charter contains a provision that eliminates the liability of our directors and officers to the maximum extent permitted by Maryland law.

The MGCL requires us (unless our charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made a party by reason of his or her service in that capacity. The MGCL permits us to indemnify our present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in those or other capacities unless it is established that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the director or officer actually received an improper personal benefit in money, property or services; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

Under the MGCL, we may not indemnify a director or officer in a suit by us or in our right in which the director or officer was adjudged liable to us or in a suit in which the director or officer was adjudged liable on the basis that personal benefit was improperly received. Nevertheless, a court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly received. However, indemnification for an adverse judgment in a suit by us or in our right, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses.

In addition, the MGCL permits us to advance reasonable expenses to a director or officer upon our receipt of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by us; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a written undertaking by the director or officer or on the director's or officer's behalf to repay the amount paid or reimbursed by us if it is ultimately determined that the director or officer did not meet the standard of conduct.

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Our charter authorizes us to obligate ourselves and our bylaws obligate us, to the fullest extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any present or former director or officer who is made or threatened to be made a party to or witness in the proceeding by reason of his or her service in that capacity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any individual who, while a director or officer of our company and at our request, serves or has served as a director, officer, partner, manager, managing member or trustee of another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to or witness in the proceeding by reason of his or her service in that capacity; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any individual who served any predecessor of our company, including the Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC and Terra Secured Income Fund 5, LLC (collectively, "Terra Funds"), in a similar capacity, who is made or threatened to be made a party to or witness in the proceeding by reason of his or her service in such capacity.

Our charter and bylaws also permit us to indemnify and advance expenses to any employee or agent of our company or a predecessor of our company, including the Terra Funds.

Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

***REIT Qualification***

Our charter provides that our Board may authorize us to revoke or otherwise terminate our REIT election, without approval of our stockholders, if it determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. Our charter also provides that our Board may determine that compliance with any restriction or limitation on ownership and transfer of our stock is no longer required for us to qualify as a REIT.

***Transfer Agent and Registrar***

Computershare Trust Company, N.A. is the transfer agent and registrar for our common stock.

**6.00% Notes due 2026**

*The following is a brief summary of the material terms of our notes. This summary is not meant to be complete and is subject to and qualified in its entirety by reference to (i) the indenture dated June 10, 2021, between us and U.S. Bank National Association, as trustee (the "trustee"), and (ii) the supplemental indenture thereto, dated as of June 10, 2021, which we collectively refer to herein as the "indenture" and copies of which are filed as exhibits to this Annual Report on Form 10-K.* 

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***General***

The notes will mature on June 30, 2026. The principal payable at maturity will be 100% of the aggregate principal amount. The interest rate of the notes is 6.00% per year and will be paid every March 30, June 30, September 30 and December 30, and the regular record dates for interest payments will be every March 15, June 15, September 15 and December 15. If an interest payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment. The interest periods will be the periods from and including an interest payment date to, but excluding, the next interest payment date or the stated maturity date, as the case may be.

The notes are issued in denominations of $25 and integral multiples of $25 in excess thereof. The notes are not subject to any sinking fund and holders of the notes do not have the option to have the notes repaid prior to the stated maturity date.

Except as described under the captions "Events of Default," "Other Covenants," and "Merger or Consolidation" below, the indenture does not contain any provisions that give holders of the notes protection in the event we issue a large amount of debt or we are acquired by another entity.

We have the ability to issue indenture securities with terms different from the notes and, without the consent of the holders thereof, to reopen the notes and issue additional notes.

***Optional Redemption***

The notes may be redeemed in whole or in part at any time or from time to time at our option on or after June 30, 2023, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of 100% of the outstanding principal amount of the notes to be redeemed plus accrued and unpaid interest payments otherwise payable thereon for the then-current quarterly interest period accrued to the date fixed for redemption.

Holders of the notes may be prevented from exchanging or transferring the notes when they are subject to redemption. In case any notes are to be redeemed in part only, the redemption notice will provide that, upon surrender of such note, holders of the notes will receive, without a charge, a new note or notes of authorized denominations representing the principal amount of the remaining unredeemed notes.

If we redeem only some of the notes, the trustee will determine the method for selection of the particular notes to be redeemed, in accordance with the indenture and in accordance with the rules of any national securities exchange or quotation system on which the notes are listed. Unless we default in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the notes called for redemption.

***Global Securities***

Each note is issued in book-entry form and represented by a global security that we deposited with and registered in the name of DTC, or its nominee. A global security may not be transferred to or registered in the name of anyone other than the depositary or its nominee unless special termination situations arise. As a result of these arrangements, the depositary, or its nominee, is the sole registered owner and holder of all the notes represented by a global security, and investors are permitted to own only beneficial interests in a global security. For more information about these arrangements, see "Book-Entry Procedures" below.

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*Termination of a Global Security*

If a global security is terminated for any reason, interests in it will be exchanged for certificates in non-book-entry form (certificated securities). After that exchange, the choice of whether to hold the certificated notes directly or in street name will be up to the holder thereof. Holders must consult their own banks or brokers to find out how to have their interests in a global security transferred on termination to their own names, so that they will be holders.

***Payment and Paying Agents***

We will pay interest to the person listed in the trustee's records as the owner of the notes at the close of business on a particular day in advance of each due date for interest, even if that person no longer owns the note on the interest due date. That day, usually about two weeks in advance of the interest due date, is called the "record date." Because we will pay all the interest for an interest period to the holders on the record date, holders buying and selling the notes must work out between themselves the appropriate purchase price. The most common manner is to adjust the sales price of the notes to prorate interest fairly between buyer and seller based on their respective ownership periods within the particular interest period. This prorated interest amount is called "accrued interest."

*Payments on Global Securities*

We will make payments on the notes so long as they are represented by a global security in accordance with the applicable policies of the depositary as in effect from time to time. Under those policies, we will make payments directly to the depositary, or its nominee, and not to any indirect holders who own beneficial interests in the global security. An indirect holder's right to those payments will be governed by the rules and practices of the depositary and its participants, as described under "Book-Entry Procedures."

*Payments on Certificated Securities*

In the event the notes become represented by certificated securities, we will make payments on the notes as follows. We will pay interest that is due on an interest payment date to the holder of the notes as shown on the trustee's records as of the close of business on the regular record date at our office in New York, New York. We will make all payments of principal and premium, if any, by check at the office of the applicable trustee in New York, New York and/or at other offices that may be specified in a notice to holders against surrender of the note.

Alternatively, at our option, we may pay any cash interest that becomes due on the notes by mailing a check to the holder at his, her or its address shown on the trustee's records as of the close of business on the regular record date or by transfer to an account at a bank in the United States, in either case, on the due date.

*Payment When Offices Are Closed*

If any payment is due on the notes on a day that is not a business day, we will make the payment on the next day that is a business day. Payments made on the next business day in this situation will be treated under the indenture as if they were made on the original due date. Such payment will not result in a default under the notes or the indenture, and no interest will accrue on the payment amount from the original due date to the next day that is a business day. Book-entry and other indirect holders should consult their banks or brokers for information on how they will receive payments on the notes.

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***Events of Default***

Holders of the notes will have rights if an Event of Default occurs in respect of the notes, as described later in this subsection.

The term "Event of Default" in respect of the notes means any of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we do not pay the principal (or premium, if any) of any note when due;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we do not pay interest on any note when due, and such default is not cured within 30 days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we remain in breach of a covenant in respect of the notes for 60 days after we receive a written notice of default stating we are in breach (the notice must be sent by either the trustee or holders of at least 25% of the principal amount of the notes); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we file for bankruptcy or certain other events of bankruptcy, insolvency or reorganization occur and in the case of certain orders or decrees entered against us under bankruptcy law, such order or decree remains undischarged or unstayed for a period of 60 days.

An Event of Default for the notes does not necessarily constitute an Event of Default for any other series of debt securities issued under the same or any other indenture. The trustee may withhold notice to the holders of the notes of any default, except in the payment of principal or interest, if it in good faith considers the withholding of notice to be in the best interests of the holders.

*Remedies if an Event of Default Occurs*

If an Event of Default has occurred and is continuing, the trustee or the holders of not less than 25% in principal amount of the notes may declare the entire principal amount of all the notes to be due and immediately payable. This is called a declaration of acceleration of maturity. In certain circumstances, a declaration of acceleration of maturity may be canceled by the holders of a majority in principal amount of the notes if (1) we have deposited with the trustee all amounts due and owing with respect to the notes (other than principal that has become due solely by reason of such acceleration) and certain other amounts, and (2) any other Events of Default have been cured or waived.

Except in cases of default, where the trustee has some special duties, the trustee is not required to take any action under the indenture at the request of any holders unless the holders offer the trustee reasonable protection from expenses and liability (called an "indemnity"). If reasonable indemnity is provided, the holders of a majority in principal amount of the notes may direct the time, method and place of conducting any lawsuit or other formal legal action seeking any remedy available to the trustee. The trustee may refuse to follow those directions in certain circumstances. No delay or omission in exercising any right or remedy will be treated as a waiver of that right, remedy or Event of Default.

Before holders are allowed to bypass the trustee and bring their own lawsuit or other formal legal action or take other steps to enforce their rights or protect their interests relating to the notes, the following must occur:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the holder must give the trustee written notice that an Event of Default has occurred and remains uncured;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the holders of at least 25% in principal amount of all the notes must make a written request that the trustee take action because of the default and must offer reasonable indemnity and/or security to the trustee against the cost and other liabilities of taking that action;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the trustee must not have taken action for 60 days after receipt of the above notice and offer of indemnity and/or security; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the holders of a majority in principal amount of the notes must not have given the trustee a direction inconsistent with the above notice during that 60-day period.

However, holders are entitled at any time to bring a lawsuit for the payment of money due on their notes on or after the due date.

Book-entry and other indirect holders should consult their banks or brokers for information on how to give notice or direction to or make a request of the trustee and how to declare or cancel an acceleration of maturity.

Each year, we will furnish to the trustee a written statement of certain of our officers certifying that to their knowledge we are in compliance with the indenture and the notes, or else specifying any default.

*Waiver of Default*

The holders of a majority in principal amount of the notes may waive any past defaults other than:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the payment of principal or interest; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• in respect of a covenant that cannot be modified or amended without the consent of each holder.

***Merger or Consolidation***

Under the terms of the indenture, we are generally permitted to consolidate or merge with another entity. We are also permitted to sell all or substantially all of our assets to another entity. However, we may not take any of these actions unless all the following conditions are met:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• where we merge out of existence or convey or transfer our assets substantially as an entirety, the resulting entity must agree to be legally responsible for our obligations under the notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the merger or sale of assets must not cause a default on the notes and we must not already be in default (unless the merger or sale would cure the default). For purposes of this no-default test, a default would include an Event of Default that has occurred and has not been cured, as described under "Events of Default" above. A default for this purpose would also include any event that would be an Event of Default if the requirements for giving us a notice of default or our default having to exist for a specific period of time were disregarded; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we must deliver certain certificates and documents to the trustee.

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***Modification or Waiver***

There are three types of changes we can make to the indenture and the notes issued thereunder.

*Changes Requiring A Holder's Approval*

First, there are changes that we cannot make to the notes without a holder's specific approval. The following is a list of those types of changes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• change the stated maturity of the principal of or interest on the notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reduce any amounts due on the notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reduce the amount of principal payable upon acceleration of the maturity of a note following a default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• change the place or currency of payment on a note;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• impair the holder's right to sue for payment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reduce the percentage of holders of notes whose consent is needed to modify or amend the indenture; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reduce the percentage of holders of notes whose consent is needed to waive compliance with certain provisions of the indenture or to waive certain defaults.

*Changes Not Requiring Approval*

The second type of change does not require any vote by the holders of the notes. This type is limited to clarifications and certain other changes that would not adversely affect holders of the notes in any material respect.

*Changes Requiring Majority Approval*

Any other change to the indenture and the notes would require the following approval:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• if the change affects only the notes, it must be approved by the holders of a majority in principal amount of the notes; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• if the change affects more than one series of debt securities issued under the same indenture, it must be approved by the holders of a majority in principal amount of all of the series affected by the change, with all affected series voting together as one class for this purpose.

In each case, the required approval must be given by written consent.

The holders of a majority in principal amount of all of the series of debt securities issued under an indenture, voting together as one class for this purpose, may waive our compliance with some of our covenants in that indenture. However, we cannot obtain a waiver of a payment default or of any of the matters covered by the bullet points included above under "Changes Requiring A Holder's Approval."

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*Further Details Concerning Voting*

When taking a vote, we will use the following rules to decide how much principal to attribute to the notes:

The notes will not be considered outstanding, and therefore not eligible to vote, if we have deposited or set aside in trust money for their payment or redemption. The notes will also not be eligible to vote if they have been fully defeased as described later under "Defeasance-Full Defeasance."

We will generally be entitled to set any day as a record date for the purpose of determining the holders of the notes that are entitled to vote or take other action under the indenture. However, the record date may not be more than 30 days before the date of the first solicitation of holders to vote on or take such action. If we set a record date for a vote or other action to be taken by holders of the notes, that vote or action may be taken only by persons who are holders of the notes on the record date and must be taken within eleven months following the record date.

Book-entry and other indirect holders should consult their banks or brokers for information on how approval may be granted or denied if we seek to change the indenture or the notes or request a waiver.

***Defeasance***

The following defeasance provisions are applicable to the notes. "Defeasance" means that, by depositing with a trustee an amount of cash and/or government securities sufficient to pay all principal and interest, if any, on the notes when due and satisfying any additional conditions noted below, we will be deemed to have been discharged from our obligations under the notes. In the event of a "covenant defeasance," upon depositing such funds and satisfying similar conditions discussed below we would be released from the restrictive covenants under the indenture relating to the notes.

*Covenant Defeasance*

Under current U.S. federal tax law and the indenture, we can make the deposit described below and be released from some of the restrictive covenants in the indenture under which the notes were issued. This is called "covenant defeasance." In that event, a holder would lose the protection of those restrictive covenants but would gain the protection of having money and government securities set aside in trust to repay the notes. If we achieve covenant defeasance and the notes were subordinated as described under "Indenture Provisions-Ranking" below, such subordination would not prevent the trustee under the indenture from applying the funds available to it from the deposit described in the first bullet to the payment of amounts due in respect of such debt securities for the benefit of the subordinated debtholders. In order to achieve covenant defeasance, we must do the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Since the notes are denominated in U.S. dollars, we must deposit in trust for the benefit of all holders of the notes a combination of cash and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the notes on their various due dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we must deliver to the trustee a legal opinion of our counsel confirming that, under current U.S. federal income tax law, we may make the above deposit without causing holders to be taxed on the notes any differently than if we did not make the deposit;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the Investment Company Act of 1940, as amended (the "1940 Act"), and a legal opinion and officers' certificate stating that all conditions precedent to covenant defeasance have been complied with;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• defeasance must not result in a breach or violation of, or result in a default under, the indenture or any of our other material agreements or instruments; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• no default or event of default with respect to the notes shall have occurred and be continuing and no defaults or events of default related to bankruptcy, insolvency or reorganization shall occur during the next 90 days.

If we accomplish covenant defeasance, holders can still look to us for repayment of the notes if there were a shortfall in the trust deposit or the trustee is prevented from making payment. In fact, if one of the remaining Events of Default occurred (such as our bankruptcy) and the notes became immediately due and payable, there might be a shortfall. Depending on the event causing the default, holders may not be able to obtain payment of the shortfall.

*Full Defeasance*

If there is a change in U.S. federal tax law, as described below, we can legally release ourselves from all payment and other obligations on the notes (called "full defeasance") if we put in place the following other arrangements for holders to be repaid:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• since the notes are denominated in U.S. dollars, we must deposit in trust for the benefit of all holders of the notes a combination of money and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the notes on their various due dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we must deliver to the trustee a legal opinion confirming that there has been a change in current U.S. federal tax law or an IRS ruling that allows us to make the above deposit without causing holders to be taxed on the notes any differently than if we did not make the deposit. Under current U.S. federal tax law the deposit and our legal release from the notes would be treated as though we paid holders their share of the cash and notes or bonds at the time the cash and notes or bonds were deposited in trust in exchange for the notes and holders would recognize gain or loss on the notes at the time of the deposit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the 1940 Act and a legal opinion and officers' certificate stating that all conditions precedent to defeasance have been complied with;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• defeasance must not result in a breach or violation of, or constitute a default under, of the indenture or any of our other material agreements or instruments; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• no default or event of default with respect to the notes shall have occurred and be continuing and no defaults or events of default related to bankruptcy, insolvency or reorganization shall occur during the next 90 days.

If we ever did accomplish full defeasance, as described above, a holder would have to rely solely on the trust deposit for repayment of the notes. A holder could not look to us for repayment in the unlikely event of any shortfall. Conversely, the trust deposit would most likely be protected from claims of our lenders and other creditors if we ever became bankrupt or

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insolvent. If the notes were subordinated as described later under "Indenture Provisions-Ranking," such subordination would not prevent the trustee under the Indenture from applying the funds available to it from the deposit referred to in the first bullet of the preceding paragraph to the payment of amounts due in respect of such notes for the benefit of the subordinated debtholders.

***Other Covenants***

In addition to any other covenants described in herein, as well as standard covenants relating to payment of principal and interest, maintaining an office where payments may be made or securities can be surrendered for payment, payment of taxes by the company and related matters, the following covenants apply to the notes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We agree that for the period of time during which the notes are outstanding, we will not pay any dividends or make any distributions in excess of 90% of our taxable income, incur any indebtedness (as defined in the indenture) or purchase any shares of our outstanding capital stock, unless, in every such case, at the time of the incurrence of such indebtedness or at the time of any such dividend, distribution or purchase, we have an asset coverage (as defined in the indenture) of at least 150% after giving effect to the incurrence of such indebtedness and the application of the net proceeds therefrom or after deducting the amount of such purchase price, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We agree that, if, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act to file any periodic reports with the SEC, we will furnish to holders of the notes and the trustee, for the period of time during which the notes are outstanding, our audited annual financial statements, within 90 days of our fiscal year end, and unaudited interim financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable U.S. generally accepted accounting principles.

***Form, Exchange and Transfer of Certificated Registered Securities***

If registered notes cease to be issued in book-entry form, they will be issued:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• only in fully registered certificated form;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• without interest coupons; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• unless we indicate otherwise, in denominations of $25 and amounts that are multiples of $25.

Holders may exchange their certificated securities for notes of smaller denominations or combined into fewer notes of larger denominations, as long as the total principal amount is not changed and as long as the denomination is equal to or greater than $25.

Holders may exchange or transfer their certificated securities at the office of the trustee. We have appointed the trustee to act as our agent for registering notes in the names of holders transferring notes. We may appoint another entity to perform these functions or perform them ourselves.

Holders will not be required to pay a service charge to transfer or exchange their certificated securities, but they may be required to pay any tax or other governmental charge

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associated with the transfer or exchange. The transfer or exchange will be made only if our transfer agent is satisfied with the holder's proof of legal ownership.

We may appoint additional transfer agents or cancel the appointment of any particular transfer agent. We may also approve a change in the office through which any transfer agent acts.

If any certificated securities of a particular series are redeemable and we redeem less than all the debt securities of that series, we may block the transfer or exchange of those debt securities during the period beginning 15 days before the day we mail the notice of redemption and ending on the day of that mailing, in order to freeze the list of holders to prepare the mailing. We may also refuse to register transfers or exchanges of any certificated securities selected for redemption, except that we will continue to permit transfers and exchanges of the unredeemed portion of any debt security that will be partially redeemed.

If a registered debt security is issued in book-entry form, only the depositary will be entitled to transfer and exchange the debt security as described in this subsection, since it will be the sole holder of the debt security.

***Resignation of Trustee***

The trustee may resign or be removed with respect to the notes provided that a successor trustee is appointed to act with respect to the notes. In the event that two or more persons are acting as trustee with respect to different series of indenture securities under the indenture, each of the trustees will be a trustee of a trust separate and apart from the trust administered by any other trustee.

***Indenture Provisions - Ranking***

The notes are our direct unsecured obligations and rank:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by us. The notes will also rank pari passu with our general liabilities, which consist of any amounts we may be required to pay pursuant to trade and other payables, including any outstanding dividend payable, base and incentive management fees payable, interest and debt fees payable, vendor payables and accrued expenses such as auditor fees, legal fees, director fees, etc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• senior to any of our future indebtedness that expressly provides it is subordinated to the notes. We currently do not have outstanding debt that is subordinated to the notes and do not currently intend to issue indebtedness that expressly provides that it is subordinated to the notes. Therefore, the notes will not be senior to any indebtedness or obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness. Because the notes are not secured by any of our assets, they are effectively subordinated to any secured indebtedness we have incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the

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assets may be used to pay other creditors, including the holders of the notes, and any assets of our subsidiaries will not be directly available to satisfy the claims of our creditors, including holders of the notes..

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries and financing vehicles since the notes are obligations exclusively of us and not of any of our subsidiaries. Structural subordination means that creditors of a parent entity are subordinate to creditors of a subsidiary entity with respect to the subsidiary's assets.

***Book-Entry Procedures***

The notes are represented by global securities that are deposited and registered in the name of The Depository Trust Company ("DTC") or its nominee. This means that, except in limited circumstances, holders will not receive certificates for the notes. Beneficial interests in the notes are represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may elect to hold interests in the notes through either DTC, if they are a participant, or indirectly through organizations that are participants in DTC.

The notes are issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each issuance of the notes, in the aggregate principal amount of such issue, and will be deposited with DTC. Interests in the notes will trade in DTC's Same Day Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. None of the Company, the trustee or the paying agent will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC").

DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's Ratings Services' highest rating: AAA. The DTC Rules applicable to its participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org.

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Purchases of the notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the notes on DTC's records. The ownership interest of each actual purchaser of each security, or the "Beneficial Owner," is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the notes are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the notes, except in the event that use of the book-entry system for the notes is discontinued.

To facilitate subsequent transfers, all notes deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of the notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the notes; DTC's records reflect only the identity of the Direct Participants to whose accounts the notes are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to DTC. If less than all of the notes within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Redemption proceeds, distributions, and interest payments on the notes will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from us or the trustee on the payment date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the trustee, or us, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of us or the trustee, but disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the notes at any time by giving reasonable notice to us or to the trustee. Under such circumstances, in the event that a successor securities depository is not obtained, certificates are required to be printed and delivered. We may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificates will be printed and delivered to DTC.

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The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy thereof.

**7.00% Notes due 2026**

*The following description is a summary of the material provisions of the 7.00% notes due 2026 (as referred to in this section, the "notes") of Terra Income Fund 6, LLC ("Terra LLC"), our wholly owned subsidiary, and (solely as it applies to the notes) the indenture, dated as of dated as of February 10, 2021, between Terra Income Fund 6, Inc. ("Terra BDC") and U.S. Bank National Association, as trustee, as supplemented by the first supplemental indenture, dated as of February 10, 2021, as further supplemented by the second supplemental indenture, dated as of October 1, 2022, by and among Terra BDC, Terra Merger Sub, LLC and U.S. Bank National Association, as trustee. This description does not purport to be complete. The base indenture, as supplemented by the first supplemental indenture and the second supplemental indenture is referred to herein as the "indenture." The terms of the notes include those expressly set forth in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended. The notes are listed and trade on the New York Stock Exchange under the symbol "TFSA."*

*This summary is subject to and is qualified by reference to all the provisions of the notes and the indenture, including the definitions of certain terms used in the indenture. We urge you to read these documents because they, and not this description, define your rights as a holder of the notes.*

***General***

On October 1, 2022 in connection with the merger of Terra BDC with and into a wholly owned subsidiary of ours, Terra BDC, Terra LLC and U.S. Bank National Association entered into a second supplemental indenture pursuant to which Terra LLC assumed the payment of the notes and the performance of every covenant of the indenture, to be performed or observed by Terra BDC.

The notes will mature on March 31, 2026. The principal payable at maturity will be 100% of the aggregate principal amount. The interest rate of the notes is 7.00% per year and will be paid every March 30, June 30, September 30 and December 30, beginning June 30, 2021, and the regular record dates for interest payments will be every March 15, June 15, September 15 and December 15, beginning June 15, 2021. If an interest payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment. The interest periods will be the periods from and including an interest payment date to, but excluding, the next interest payment date or the stated maturity date, as the case may be.

Terra LLC issued the notes in denominations of $25 and integral multiples of $25 in excess thereof. The notes are not subject to any sinking fund and holders of the notes do not have the option to have the notes repaid prior to the stated maturity date.

Except as described under the captions "— Events of Default," "— Other Covenants," and "— Merger or Consolidation", the indenture does not contain any provisions that give holders protection in the event Terra LLC issues a large amount of debt or is acquired by another entity.

Terra LLC has the ability to issue indenture securities with terms different from the notes and, without the consent of the holders thereof, to reopen the notes and issue additional notes.

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***Optional Redemption***

The notes may be redeemed in whole or in part at any time or from time to time at Terra LLC's option on or after February 10, 2023, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of 100% of the outstanding principal amount of the notes to be redeemed plus accrued and unpaid interest payments otherwise payable thereon for the then-current quarterly interest period accrued to the date fixed for redemption.

Holders may be prevented from exchanging or transferring the notes when they are subject to redemption. In case any notes are to be redeemed in part only, the redemption notice will provide that, upon surrender of such note, holders will receive, without a charge, a new note or notes of authorized denominations representing the principal amount of their remaining unredeemed notes. Any exercise of Terra LLC's option to redeem the notes will be done in compliance with the 1940 Act.

If Terra LLC redeems only some of the notes, the trustee will determine the method for selection of the particular notes to be redeemed, in accordance with the indenture and the 1940 Act and in accordance with the rules of any national securities exchange or quotation system on which the notes are listed. Unless Terra LLC defaults in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the notes called for redemption.

***Global Securities***

Each note will be issued in book-entry form and represented by a global security that Terra LLC deposits with and register in the name of DTC, or its nominee. A global security may not be transferred to or registered in the name of anyone other than the depositary or its nominee, unless special termination situations arise. As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and holder of all the notes represented by a global security, and investors will be permitted to own only beneficial interests in a global security. For more information about these arrangements, see "— Book-Entry Procedures" below.

*Termination of a Global Security*

If a global security is terminated for any reason, interests in it will be exchanged for certificates in non-book-entry form (certificated securities). After that exchange, the choice of whether to hold the certificated notes directly or in street name will be up to the investor. Investors must consult their own banks or brokers to find out how to have their interests in a global security transferred on termination to their own names, so that they will be holders.

***Payment and Paying Agents***

Terra LLC will pay interest to the person listed in the trustee's records as the owner of the notes at the close of business on a particular day in advance of each due date for interest, even if that person no longer owns the note on the interest due date. That day, usually about two weeks in advance of the interest due date, is called the "record date." Because Terra LLC will pay all the interest for an interest period to the holders on the record date, holders buying and selling the notes must work out between themselves the appropriate purchase price. The most common manner is to adjust the sales price of the notes to prorate interest fairly between buyer and seller based on their respective ownership periods within the particular interest period. This prorated interest amount is called "accrued interest."

*Payments on Global Securities*

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Terra LLC will make payments on the notes so long as they are represented by a global security in accordance with the applicable policies of the depositary as in effect from time to time. Under those policies, Terra LLC will make payments directly to the depositary, or its nominee, and not to any indirect holders who own beneficial interests in the global security. An indirect holder's right to those payments will be governed by the rules and practices of the depositary and its participants, as described under "— Book-Entry Procedures."

*Payments on Certificated Securities*

In the event the notes become represented by certificated securities, Terra LLC will make payments on the notes as follows. Terra LLC will pay interest that is due on an interest payment date to the holder of the notes as shown on the trustee's records as of the close of business on the regular record date at its office in New York, New York. Terra LLC will make all payments of principal and premium, if any, by check at the office of the applicable trustee in New York, New York and/or at other offices that may be specified in a notice to holders against surrender of the note.

Alternatively, at Terra LLC's option, it may pay any cash interest that becomes due on the notes by mailing a check to the holder at his, her or its address shown on the trustee's records as of the close of business on the regular record date or by transfer to an account at a bank in the United States, in either case, on the due date.

*Payment When Offices Are Closed*

If any payment is due on the notes on a day that is not a business day, Terra LLC will make the payment on the next day that is a business day. Payments made on the next business day in this situation will be treated under the indenture as if they were made on the original due date. Such payment will not result in a default under the notes or the indenture, and no interest will accrue on the payment amount from the original due date to the next day that is a business day. Book-entry and other indirect holders should consult their banks or brokers for information on how they will receive payments on the notes.

**Events of Default**

Holders will have rights if an Event of Default occurs in respect of the notes, as described later. The term "Event of Default" in respect of the notes means any of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC does not pay the principal (or premium, if any) of any note when due;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC does not pay interest on any note when due, and such default is not cured within 30 days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC remains in breach of a covenant in respect of the notes for 60 days after it receives a written notice of default stating it is in breach (the notice must be sent by either the trustee or holders of at least 25% of the principal amount of the notes);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC files for bankruptcy or certain other events of bankruptcy, insolvency or reorganization occur and in the case of certain orders or decrees entered against it under bankruptcy law, such order or decree remains undischarged or unstayed for a period of 60 days; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• on the last business day of each of twenty-four consecutive calendar months, the notes have the asset coverage, as defined in the 1940 Act, of less than 100% after giving effect to any exemptive relief granted to us by the SEC.

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An Event of Default for the notes does not necessarily constitute an Event of Default for any other series of debt securities issued under the same or any other indenture. The trustee may withhold notice to the holders of the notes of any default, except in the payment of principal or interest, if it in good faith considers the withholding of notice to be in the best interests of the holders.

*Remedies if an Event of Default Occurs*

If an Event of Default has occurred and is continuing, the trustee or the holders of not less than 25% in principal amount of the notes may declare the entire principal amount of all the notes to be due and immediately payable. This is called a declaration of acceleration of maturity. In certain circumstances, a declaration of acceleration of maturity may be canceled by the holders of a majority in principal amount of the notes if (1) Terra LLC has deposited with the trustee all amounts due and owing with respect to the notes (other than principal that has become due solely by reason of such acceleration) and certain other amounts, and (2) any other Events of Default have been cured or waived.

Except in cases of default, where the trustee has some special duties, the trustee is not required to take any action under the indenture at the request of any holders unless the holders offer the trustee reasonable protection from expenses and liability (called an "indemnity"). If reasonable indemnity is provided, the holders of a majority in principal amount of the notes may direct the time, method and place of conducting any lawsuit or other formal legal action seeking any remedy available to the trustee. The trustee may refuse to follow those directions in certain circumstances. No delay or omission in exercising any right or remedy will be treated as a waiver of that right, remedy or Event of Default.

Before holders are allowed to bypass the trustee and bring their own lawsuit or other formal legal action or take other steps to enforce their rights or protect their interests relating to the notes, the following must occur:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• holders must give the trustee written notice that an Event of Default has occurred and remains uncured;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the holders of at least 25% in principal amount of all the notes must make a written request that the trustee take action because of the default and must offer reasonable indemnity and/or security to the trustee against the cost and other liabilities of taking that action;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the trustee must not have taken action for 60 days after receipt of the above notice and offer of indemnity and/or security; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the holders of a majority in principal amount of the notes must not have given the trustee a direction inconsistent with the above notice during that 60-day period.

However, holders are entitled at any time to bring a lawsuit for the payment of money due on their notes on or after the due date. Book-entry and other indirect holders should consult their banks or brokers for information on how to give notice or direction to or make a request of the trustee and how to declare or cancel an acceleration of maturity. Each year, Terra LLC will furnish to the trustee a written statement certifying that to its knowledge it is in compliance with the indenture and the notes, or else specifying any default.

*Waiver of Default*

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The holders of a majority in principal amount of the notes may waive any past defaults other than:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the payment of principal or interest; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• in respect of a covenant that cannot be modified or amended without the consent of each holder.

***Merger or Consolidation***

Under the terms of the indenture, Terra LLC is generally permitted to consolidate or merge with another entity. Terra LLC is also permitted to sell all or substantially all of its assets to another entity. However, Terra LLC may not take any of these actions unless all the following conditions are met:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• where Terra LLC merges out of existence or conveys or transfers its assets substantially as an entirety, the resulting entity must agree to be legally responsible for its obligations under the notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the merger or sale of assets must not cause a default on the notes and Terra LLC must not already be in default (unless the merger or sale would cure the default). For purposes of this no-default test, a default would include an Event of Default that has occurred and has not been cured, as described under "Events of Default" above. A default for this purpose would also include any event that would be an Event of Default if the requirements for giving Terra LLC a notice of default or its default having to exist for a specific period of time were disregarded; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC must deliver certain certificates and documents to the trustee.

***Modification or Waiver***

There are three types of changes Terra LLC can make to the indenture and the notes issued thereunder.

*Changes Requiring Your Approval*

First, there are changes that Terra LLC cannot make to the notes without specific approval from holders thereof. The following is a list of those types of changes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• change the stated maturity of the principal of or interest on the notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reduce any amounts due on the notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reduce the amount of principal payable upon acceleration of the maturity of a note following a default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• change the place or currency of payment on a note;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• impair holders' right to sue for payment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reduce the percentage of holders of notes whose consent is needed to modify or amend the indenture; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reduce the percentage of holders of notes whose consent is needed to waive compliance with certain provisions of the indenture or to waive certain defaults.

*Changes Not Requiring Approval*

The second type of change does not require any vote by the holders of the notes. This type is limited to clarifications and certain other changes that would not adversely affect holders of the notes in any material respect.

*Changes Requiring Majority Approval*

Any other change to the indenture and the notes would require the following approval:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• if the change affects only the notes, it must be approved by the holders of a majority in principal amount of the notes; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• if the change affects more than one series of debt securities issued under the same indenture, it must be approved by the holders of a majority in principal amount of all of the series affected by the change, with all affected series voting together as one class for this purpose.

In each case, the required approval must be given by written consent.

The holders of a majority in principal amount of all of the series of debt securities issued under an indenture, voting together as one class for this purpose, may waive Terra LLC's compliance with some of its covenants in that indenture. However, Terra LLC cannot obtain a waiver of a payment default or of any of the matters covered by the bullet points included above under "— Changes Requiring Your Approval."

*Further Details Concerning Voting*

When taking a vote, Terra LLC will use the following rules to decide how much principal to attribute to the notes:

The notes will not be considered outstanding, and therefore not eligible to vote, if Terra LLC has deposited or set aside in trust money for their payment or redemption. The notes will also not be eligible to vote if they have been fully defeased as described later under "— Defeasance — Full Defeasance."

Terra LLC will generally be entitled to set any day as a record date for the purpose of determining the holders of the notes that are entitled to vote or take other action under the indenture. However, the record date may not be more than 30 days before the date of the first solicitation of holders to vote on or take such action. If Terra LLC sets a record date for a vote or other action to be taken by holders of the notes, that vote or action may be taken only by persons who are holders of the notes on the record date and must be taken within eleven months following the record date. Book-entry and other indirect holders should consult their banks or brokers for information on how approval may be granted or denied if Terra LLC seeks to change the indenture or the notes or request a waiver.

***Defeasance***

The following defeasance provisions will be applicable to the notes. "Defeasance" means that, by depositing with a trustee an amount of cash and/or government securities sufficient to pay all principal and interest, if any, on the notes when due and satisfying any additional

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conditions noted below, Terra LLC will be deemed to have been discharged from its obligations under the notes. In the event of a "covenant defeasance," upon depositing such funds and satisfying similar conditions discussed below Terra LLC would be released from the restrictive covenants under the indenture relating to the notes.

*Covenant Defeasance*

Under current U.S. federal tax law and the indenture, Terra LLC can make the deposit described below and be released from some of the restrictive covenants in the indenture under which the notes were issued. This is called "covenant defeasance." In that event, holders would lose the protection of those restrictive covenants but would gain the protection of having money and government securities set aside in trust to repay the notes. If Terra LLC achieves covenant defeasance and the notes were subordinated as described under "Indenture Provisions — Ranking" below, such subordination would not prevent the trustee under the indenture from applying the funds available to it from the deposit described in the first bullet to the payment of amounts due in respect of such debt securities for the benefit of the subordinated debtholders. In order to achieve covenant defeasance, Terra LLC must do the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Since the notes are denominated in U.S. dollars, Terra LLC must deposit in trust for the benefit of all holders of the notes a combination of cash and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the notes on their various due dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC must deliver to the trustee a legal opinion of its counsel confirming that, under current U.S. federal income tax law, Terra LLC may make the above deposit without causing holders to be taxed on the notes any differently than if it did not make the deposit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC must deliver to the trustee a legal opinion of its counsel stating that the above deposit does not require registration by us under the 1940 Act, and a legal opinion and officers' certificate stating that all conditions precedent to covenant defeasance have been complied with;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• defeasance must not result in a breach or violation of, or result in a default under, the indenture or any of Terra LLC's other material agreements or instruments; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• no default or event of default with respect to the notes shall have occurred and be continuing and no defaults or events of default related to bankruptcy, insolvency or reorganization shall occur during the next 90 days.

If Terra LLC accomplishes covenant defeasance, holders can still look to it for repayment of the notes if there were a shortfall in the trust deposit or the trustee is prevented from making payment. In fact, if one of the remaining Events of Default occurred (such as Terra LLC's bankruptcy) and the notes became immediately due and payable, there might be a shortfall. Depending on the event causing the default, Terra LLC may not be able to obtain payment of the shortfall.

*Full Defeasance*

If there is a change in U.S. federal tax law, as described below, Terra LLC can legally release itself from all payment and other obligations on the notes (called "full defeasance") if Terra LLC puts in place the following other arrangements for holders to be repaid:

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• since the notes are denominated in U.S. dollars, Terra LLC must deposit in trust for the benefit of all holders of the notes a combination of money and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the notes on their various due dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC must deliver to the trustee a legal opinion confirming that there has been a change in current U.S. federal tax law or an IRS ruling that allows it to make the above deposit without causing holders to be taxed on the notes any differently than if Terra LLC did not make the deposit. Under current U.S. federal tax law the deposit and Terra LLC's legal release from the notes would be treated as though it paid holders their respective shares of the cash and notes or bonds at the time the cash and notes or bonds were deposited in trust in exchange for the notes and holders would recognize gain or loss on the notes at the time of the deposit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC must deliver to the trustee a legal opinion of its counsel stating that the above deposit does not require registration by us under the 1940 Act, and a legal opinion and officers' certificate stating that all conditions precedent to defeasance have been complied with;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• defeasance must not result in a breach or violation of, or constitute a default under, of the indenture or any of Terra LLC's other material agreements or instruments; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• no default or event of default with respect to the notes shall have occurred and be continuing and no defaults or events of default related to bankruptcy, insolvency or reorganization shall occur during the next 90 days.

If Terra LLC ever did accomplish full defeasance, as described above, holders would have to rely solely on the trust deposit for repayment of the notes. Holders could not look to us for repayment in the unlikely event of any shortfall. Conversely, the trust deposit would most likely be protected from claims of Terra LLC's lenders and other creditors if Terra LLC ever became bankrupt or insolvent. If the notes were subordinated as described later under "— Indenture Provisions — Ranking," such subordination would not prevent the trustee under the Indenture from applying the funds available to it from the deposit referred to in the first bullet of the preceding paragraph to the payment of amounts due in respect of such notes for the benefit of the subordinated debtholders.

*Other Covenants*

In addition to any other covenants described herein, as well as standard covenants relating to payment of principal and interest, maintaining an office where payments may be made or securities can be surrendered for payment, payment of taxes by Terra LLC and related matters, the following covenants apply to the notes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC agrees that for the period of time during which the notes are outstanding, Terra LLC will not violate (whether or not it is subject thereto) Section 18(a)(1)(A) as modified by Section 61(a)(1) of the1940 Act or any successor provisions, but giving effect to any exemptive relief granted to Terra LLC by the SEC. Currently, these provisions generally prohibit Terra LLC from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless its asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Terra LLC agrees that, if, at any time, Terra LLC is not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act to file any periodic reports

------

with the SEC, Terra LLC agrees to furnish to holders of the notes and the trustee, for the period of time during which the notes are outstanding, its audited annual financial statements, within 90 days of its fiscal year end, and unaudited interim financial statements, within 45 days of its fiscal quarter end (other than its fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable U.S. GAAP.

***Form, Exchange and Transfer of Certificated Registered Securities***

If the notes cease to be issued in book-entry form, they will be issued:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• only in fully registered certificated form;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• without interest coupons; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• unless Terra LLC indicates otherwise, in denominations of $25 and amounts that are multiples of $25.

Holders may exchange their certificated securities for notes of smaller denominations or combined into fewer notes of larger denominations, as long as the total principal amount is not changed and as long as the denomination is equal to or greater than $25.

Holders may exchange or transfer their certificated securities at the office of the trustee. Terra LLC has appointed the trustee to act as its agent for registering notes in the names of holders transferring notes. Terra LLC may appoint another entity to perform these functions or perform them itself.

Holders will not be required to pay a service charge to transfer or exchange their certificated securities, but they may be required to pay any tax or other governmental charge associated with the transfer or exchange. The transfer or exchange will be made only if Terra LLC's transfer agent is satisfied with the holder's proof of legal ownership.

Terra LLC may appoint additional transfer agents or cancel the appointment of any particular transfer agent. Terra LLC may also approve a change in the office through which any transfer agent acts.

If any certificated securities of a particular series are redeemable and Terra LLC redeems less than all the debt securities of that series, Terra LLC may block the transfer or exchange of those debt securities during the period beginning 15 days before the day it mails the notice of redemption and ending on the day of that mailing, in order to freeze the list of holders to prepare the mailing. Terra LLC may also refuse to register transfers or exchanges of any certificated securities selected for redemption, except that it will continue to permit transfers and exchanges of the unredeemed portion of any debt security that will be partially redeemed.

If a registered debt security is issued in book-entry form, only the depositary will be entitled to transfer and exchange the debt security as described in this subsection, since it will be the sole holder of the debt security.

***Resignation of Trustee***

The trustee may resign or be removed with respect to the notes provided that a successor trustee is appointed to act with respect to the notes. In the event that two or more persons are acting as trustee with respect to different series of indenture securities under the indenture, each

------

of the trustees will be a trustee of a trust separate and apart from the trust administered by any other trustee.

***Indenture Provisions — Ranking***

The notes will be Terra LLC's direct unsecured obligations and will rank:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by Terra LLC. The notes will also rank pari passu with Terra LLC's general liabilities, which consist of any amounts Terra LLC may be required to pay pursuant to trade and other payables, including any outstanding dividend payable, base and incentive management fees payable, interest and debt fees payable, vendor payables and accrued expenses such as auditor fees, legal fees, director fees, etc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• senior to any of Terra LLC's future indebtedness that expressly provides it is subordinated to the notes. Terra LLC currently does not have outstanding debt that is subordinated to the notes and does not currently intend to issue indebtedness that expressly provides that it is subordinated to the notes. Therefore, the notes will not be senior to any indebtedness or obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• effectively subordinated to all of Terra LLC's existing and future secured indebtedness (including indebtedness that is initially unsecured to which Terra LLC subsequently grants security), to the extent of the value of the assets securing such indebtedness. Because the notes will not be secured by any of Terra LLC's assets, they will be effectively subordinated to any secured indebtedness Terra LLC has incurred and may incur in the future (or any indebtedness that is initially unsecured to which Terra LLC subsequently grant security), to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of Terra LLC's existing or future secured indebtedness may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the notes, and any assets of Terra LLC's subsidiaries will not be directly available to satisfy the claims of its creditors, including holders of the notes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• structurally subordinated to all existing and future indebtedness and other obligations of any of Terra LLC's subsidiaries and financing vehicles since the notes are obligations exclusively of Terra LLC and not of any of its subsidiaries. Structural subordination means that creditors of a parent entity are subordinate to creditors of a subsidiary entity with respect to the subsidiary's assets.

***Book-Entry Procedures***

The notes are represented by global securities that are deposited and registered in the name of The Depository Trust Company ("DTC") or its nominee. This means that, except in limited circumstances, holders will not receive certificates for the notes. Beneficial interests in the notes are represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may elect to hold interests in the notes through either DTC, if they are a participant, or indirectly through organizations that are participants in DTC.

The notes are issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each issuance of the

------

notes, in the aggregate principal amount of such issue, and will be deposited with DTC. Interests in the notes will trade in DTC's Same Day Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. None of Terra LLC, the trustee or the paying agent will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC").

DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's Ratings Services' highest rating: AAA. The DTC Rules applicable to its participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of the notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the notes on DTC's records. The ownership interest of each actual purchaser of each security, or the "Beneficial Owner," is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the notes are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the notes, except in the event that use of the book-entry system for the notes is discontinued.

To facilitate subsequent transfers, all notes deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of the notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the notes; DTC's records reflect only the identity of the Direct Participants to whose accounts the notes are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to

------

Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to DTC. If less than all of the notes within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Redemption proceeds, distributions, and interest payments on the notes will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from us or the trustee on the payment date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the trustee, or us, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of us or the trustee, but disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the notes at any time by giving reasonable notice to us or to the trustee. Under such circumstances, in the event that a successor securities depository is not obtained, certificates are required to be printed and delivered. Terra LLC may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy thereof.

## Exhibit 21.1

**Exhibit 21.1**

**Terra Property Trust, Inc.**

**Subsidiaries**

---

| | |
|:---|:---|
| **Subsidiaries** | **Jurisdiction of formation** |
| Terra Ocean Ave, LLC | New York |
| Terra Ocean Ave, LLC | Delaware |
| Terra Driggs, LLC | Delaware |
| Terra Orange Grove Pref, LLC | Delaware |
| Terra Harlem Member, LLC | Delaware |
| Terra 370 Lex LLC | Delaware |
| Terra Mortgage Capital I, LLC | Delaware |
| Terra Mortgage Portfolio I, LLC | Delaware |
| Terra Lakeside Development, LLC | Delaware |
| Terra LOC Portfolio I, LLC | Delaware |
| Terra Walnut Development, LLC | Delaware |
| Terra Rockland Pref, LLC | Delaware |
| Terra Palm Springs, LLC | Delaware |
| Terra University Park Mortgage, LLC | Delaware |
| Terra 870SC, LLC | Delaware |
| Terra Mortgage Capital II, LLC | Delaware |
| Terra Mortgage Portfolio II, LLC | Delaware |
| Terra Mortgage Capital III, LLC | Delaware |
| Terra Mortgage Portfolio III, LLC | Delaware |
| TPT Special Subsidiary, LLC | Delaware |
| Terra Industrial, LLC | Delaware |
| Asano Bankers Hill LLC | Delaware |
| Mavik Asano LLC | Delaware |
| Terra Astoria Pref, LLC | Delaware |
| Terra Northlake LLC | Delaware |
| Mavik Ann Street Prf II LLC | Delaware |
| MCM Maxx, LLC | Delaware |
| Terra Larkin Development LLC | Delaware |

---

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER**

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

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

I, Vikram S. Uppal, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this Annual Report on Form 10-K of Terra Property Trust, Inc.;

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

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

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

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

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

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

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

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

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

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

---

| | | |
|:---|:---|:---|
| Date: | March 10, 2023 | |
| | | /s/ Vikram S. Uppal |
| | | Vikram S. Uppal |
| | | Chief Executive Officer |
| | | (Principal Executive Officer) |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION OF CHIEF FINANCIAL OFFICER**

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

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

I, Gregory M. Pinkus, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this Annual Report on Form 10-K of Terra Property Trust, Inc.;

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

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

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

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

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

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

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

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

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

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

---

| | | |
|:---|:---|:---|
| Date: | March 10, 2023 | |
| | | /s/ Gregory M. Pinkus |
| | | Gregory M. Pinkus |
| | | Chief Financial Officer and Chief Operating Officer |
| | | (Principal Financial and Principal Accounting Officer) |

---

## Ex-32

**Exhibit 32**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report on Form 10-K of Terra Property Trust, Inc. (the "Company") for the annual period ended December 31, 2022, as filed with the Securities Exchange Commission on the date hereof (the "Report"), I, Vikram S. Uppal, Chief Executive Officer, and I, Gregory M. Pinkus, Chief Financial Officer, each certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

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

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

---

| | | |
|:---|:---|:---|
| Date: | March 10, 2023 |  |
|  |  | /s/ Vikram S. Uppal |
|  |  | Vikram S. Uppal |
|  |  | Chief Executive Officer |
|  |  | (Principal Executive Officer) |
|  |  | /s/ Gregory M. Pinkus |
|  |  | Gregory M. Pinkus |
|  |  | Chief Financial Officer and Chief Operating Officer |
|  |  | (Principal Financial and Principal Accounting Officer) |

---

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

<br>