10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the Fiscal Year Ended December 31, 2020

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

For the transition period from to

Commission File Number: 000-56117

Terra Property Trust, Inc.

(Exact name of registrant as specified in its charter)

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

550 Fifth Avenue, 6th Floor

New York, New York 10036

(Address of principal executive offices)

(212) 753-5100

(Registrant’s telephone number, including area code)

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

None

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

Common Stock $0.01 par value per share

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

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 o No þ

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

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

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	þ	Smaller reporting company	☑
		Emerging growth company	☑

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

Indicate by check mark whether the registrant 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. ☐

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 18, 2021, the registrant had 19,487,460 shares of common stock, $0.01 par value, outstanding. No market value has been computed based upon the fact that no active trading market had been established as of the date of this document.

Documents Incorporated by Reference

None.

TABLE OF CONTENTS

		Page
PART I
	Item 1. Business	1
	Item 1A. Risk Factors	8
	Item 1B. Unresolved Staff Comments	35
	Item 2. Properties	35
	Item 3. Legal Proceedings	35
	Item 4. Mine Safety Disclosures	36
PART II
	Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	36
	Item 6. Selected Financial Data	37
	Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	38
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk	53
	Item 8. Financial Statements and Supplementary Data	55
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	55
	Item 9A. Controls and Procedures	55
	Item 9B. Other Information	55
PART III
	Item 10. Directors, Executive Officers and Corporate Governance	56
	Item 11. Executive Compensation	59
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	59
	Item 13. Certain Relationships and Related Transactions, and Director Independence	60
	Item 14. Principal Accountant Fees and Services	64
PART IV
	Item 15.Exhibits and Financial Statement Schedules	65
	Item 16. Form 10-K Summary	66
Signatures		67

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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.

•“Terra Capital Advisors” refers to Terra Capital Advisors, LLC, a subsidiary of Terra Capital Partners;

•“Terra Capital Markets” refers to Terra Capital Markets, LLC, an affiliate of Terra Capital Partners;

•“Terra Capital Partners” refers to Terra Capital Partners, LLC, our sponsor;

•“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 Fund 6” refers to Terra Income Fund 6, Inc.; “Terra Offshore REIT” refers to Terra Offshore Funds REIT, LLC (formerly known as Terra International Fund 3 REIT, LLC); “Terra Fund 7” refers to Terra Secured Income Fund 7, LLC; “Terra Property Trust 2” refers to Terra Property Trust 2, Inc., a subsidiary of Terra Fund 7; “Terra RECO” refers to Terra Real Estate Credit Opportunities Fund, L.P.; “Terra RECO REIT” refers to Terra Real Estate Credit Opportunities Fund REIT, LLC, a subsidiary of Terra RECO;

•“Terra Fund Advisors” refers to Terra Fund Advisors, LLC, an affiliate of Terra Capital Partners, and the manager of Terra Fund 5;

•“Terra Funds” refer to Terra Fund 1, Terra Fund 2, Terra Fund 3, Terra Fund 4 and Terra Fund 5, collectively;

•“Terra Income Advisors” refers to Terra Income Advisors, LLC, an affiliate of Terra Capital Partners;

•“Terra Income Advisors 2” refers to Terra Income Advisors 2, LLC, an affiliate of Terra Capital Partners; and

•“Terra REIT Advisors” or our “Manager” refers to Terra REIT Advisors, 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:

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

•the potential negative impacts of a novel coronavirus (“COVID-19”) on the global economy and the impacts of COVID-19 on the Company’s financial condition, results of operations, liquidity and capital resources and business operations;

•actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impact;

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

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

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

•changes in our investment objectives and business strategy;

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

•the performance and financial condition of our borrowers;

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

•borrower defaults or decreased recovery rates from our borrowers;

•changes in prepayment rates on our loans;

•our use of financial leverage;

•actual and potential conflicts of interest with any of the following affiliated entities: Terra Income Advisors; our Manager; Terra Capital Partners; Terra Fund 6; Terra Fund 7, Terra 5 International, TIFI, Terra Offshore REIT, Terra RECO; or any of their affiliates;

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

•liquidity transactions that may be available to us in the future, including a liquidation of our assets, a sale of our company or an initial public offering and listing of our shares of common stock on a national securities exchange, and the timing of any such transactions;

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

•limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our 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

•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:

•changes in the economy;

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

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

We have based the forward-looking statements included in this 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 (many of which may be amplified by the COVID-19 outbreak), 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 Item 1A — Risk Factors.

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, the value of our assets and returns to our investors.

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

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

•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.

•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.

•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.

•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.

•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.

Risks Related to Regulation

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

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 face certain conflicts of interest with respect to our operations and our relationship with our Manager and its affiliates.

•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 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.

Risks Related to Financing and Hedging

•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.

•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 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.

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

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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.

Risks Related to Our Organization and Structure

•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

•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 distribution to our stockholders.

•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.

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

•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

    We are a real estate credit focused company that originates, structures, funds and manages high yielding 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 of this size are subject to less competition, offer higher risk adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. Our objective is to continue 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 objective.

    Each of our loans was originated by Terra Capital Partners or its affiliates. Our portfolio is diversified geographically with underlying properties located in 20 markets across eight states and by loan structure and property type. The portfolio includes diverse property types such as multifamily housing, condominiums, hotels, student housing, commercial offices, medical offices and mixed-use 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, and preferred equity investments.

    We believe that compelling opportunities for us will emerge as a result of the economic downtown caused by the COVID-19 pandemic. While it has had a demonstrable effect on employment, the economy and the national psyche, the impact of the pandemic on property values has yet to be fully realized. The reason is that property values are the result of slow moving forces, including consumer behavior, supply and demand for space, availability and pricing of mortgage financing and investor demand for property. As these factors become clear and commercial real estate is repriced accordingly, we believe there will be abundant opportunities available to experienced alternative lenders such as us to provide financing for property acquisition, refinancing, development and redevelopment on attractive terms that reflect the new realities of the economy. 

    We believe that we are well positioned to capitalize on these opportunities through our relationship with our Manager and Terra Capital Partners. Our Manager’s debt finance professionals maintain extensive relationships within the real estate industry, including with real estate developers, institutional real estate sponsors and investors, real estate funds, investment and commercial banks, private equity funds, asset originators and broker-dealers, as well as the capital and financing markets generally. We leverage the many years of experience and well-established contacts of our Manager’s debt finance professionals to grow our portfolio and expand our business.

    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.

    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”). As of December 31, 2020, Terra JV held 87.4% of the issued and outstanding shares of our common stock with the remainder 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.

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Our Manager and Terra Capital Partners

    We are externally managed by our Manager, which is registered as an investment adviser under the Investment Advisers Act of 1940 (the “Advisers Act”).

    Our Manager is a subsidiary of Terra Capital Partners, a real estate credit focused investment manager based in New York City with a 18-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, 2020 have been secured by approximately 13.5 million square feet of office properties, 3.6 million square feet of retail properties, 3.8 million square feet of industrial properties, 4,855 hotel rooms and 26,854 apartment units. The value of the properties underlying this capital was approximately $9.6 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.

    An affiliate of Axar Capital Management L.P. (“Axar Capital Management”) owns 100% of the voting interest and, together with certain members of the senior management of Terra Capital Partners, 100% of the economic interest in Terra Capital Partners. Axar Capital Management is an investment manager registered under the Advisers Act with over $750 million in assets under management as of December 31, 2020, headquartered in New York City and founded by Andrew M. Axelrod. Axar Capital Management focuses on value-oriented and opportunistic investing across the capital structure and multiple sectors. The firm seeks attractive prices relative to intrinsic value and invests in event-driven situations with clear catalysts and asymmetric return potential. Axar Capital Management’s senior real estate team, which joined Terra Capital Partners in February 2018, has worked together for over five years, having previously built the $3 billion real estate business at Mount Kellett Capital Management, LP. Axar Capital Management has a deep network of industry relationships including institutional investors (for both public and private investments), operators, advisers and senior lenders.

    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 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 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.

Our Investment Strategy

    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.

    As part of our investment strategy, we:

•focus on middle market loans of approximately $10 million to $50 million;

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

•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;

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

•maximize current income;

•lend to creditworthy borrowers;

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

•source off-market transactions; and

•hold loans until maturity unless, in our Manager’s judgment, market conditions warrant earlier disposition.

Our Financing Strategy

    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 consists of borrowings under first mortgage financings, a revolving credit facility, 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 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.

    In December 2018, we entered into a master repurchase agreement with Goldman Sachs Bank USA (“Goldman”) that provided for advances of up to $150 million in the aggregate, which we used to finance certain secured performing commercial real estate loans, primarily senior mortgage loans. In September 2020, we terminated the master repurchase agreement and replaced it with a term loan from Goldman of $103.0 million. In addition, Goldman has agreed to provide $3.6 million of additional future advances and may provide up to $11.6 million of additional future discretionary advances under the term loan. In June 2019, we entered into a credit facility with Israel Discount Bank that provided for revolving credit loans of up to $35.0 million in the aggregate. In October 2020, we amended the credit facility and reduced the amount available for borrowing to $15.0 million. In March 2021, the credit facility was terminated. The credit facility was used for short term financing needed to bridge the timing of anticipated loan repayments and funding obligations.

    As of December 31, 2020, we had outstanding indebtedness, consisting of borrowings under a mortgage loan of $44.0 million and borrowings under the term loan of $107.6 million. As of December 31, 2020, the amount remaining available under the credit facility was $15.0 million.

    Additionally, as of December 31, 2020, we had obligations under participation agreements and secured borrowing with an aggregate outstanding principal amount of $89.5 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

    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

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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.

    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, 2020, we owned five mezzanine loans with a total net principal amount of $23.9 million, which constituted 7.2% of our net loan investment portfolio.

    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, 2020, we owned six preferred equity investments with a total net principal amount of $101.0 million, which constituted 30.2% of our net loan investment portfolio.

    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.

    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 loans, B-notes, or preferred equity investments. As of December 31, 2020, we owned nine first mortgage loans with a total net principal amount of $209.7 million, which constituted 62.7% of our net loan investment portfolio. As of December 31, 2020, we used $184.2 million of senior mortgage loans as collateral for $107.6 million of borrowings under a term loan.

    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.

    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, 2020, we did not own any B-notes.

    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

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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, 2020, we did not own any equity participations.

    Other Real Estate-Related Investments. We may invest in other real estate-related investments, which may include commercial mortgage-backed securities (“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, 2020, we owned a 90.3% equity interest, or $35.9 million, 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.

Operating Real Estate

    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. As of December 31, 2020, the office building and the development parcel had a carrying value of $62.9 million, and the mortgage loan payable encumbering the office building had a principal amount of $44.0 million.

Investment Guidelines

    Our board of directors adopts investment guidelines from time to time relating to the criteria to be used by the Manager’s senior management team to evaluate specific investments as well as our overall portfolio composition. Our board of directors will review our 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 of directors.

    Our board of directors adopted the following investment guidelines:

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

•no origination or acquisition shall be made that would cause us or any of our subsidiaries to be required to register as an investment company under the 1940 Act; and

•until appropriate investments can be identified, we may invest the proceeds of our equity or debt offerings in interest-bearing, short-term investments, including money market accounts and/or funds, that are consistent with our intention to qualify as a REIT.

    These investment guidelines may be changed from time to time by a majority of our board of directors without the approval of our stockholders.

Disposition Policies

    The period we hold our investments in real estate-related loans varies depending on the type of asset, interest rates and other factors. Our Manager has developed a well-defined exit strategy for each investment we make. 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 different 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

    We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (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

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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.

1940 Act Exclusion

    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:

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

•restrictions on specified investments;

•prohibitions on transactions with affiliates; and

•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 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 are primarily engaged in the non-investment company businesses of our subsidiaries.

    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

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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 would have an adverse effect on our business.

Emerging Growth Company Status

    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 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.

    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.

    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

    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.

    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.

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Employees; Staffing; Human Capital

    We are supervised by our board of directors consisting of four directors. We have entered into a 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. See “Item 10. Directors, Executive Officers and Corporate Governance” in this Annual Report on Form 10-K.

Available Information

We are subject to the information requirements of the Exchange Act. Therefore, we file periodic reports and other information with the SEC. The SEC maintains a website at www.sec.gov where our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other filings we make with the SEC, including amendments to such filings, may be obtained free of charge.

Item 1A. Risk Factors.

    Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this Annual Report on Form 10-K. If any of the following risks occur, our business, financial condition, liquidity and results of operations could be materially and adversely affected. In that case, the value of our common stock could decline, and you may lose some or all of your investment. Some statements in this section constitute forward-looking statements. See “Forward-Looking Statements.”

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, the value of our assets and returns to our investors.

    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; 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, geopolitical issues, including events such as the 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 the value of our assets, our results of operations, cash flow and returns to our investors.

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 and financial condition.

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

    Pursuant to the terms of the management agreement between us and our Manager, 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 of

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directors. Our stockholders will not have input into investment decisions. This will increase the uncertainty, and thus the risk, of investing in our common stock, 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, could cause a material adverse effect on our business, financial condition, liquidity, results of operations and ability to make distributions to our stockholders, and could cause the value of our common stock to decline. 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.

    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 business, results of operations and financial condition.

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 business, results of operations and financial condition.

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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.

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 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.

Major public health issues, including the ongoing COVID-19 pandemic, and related disruptions in the U.S. and global economy and financial markets have adversely impacted us and could continue to adversely impact or disrupt our financial condition and results of operations.

The ongoing pandemic of COVID-19 in many countries continues to adversely impact global economic activity and has contributed to significant volatility in financial markets. On March 11, 2020, the World Health Organization publicly characterized COVID-19 as a pandemic. On March 13, 2020, former President Trump declared the COVID-19 outbreak a national emergency. The global impact of the pandemic has been rapidly evolving, and as cases of the virus increased around the world, governments and organizations have implemented a variety of actions to mobilize efforts to mitigate the ongoing and expected impact. Many governments, including where real estate is located that secures or underlies a significant portion of our

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commercial real estate loans, have reacted by 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, with exceptions, in certain cases, available for certain essential operations and businesses, and/or restrictions on types of construction projects that may continue. Although, in certain cases, exceptions may be available for certain essential operations and businesses, and in other cases certain of these restrictions have been relaxed or phased out, many of these or similar restrictions remain in place, continue to be implemented or additional restrictions are being considered. There is no assurance that any exceptions or easing of restrictions will enable us to avoid adverse effects to our results of operations and business. Further, such actions have created, and we expect will continue to create, disruption in real estate financing transactions and the commercial real estate market and adversely impact a number of industries. The pandemic has triggered a period of economic slowdown and experts are uncertain as to how long these conditions may last.

In the United States, there have been a number of federal, state and local government initiatives applicable to a significant number of mortgage loans, to manage the spread of the virus and its impact on the economy, financial markets and continuity of businesses of all sizes and industries. In March 2020, the U.S. Congress approved, and former President Trump signed into law, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act provides approximately $2 trillion in financial assistance to individuals and businesses resulting from the outbreak of COVID-19. The CARES Act, among other things, provides certain measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of financing and loan forgiveness and/or forbearance. The Federal Reserve implemented asset purchase and lending programs, including purchases of residential and commercial mortgage backed securities and the establishment of lending facilities to support loans to small- and mid-size businesses. To further address the continued economic impact of the COVID-19 pandemic, the U.S. Congress passed, and former President Trump signed into law, a second COVID-19 relief bill in December 2020, which provided approximately $900 billion in additional financial assistance to individuals and businesses, including funds for rental assistance to be distributed by state and local governments and a revival of the forgivable small business loan program originally provided for under the CARES Act. Although these actions by the federal government, together with other actions taken at the federal, regional and local levels, are intended to support these economies, and while President Biden, with the support of a Democratic Congress, is likely to implement additional relief measures in 2021, there is no guarantee that such measures will provide sufficient relief to avoid continued adverse effects on the economy and potentially a recession. Similar actions have been taken by governments around the globe but as is the case in the United States there is no assurance that such measures will prevent further economic disruptions, which may be significant, around the world.

We believe that our ability, as well as that of our Manager, to operate, our level of business activity and the profitability of our business, as well as the values of, and the cash flows from, the assets we own have been, and will continue to be, impacted by the effects of COVID-19 and could in the future be impacted by another pandemic or other major public health issues. While we have implemented risk management and contingency plans and taken preventive measures and other precautions, no predictions of specific scenarios can be made with respect to the COVID-19 pandemic and such measures may not adequately predict the impact on our business from such events.

The effects of COVID-19 have adversely impacted the value of our assets, our business, financial condition and results of operations and cash flows. Some of the factors that impacted us to date and may continue to affect us include the following:

•the decline in the value of commercial real estate, which negatively impacts the value of our loans and real estate owned, potentially materially;

•difficulty accessing debt and equity capital on attractive terms, or at all;

•a severe disruption and instability in the financial markets or deteriorations in credit and financing conditions may affect our or our borrowers’ ability to make regular payments of principal and interest (whether due to an inability to make such payments, an unwillingness to make such payments, or a waiver of the requirement to make such payments on a timely basis or at all);

•government-mandated moratoriums on the construction, development or redevelopment of properties underlying our construction loans may prevent the completion, on a timely basis or at all, of such projects.

•unavailability of information, resulting in restricted access to key inputs used to derive certain estimates and assumptions made in connection with evaluating our loans for impairments, and establishing allowances for loan losses and impairments on real estate owned;

•our ability to remain in compliance with the financial covenants under our borrowings, including in the event of impairments in the value of the loans we own;

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•a general decline in business activity and demand for mortgage financing, servicing and other real estate and real estate-related transactions, which could adversely affect our ability to make new investments or to redeploy the proceeds from repayments of our existing investments;

•disruptions to the efficient function of our operations because of, among other factors, any inability to access short-term or long-term financing for the loans we make;

•our need to sell assets, including at a loss;

•reductions in loan origination activities;

•inability of other third-party vendors we rely on to conduct our business to operate effectively and continue to support our business and operations, including vendors that provide IT services, legal and accounting services, or other operational support services;

•effects of legal and regulatory responses to concerns about the COVID-19 pandemic and related public health issues, which could result in additional regulation or restrictions affecting the conduct of our business; and

•our ability to ensure operational continuity in the event our business continuity plan is not effective or ineffectually implemented or deployed during a disruption.

The rapid development and fluidity of the circumstances resulting from this pandemic precludes any prediction as to the ultimate adverse impact of COVID-19. There are no comparable recent events which provide guidance as to the effect of the spread of COVID-19 and a pandemic on our business. Nevertheless, COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present material uncertainty and risk with respect to our performance, financial condition, volume of business, results of operations and cash flows.

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

In July 2017, the U.K. Financial Conduct Authority, which regulates the London interbank offered rate (“LIBOR”) administrator, ICE Benchmark Administration Limited (“IBA”) announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021. Such announcement indicates that market participants cannot rely on LIBOR being published after 2021. On December 4, 2020, the IBA published a consultation on its intention to cease the publication of LIBOR. For the most commonly used tenors (overnight and one, three, six and 12 months) of U.S. dollar LIBOR, the IBA is proposing to cease publication immediately after June 30, 2023, anticipating continued rate submissions from panel banks for these tenors of U.S. dollar LIBOR. The IBA's consultation also proposes to cease publication of all other U.S. dollar LIBOR tenors, and of all non-U.S. dollar LIBOR rates, after December 31, 2021. The FCA and U.S. bank regulators have welcomed the IBA's proposal to continue publishing certain tenors for U.S. dollar LIBOR through June 30, 2023 because it would allow many legacy U.S. dollar LIBOR contracts that lack effective fallback provisions and are difficult to amend to mature before such LIBOR rates experience disruptions. U.S. bank regulators are, however, encouraging banks to cease entering into new financial contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. Given consumer protection, litigation, and reputation risks, U.S. bank regulators believe entering into new financial contracts that use LIBOR as a reference rate after December 31, 2021 would create safety and soundness risks. In addition, they expect new financial contracts to either utilize a reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation. Although the foregoing may provide some sense of timing, there is no assurance that LIBOR, of any particular currency and tenor, will continue to be published or be representative of the underlying market until any particular date, and it appears highly likely that LIBOR will be discontinued or modified after December 31, 2021 or June 30, 2023, depending on the currency and tenor.

The Alternative Reference Rates Committee, a group of private-market participant convened by the U.S. Federal Reserve Board and the New York Federal Reserve, has recommended Secured Overnight Financing Rate (“SOFR”) 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. 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

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account bank credit risk (as is the case with LIBOR). SOFR is therefore likely to be lower than U.S. dollar LIBOR and is less likely to correlate with the funding costs of financial institutions. To approximate economic equivalence to LIBOR, SOFR can be compounded over a relevant term and a spread adjustment may be added. Market practices related to SOFR calculation conventions continue to develop and may vary, and inconsistent calculation conventions may develop among financial products.

Our term loan, the mortgage loan payable and our credit facility, as well as certain of our floating rate loan assets, are, and other future financings may be, linked to this benchmark rate. 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. Some of our debt and loan assets may not include robust fallback language that would facilitate replacing LIBOR with a clearly defined alternative reference rate after LIBOR’s discontinuation, and we may need to amend these before the IBA ceases to publish LIBOR. 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 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.

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 an adverse effect on our business, results of operations, financial condition, and the market price of our common stock.

While we expect LIBOR to be available in substantially its current form until the end of 2021, if a significant number of panel banks decline to provide LIBOR submissions to the IBA, it is possible that LIBOR will become unrepresentative of the underlying market and subject to increased volatility prior to such date. Should that occur, the risks associated with the transition to alternative reference rates will be accelerated and magnified.

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 business, financial condition and results of operations. 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.

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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:

•tenant mix;

•success of tenant businesses;

•property management decisions;

•property location, condition and design;

•competition from comparable types of properties;

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

•declines in regional or local real estate values;

•declines in regional or local rental or occupancy rates;

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

•costs of remediation and liabilities associated with environmental conditions;

•the potential for uninsured or underinsured property losses;

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

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

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

    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 cash flow from operations and limit amounts available for distribution to our stockholders. 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.

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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, Georgia, New York, North Carolina and Washington representing approximately 42.9%, 22.2%, 16.8%, 8.6% and 5.5% of our net loan portfolio as of December 31, 2020, respectively. 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.

    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, including recently, 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 reduce our net income and the value of our common stock and accordingly reduce our ability to pay dividends to our stockholders.

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:

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

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

•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.

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

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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 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. 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 and may limit our ability to make distributions to our stockholders.

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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 our business, results of operations and financial condition.

    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.

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 negatively impact our financial 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 of directors 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 of directors 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.

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 materially and adversely affect our cost of doing business and profitability.

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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 and adverse effect on our business, results of operation and financial condition.

The impact of financial reform legislation and legislation promulgated thereunder on us is uncertain.

    The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) enacted in 2010 instituted a wide range of reforms that will have an impact on all financial institutions. Many of the requirements called for in the Dodd-Frank Act will be implemented over time, most of which will be subject to implementing regulations over the course of several years. Many of these regulations have yet to be promulgated or are only recently promulgated. In February 2017, former President Trump signed an executive order for a broad review of federal regulation of the U.S. financial system by the Secretary of the Treasury, in consultation with the heads of the member agencies of the Financial Stability Oversight Council, a panel comprising top U.S. financial regulators. In May 2018, the Congress passed, and former President Trump signed, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA”), which among other things, modified certain provisions of the Dodd-Frank Act related to mortgage lending, consumer protection, regulatory relief for large banks, regulatory relief for community banks and regulatory relief in securities markets. The EGRRCPA relaxed or eliminated so-called “enhanced regulation” of banks falling into certain ranges of asset value and will impact the application of the Volcker Rule and the Basel III guidelines as to certain banks. Specifically, the EGRRCPA relaxed (or eliminated) certain risk-based capital and leverage requirements for community banks with less than $10 billion in assets that maintain a certain “community bank leverage ratio” that bank regulators are directed to develop, but the impact and effect of the foregoing on market liquidity is uncertain. It is possible that Democratic majorities in the House and Senate, with the support of the Biden Administration, will roll back some of the changes made by EGRRCPA to the Dodd-Frank Act, although it is not possible at this time to predict the nature or extent of any amendments.

The Biden Administration, along with the Democratic Congress, is likely to focus in the short-term on additional stimulus measures to address the economic impact of the COVID-19 pandemic, rather than comprehensive financial services and banking reform. However, in the long-term the Biden Administration and Congress are likely to take a more active approach to banking and financial regulation than the prior Trump Administration, particularly to promote policy goals involving climate change, racial equity, environmental, social, and corporate governance (“ESG”) matters, consumer financial protection and infrastructure.

    In addition, the substance of regulatory supervision may be influenced through the appointment of individuals to the Federal Reserve Board and other financial regulatory bodies. Measures focused on deregulation of the U.S. financial services industry may, among other things, decrease the restrictions on banks and other financial institutions and allow them to compete with us for investment opportunities that were previously not available to them. Measures focused on deregulation of the U.S. financial services industry may have the effect of increasing competition for our business. Increased competition from banks and other financial institutions in the credit markets could have the effect of reducing credit spreads, which may adversely affect our revenues.

    Given the uncertainty associated with financial reform legislation, including the implementation of the Dodd-Frank Act and any legislative and/or regulatory actions under a Biden Administration and Democratic Congress, the full impact such requirements will have on our business, results of operations or financial condition is unclear. The changes resulting from the Dodd-Frank Act, the EGRRCPA, and other legislative actions may require us to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements or address resulting changes in the mortgage loan market. Failure to comply with any such laws, regulations or principles, or changes thereto, or to adapt to any changes in the marketplace, may negatively impact our business, results of operations and financial condition. While we cannot predict what effect any changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to us and our stockholders.

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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 stockholders.

    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 and could materially and adversely affect the market price of our common stock.

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 our common stock less attractive to investors. In particular, 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.

    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 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. 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:

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

(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 common stock 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 materially and adversely affect our business, financial condition, liquidity and results of operations.

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:

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

•restrictions on specified investments;

•prohibitions on transactions with affiliates; and

•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 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.

    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 would have an adverse effect on our business.

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. If our Manager were to lose the benefit of the experience, efforts and abilities of any of these individuals, our operating results could suffer.

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. Certain of those transactions will be subject to certain regulatory restrictions as a result of the 1940 Act or the conditions of an order granting exemptive relief to our affiliate, Terra Fund 6. There can be no assurance that any

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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.

    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 Vikram S. Uppal, Gregory M. Pinkus and Daniel J. 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 reduce the level of distributions we may be able to pay our stockholders.

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, and the value of our common stock, may decline.

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.

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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 non-performance-based compensation might reduce its incentive to devote its time and effort to seeking assets that provide attractive risk-adjusted returns for our portfolio. This in turn could hurt both our ability to make distributions to our stockholders and the market price of our common stock.

We cannot predict the amounts of compensation to be paid to the Manager.

    Because the fees that we pay to the 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, 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. 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 of directors 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 our term loan and revolving credit facility, 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, 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 cash available for distributions to stockholders. 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 distributions to our stockholders may cause the value of our shares of common stock to decline.

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    Our Manager is authorized to follow broad investment guidelines that have been approved by our board of directors. 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 stockholders. 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 materially and adversely affect us.

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, 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 and adverse effect on our business, financial condition and results of operations.

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 harm our cash flow, results of operations, financial condition and business prospects.

The documents governing our indenture and credit agreement contain, and additional financing arrangements may contain, financial covenants that could restrict our borrowings or subject us to additional risks.

We have borrowed funds under our indenture and credit agreement. The documents that govern the indenture and credit agreement contain, and additional financing arrangements may contain, various financial and other restrictive covenants, including covenants that require us to maintain a certain interest coverage ratio and net asset value and that create a maximum balance sheet leverage ratio. The guaranty relating to our indenture and credit agreement requires us to maintain: (a) a minimum tangible net worth in an amount not less than seventy-five percent (75%) of our 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. Additionally, our revolving credit facility requires us to maintain: (i) an EBITDA to interest expense ratio of not less than 1.00; (ii) cash liquidity of at least $7.0 million; (iii) tangible net worth of at least $200.0 million; and (iii) a total indebtedness to tangible net worth ratio of not more than 1.75 to 1.00. If we fail to satisfy any of the financial or other restrictive covenants, or otherwise default under these agreements, the lenders will have the right to accelerate repayment and terminate the agreements. Accelerating repayment and terminating the agreements will require immediate repayment by us of the borrowed funds, which may require us to

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liquidate assets at a disadvantageous time, causing us to incur further losses and adversely affecting our results of operations and financial condition, which may impair our ability to maintain our current level of distributions.

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.

    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 expose 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.

    The dislocations in the mortgage sector in the financial crisis that began in 2007 have caused many lenders to tighten their lending standards, reduce their lending capacity or exit the market altogether. Further contraction among lenders, insolvency of lenders or other general market disruptions could adversely affect one or more of our potential lenders and could cause one or more of our potential lenders to be unwilling or unable to provide us with financing on attractive terms or at all. This could increase our financing costs and reduce our access to liquidity.

An increase in our borrowing costs relative to the interest we receive on our leveraged assets may adversely affect our profitability and our cash available for distribution to our stockholders.

    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 might reduce earnings and, in turn, cash available for distribution to our stockholders.

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 adversely impact our financial condition.

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 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.

    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.

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

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

•volatility in our industry, the performance of the real estate-related loans we target, interest rates and spreads, the debt or equity markets, the general economy or the real estate market specifically, whether the result of market events or otherwise;

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

•events or circumstances which undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters or threatened or actual armed conflicts;

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

•the degree and nature of our competition;

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

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

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

•an increase in interest rates;

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

•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).

    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.

    Examples of the alternative liquidity transactions that may be available to us include an initial public offering or listing of our shares of common stock on a national securities exchange, a liquidation of our assets or a sale of our company. 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:

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    Trading Value of our Shares: If an alternative liquidity transaction 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, 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.

    Distributions: If an alternative liquidity event 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, 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 90% of our taxable income (excluding net capital gains) to our investors each year in order to maintain our qualification as a REIT.

    Manager Compensation: If an alternative liquidity event 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, 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.

    Transfer Restrictions: If an alternative liquidity event 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, 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.

    Our board of directors 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. As of December 31, 2020, Terra JV held 87.4% of the issued and outstanding shares of our common stock with the remainder 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.

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.

    Through Terra JV, Terra Fund 5 and Terra Fund 7 beneficially own shares of our common stock representing 76.5% and 10.9% of the voting power of our outstanding shares of common stock, respectively. In addition, Terra Offshore REIT owns shares of our common stock representing 12.6% of the voting power of our outstanding shares of common stock. 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:

•the election and removal of directors; and

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

    Our Manager is a subsidiary of Terra Capital Partners, 100% of the voting interest in which is owned by an affiliate of Axar Capital Management. Terra Fund 5 and Terra Fund 7 are managed by Terra Fund Advisors, which is 51% owned by 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 “Voting Agreement”), pursuant to which Terra Fund 5 assigned its rights and obligations under the Voting Agreement to Terra JV. Consistent with the original voting agreement dated February 8, 2018, for the period that Terra REIT Advisors remains 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

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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 Voting Agreement. Other than with respect to the election of directors, the 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 of directors.

    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 at least 90% of our REIT taxable income, although our reported financial results for United States generally accepted accounting principles (“U.S. GAAP”) purposes may differ materially from our REIT taxable income.

For the year ended December 31, 2019, we paid $30.4 million of cash distributions on our common stock, representing total distributions of $2.03 per share. For the year ended December 31, 2020, our board of directors declared total cash distributions of $1.16 per share 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.

    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 Organization and Structure

Certain provisions of Maryland law could inhibit changes in control.

    Certain provisions of the Maryland General Corporation Law (“MGCL”) may have the effect of deterring a third-party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the

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holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock, including:

•“business combination” provisions of the MGCL that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of our then outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder and, thereafter, impose fair price and/or supermajority stockholder voting requirements on these combinations;

•“control share” provisions of the MGCL that provide that a holder of “control shares” of a Maryland corporation (defined as shares which, when aggregated with all other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) has no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and personnel who are also directors; and

•“unsolicited takeover” provisions of the MGCL that permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not yet have.

As permitted by the MGCL, our board of directors has by resolution exempted from the “business combination” provision of the MGC business combinations (1) between us and any other person, provided that such business combination is first approved by our board of directors (including a majority of our directors who are not affiliates or associates of such person) and (2) between us and Apollo and its affiliates and associates and persons acting in concert with any of the foregoing. 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 can be no assurance that these exemptions will not be amended or eliminated at any time in the future.

Our authorized but unissued shares of common and preferred stock may prevent a change in our control.

    Our charter permits our board of directors to authorize us to issue additional shares of our authorized but unissued common or preferred stock. In addition, our board of directors may, without stockholder approval, 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 have the authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the terms of the classified or reclassified shares. As a result, our board of directors may establish a class or series of shares of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for shares of our common stock or otherwise be in the best interest of our stockholders.

Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests.

    Our charter limits the liability of our present and former directors and officers to us and our stockholders 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 or our stockholders for money damages other than liability resulting from:

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

•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.

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Our charter and bylaws contain provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our management.

    Our charter provides that, subject to the rights of holders of any class or series of preferred stock, a director may be removed only with cause upon the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast generally in the election of directors. Vacancies may be filled only by a majority of the remaining directors in office, even if less than a quorum. Pursuant to the Voting Agreement, for so long as the Voting Agreement remains in effect, in the case of any vacancy on the board of directors created by the death, disability, retirement, resignation, refusal to stand for reelection, unwillingness to nominate or removal of a director previously nominated by a party to the Voting Agreement, so long as such party is entitled under the Voting Agreement to nominate an individual to fill such vacancy, the board of directors will fill such vacancy with the individual nominated by such party. Our board has the exclusive power to fix the number of directorships, and the written request of stockholders entitled to cast a majority of all votes entitled to be cast on any matter that may properly be considered at a meeting of stockholders are required to call a special meeting of our stockholders to vote on such matters. These requirements make it more difficult to change our management by removing and replacing directors and may prevent a change in control of our company that is in the best interests of our stockholders.

Ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares.

    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 in which holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.

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.

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 would reduce the amount of cash available for distribution to our stockholders.

    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 ending 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 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 REIT income and quarterly asset requirements also depends upon our ability to manage successfully the composition of our 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.

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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 distributions in order to pay our taxes. Our payment of income tax would reduce significantly the amount of operating cash flow available to be distributed to our stockholders. Furthermore, if we fail to maintain our qualification as a REIT, we no longer would be required to make 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 to our stockholders, each calendar year, 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 adversely affect the value of our common stock.

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 distribution 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 Merger was intended to be treated as a tax-free reorganization for U.S. federal income tax purposes, if the Merger is determined not to have qualified for such tax-free treatment, or if Terra Property Trust 2 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 Property Trust 2 for any periods prior to the Merger for which Terra Property Trust 2 did not qualify as a REIT. Any resulting taxes would decrease the cash available for distribution to our stockholders.

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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% 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. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders. Thus, compliance with the REIT requirements may hinder our ability to make, and, in certain cases, maintain ownership of certain attractive investments.

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 REIT assets tests, and interest derived from such a loan will be treated as qualifying mortgage interest for purposes of the REIT 75% and 95% 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 REIT 95% gross income test, but not for the REIT 75% gross income test, and such mezzanine loans or preferred equity investments would not be qualifying assets for the REIT 75% asset test and would be subject to the REIT 5% and 10% asset tests, which could jeopardize our ability to qualify as a REIT.

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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 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 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.

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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 stockholders, 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 stockholders may be enacted. Changes to the U.S. federal income tax laws and interpretations of U.S. federal tax laws could adversely affect an investment in our common stock.

    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 common stock.

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Your investment has various U.S. federal 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 our common stock.

General Risk Factors

Future recessions, downturns, disruptions or instability could have a materially adverse effect on our business.

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.

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

Future offerings of debt or equity securities, which may rank senior to our common stock, may adversely affect the market price of our common stock.

If we decide to issue debt securities in the future, which would rank senior to our common stock, it is likely that they will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any equity securities or convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our administrative and principal executive offices are located at 550 Fifth Avenue, 6th Floor, New York, New York 10036. We believe that our office facilities are suitable and adequate for our business as it is presently conducted.

Item 3. Legal Proceedings.

Neither we nor our Manager is currently subject to any material legal proceedings, nor, to our knowledge, are material legal proceedings threatened against us or our Manager. From time to time, we and individuals employed by our Manager or its affiliates may be a party to certain legal proceedings in the ordinary course of business. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

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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

    There is no established trading market for our shares of common stock. As of December 31, 2020, we had 19,487,460 shares of common stock outstanding held by two investors. As of December 31, 2020, there were no outstanding options, warrants to purchase our common stock or securities convertible into our shares of common stock.

    U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. We generally intend over time to pay monthly dividends in an amount equal to our net taxable income. Any distributions we make are at the discretion of our board of directors and depend upon our actual results of operations and other factors. These results and our ability to pay distributions are affected by various factors, including the net interest and other income from our portfolio, restrictions under applicable law, our operating expenses and any other expenditures. We are generally not required to make distributions with respect to activities conducted through any of our TRSs, should we decide to form TRSs in the future, except with respect to dividends we receive from such TRSs. To the extent that in respect of any calendar year, cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities. Although not currently anticipated, in the event that our board of directors determines to make distributions in excess of the income or cash flow generated from our target assets, we may make such distributions from the proceeds of future offerings of equity or debt securities or other forms of debt financing or the sale of assets. For more information regarding risk factors that could materially adversely affect our earnings and financial condition, see “Risk Factors.”

    We commenced making distributions to our stockholders in January 2016. Prior to September 30, 2019, all of the outstanding shares of our common stock were held by Terra Fund 5 and our distribution policy, including the amount and frequency of distributions, was determined by our board of directors in part based on Terra Fund 5’s cash requirements, including cash required to fund regular monthly distributions to Terra Fund 5’s unitholders and additional distribution amounts which were used to allow the repurchase of units from such unitholders. In connection with the Merger and the Issuance of Common Stock to Terra Offshore REIT described in “— Business” above, our board of directors has adopted a distribution policy to better match earnings with distributions. The following tables summarize the regular per share distributions declared by our board of directors during the years ended December 31, 2020 and 2019 with the additional distribution amounts to allow repurchase of units being set forth in the footnotes below the table.

Year Ended December 31, 2020
Payment Date	Distributions Per Share of Common Stock
January 29, 2020	$	0.17
February 25, 2020	$	0.17
March 25, 2020	$	0.19
April 28, 2020	$	0.08
May 27, 2020	$	0.07
June 26, 2020	$	0.07
July 29, 2020	$	0.07
August 26, 2020	$	0.07
September 29, 2020	$	0.07
October 27, 2020	$	0.07
November 25, 2020	$	0.07
December 29, 2020	$	0.06
	$	1.16

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Year Ended December 31, 2019
Payment Date	Distributions Per Share of Common Stock
January 31, 2019	$	0.17
February 28, 2019	0.17
March 27, 2019	0.16
April 26, 2019	0.17
May 23, 2019	0.17
June 25, 2019	0.17
July 24, 2019	0.17
August 22, 2019	0.17
September 24, 2019	0.17
October 29, 2019	0.17
November 22, 2019	0.17
December 26, 2019	0.17
	$	2.03

The dividends that will be made in the future are at the discretion of our board of directors and will depend upon, among other things, our actual results of operations and liquidity.

Unregistered Sales of Equity Securities

    On March 1, 2020, Terra Property Trust 2 merged with and into us with us continuing as the surviving company. 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, as consideration in the merger. In addition, on March 2, 2020, Terra Offshore REIT contributed cash and released the obligations under certain participation agreements to us in exchange for the issuance of 2,457,684.59 shares of our common stock. The shares of common stock were issued in private placements in reliance on Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder.

Item 6. Selected Financial Data.

    The selected data presented below under the captions “Operating Data”, “Per Share Data” and “Balance Sheet Data” as of and for the years ended December 31, 2020 and 2019 are derived from our consolidated financial statements, which have been audited by KPMG LLP, an independent registered public accounting firm. The data should be read in conjunction with our “Management's Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto.

	Years Ended December 31,
	2020		2019
Operating Data:
Total revenues	$	50,320,888	$	51,399,525
Total operating expenses	26,667,214		22,607,397
Other income and (expenses)	(18,397,944)		(19,749,353)
Net income	$	5,255,730	$	9,042,775
Net income allocable to common stock	$	5,240,106	$	9,027,151
Per Share Data:
Net income per share of common stock
Basic and diluted	$	0.28	$	0.60
Distribution declared per share of common stock	$	1.16	$	2.03

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	December 31,
	2020		2019
Balance Sheet Data:
Loans held for investment, net	$	422,280,515	$	378,612,768
Equity investment in a limited partnership	36,259,959		—
Real estate owned, net	73,178,939		77,596,475
Other assets	56,757,768		71,133,835
Total assets	588,477,181		527,343,078
Debt	239,132,654		227,548,397
Lease intangible liabilities	10,249,776		11,424,809
Other liabilities	35,769,686		40,826,139
Total liabilities	285,152,116		279,799,345
Equity	$	303,325,065	$	247,543,733

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

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

Overview

    We are a real estate credit focused company that originates, structures, funds and manages high yielding 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 of this size are subject to less competition, offer higher risk adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. Our objective is to continue 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 objective.

    As of December 31, 2020, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of 20 loans in eight states with an aggregate net principal balance of $334.6 million, a weighted average coupon rate of 8.1%, a weighted average loan-to-value ratio of 76.0% and a weighted average remaining term to maturity of 1.59 years.

    Each of our loans was originated by Terra Capital Partners or its affiliates. Our portfolio is diversified geographically with underlying properties located in 20 markets across eight states and by loan structure and property type. The portfolio includes diverse property types such as multifamily housing, condominiums, hotels, student housing, commercial offices, medical offices and mixed-use 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, and preferred equity investments.

    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. Following the REIT formation transaction, Terra Fund 5 contributed the consolidated portfolio of net assets of the Terra Funds to our company in exchange for all of the shares of our common stock.

    On March 1, 2020, Terra Property Trust 2 merged with and into our company and we continued as the surviving corporation. 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. 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. The shares of common stock were issued in private placements in

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reliance on Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder. We consummated these transactions with the objective of increasing the size and scale of our loan portfolio, further strengthening our balance sheet and positioning us for future growth. On April 29, 2020, we repurchased the 212,691 shares of common stock we had previously sold to Terra Offshore REIT on September 30, 2019. As of December 31, 2020, Terra JV held 87.4% of the issued and outstanding shares of our common stock with the remainder 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

    As of December 31, 2020, there has been an ongoing global outbreak of a novel coronavirus, or COVID-19, which has spread to over 200 countries and territories, including the United States, and has spread to every state in the United States. The World Health Organization has designated COVID-19 as a pandemic, and numerous countries, including the United States, have declared national emergencies with respect to COVID-19. The global impact of the pandemic has been rapidly evolving, and as cases of COVID-19 have continued to be identified in additional countries, many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading, and limiting operations of non-essential offices and retail centers. Such actions are creating disruption in global supply chains, increasing rates of unemployment and adversely impacting many industries. The pandemic could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.

    We believe that compelling opportunities for us will emerge as a result of the economic downtown caused by the COVID-19 pandemic. While it has had a demonstrable effect on employment, the economy and the national psyche, the impact of the pandemic on property values has yet to be fully realized. The reason is that property values are the result of slow moving forces, including consumer behavior, supply and demand for space, availability and pricing of mortgage financing and investor demand for property. As these factors become clear and commercial real estate is repriced accordingly, we believe there will be abundant opportunities available to experienced alternative lenders such as us to provide financing for property acquisition, refinancing, development and redevelopment on attractive terms that reflect the new realities of the economy. 

Portfolio Summary

The following tables provide a summary of our net loan portfolio as of December 31, 2020 and 2019:

	December 31, 2020
	Fixed Rate			Floating Rate (1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements and Secured Borrowing			Total Net Loans
Number of loans	6			14			20			8			20
Principal balance	$	56,335,792		$	367,838,966		$	424,174,758		$	89,548,151		$	334,626,607
Amortized cost	56,464,310			365,816,205			422,280,515			89,769,560			332,510,955
Fair value	56,284,334			363,122,860			419,407,194			87,730,239			331,676,955
Weighted average coupon rate	12.17		%	7.95		%	8.51		%	10.16		%	8.07		%
Weighted-average remaining term (years)	1.78			1.44			1.48			1.08			1.59

	December 31, 2019
	Fixed Rate			Floating Rate (1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements		Total Net Loans
Number of loans	8			15			23			13		23
Principal balance	$	70,692,767		$	306,695,550		$	377,388,317		102,564,795		$	274,823,522
Amortized cost	71,469,137			307,143,631			378,612,768			103,186,327		275,426,441
Fair value	71,516,432			307,643,983			379,160,415			103,188,783		275,971,632
Weighted average coupon rate	11.93		%	9.13		%	9.65		%	11.77	%	8.87		%
Weighted-average remaining term (years)	2.28			2.09			2.13			1.58		2.33

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_______________

(1)These loans pay a coupon rate of LIBOR plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.14% and 1.76% as of December 31, 2020 and 2019.

(2)As of December 31, 2020, amounts included $184.2 million of senior mortgages used as collateral for $107.6 million of borrowings under a term loan (Note 9). These borrowings bear interest at an annual rate of LIBOR plus 4.25% with a LIBOR floor of 1.00% as of December 31, 2020. As of December 31, 2019, amount included $114.8 million of senior mortgages used as collateral for $81.1 million of borrowings under a repurchase agreement (Note 9). These borrowings bore interest at an annual rate of LIBOR plus a spread ranging from 2.25% to 2.50% as of December 31, 2019. The repurchase agreement was terminated in September 2020.

(3)As of both December 31, 2020 and 2019, twelve of these loans are subject to a LIBOR floor.

    In addition to our net loan portfolio, as of December 31, 2020 and December 31, 2019, we own 4.9 acres of adjacent land acquired via deed in lieu of foreclosure and a multi-tenant office building acquired via foreclosure. The land and building and related lease intangible assets and liabilities had a net carrying value of $62.9 million and $66.2 million as of December 31, 2020 and 2019, respectively. The mortgage loan payable encumbering the office building had an outstanding principal amount of $44.0 million and $44.6 million as of December 31, 2020 and 2019, respectively.

Additionally, as of December 31, 2020, we owned a 90.3%, or $36.3 million, equity interest in a limited partnership that invests in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets.

Portfolio Investment Activity

    For the years ended December 31, 2020 and 2019, we invested $37.9 million and $53.5 million in new and/or add-on loans, respectively, and had $21.0 million and $84.3 million of repayments, respectively, resulting in net investments of $16.8 million and net repayment of $30.8 million, respectively. Amounts are net of obligations under participation agreements, secured borrowing, borrowings under the master repurchase agreement and the term loan. Additionally, for the year ended December 31, 2020, we used $35.9 million to purchase equity interest in a limited partnership. There was no such purchase for the year ended December 31, 2019.

    In addition, in March 2020, we issued an aggregate of 4,574,470.35 shares of our common stock in exchange for the obligation relief of an aggregate of $49.8 million of participation interests in loans that we owed, cash of $25.5 million and other working capital, in connection with the Merger and Issuance of Common Stock to Terra Offshore REIT transactions described under “Item 1. Business.”

For the year ended December 31, 2020, we sold $6.0 million of marketable securities, and recognized net gains on sale of marketable securities of $1.2 million.

    In January 2019, we acquired 4.9 acres of adjacent land encumbering a $14.3 million first mortgage via deed in lieu of foreclosure in exchange for the release of the first mortgage and related fees and expenses.

Net Loan Portfolio Information

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

	December 31, 2020						December 31, 2019
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	209,660,270	$	210,694,778	63.3	%	$	160,984,996	$	160,948,585	58.4	%
Preferred equity investments	101,019,788		101,267,732		30.5	%	84,202,144		84,485,061		30.7	%
Mezzanine loans	23,946,549		24,287,203		7.3	%	29,636,382		29,992,795		10.9	%
Allowance for loan losses	—		(3,738,758)		(1.1)	%	—		—		—	%
Total	$	334,626,607	$	332,510,955	100.0	%	$	274,823,522	$	275,426,441	100.0	%

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	December 31, 2020						December 31, 2019
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	145,560,299	$	146,010,011	44.0	%	$	119,331,369	$	119,145,879	43.3	%
Hotel	53,392,809		53,687,304		16.1	%	41,239,194		41,327,772		15.0	%
Multifamily	52,605,773		53,061,857		16.0	%	49,017,844		49,331,885		17.9	%
Student housing	51,331,905		51,680,581		15.5	%	26,470,740		26,725,148		9.7	%
Infill land	22,615,821		22,669,559		6.8	%	29,644,375		29,756,375		10.8	%
Industrial	7,000,000		7,000,000		2.1	%	7,000,000		7,000,000		2.5	%
Condominium	2,120,000		2,140,401		0.6	%	2,120,000		2,139,382		0.8	%
Allowance for loan losses	—		(3,738,758)		(1.1)	%	—		—		—	%
Total	$	334,626,607	$	332,510,955	100.0	%	$	274,823,522	$	275,426,441	100.0	%

	December 31, 2020						December 31, 2019
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	143,454,602	$	144,066,584	43.3	%	$	102,774,905	$	102,622,718	37.3	%
Georgia	74,116,787		74,505,752		22.4	%	61,772,764		61,957,443		22.5	%
New York	56,058,669		56,139,234		16.9	%	52,909,847		53,029,923		19.3	%
North Carolina	28,647,837		28,802,869		8.7	%	28,283,950		28,421,676		10.3	%
Washington	18,500,000		18,643,699		5.5	%	13,525,556		13,618,636		4.9	%
Massachusetts	7,000,000		7,000,000		2.1	%	7,000,000		7,000,000		2.5	%
Texas	3,848,712		3,887,200		1.2	%	2,450,000		2,472,244		0.9	%
Illinois	—		—		—	%	2,209,189		2,227,593		0.8	%
Other (1)	3,000,000		3,204,375		1.0	%	3,897,311		4,076,208		1.5	%
Allowance for loan losses	—		(3,738,758)		(1.1)	%	—		—		—	%
Total	$	334,626,607	$	332,510,955	100.0	%	$	274,823,522	$	275,426,441	100.0	%

_______________

(1)As of December 31, 2020, Other includes $3.0 million of loans with collateral located in South Carolina. As of December 31, 2019, Other includes $0.3 million of unused portion of a credit facility, a $1.7 million of loans with collateral located in Kansas, and $1.9 million of loans with collateral located in South Carolina.

Factors Impacting Operating Results

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

Credit Risk

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

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

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    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 its investments.

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

    The COVID-19 pandemic has significantly impacted the commercial real estate markets, causing reduced occupancy, requests from tenants for rent deferral or abatement, and delays in construction and development projects currently planned or underway. These negative conditions may persist into the future and impair our borrowers’ ability to pay principal and interest due to us under our loan agreements.

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

Concentration Risk

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

Interest Rate Risk

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

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

Prepayment Risk

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

Extension Risk

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

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Real Estate Risk

    The market values of commercial and residential mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and 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. Market volatility has been particularly heightened due to the COVID-19 global pandemic. COVID-19 has disrupted economic activities and could have a continued significant adverse effect on economic and market conditions including limited lending from financial institutions, depressed asset values, and limited market liquidity.

Use of Leverage

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

Market Risk

    Our loans are highly illiquid and there is no assurance that we will achieve our 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.

    The COVID-19 pandemic has resulted in extreme volatility in a variety of global markets, including the real estate-related debt markets. U.S. financial markets, in particular, are experiencing limited liquidity and forced selling by certain market participants with insufficient liquidity available to meet current obligations, which puts further downward pressure on asset prices. In reaction to these tumultuous and unpredictable market conditions, banks and other lenders have generally restricted lending activity and requested margin posting or repayments where applicable for secured loans collateralized by assets with depressed valuations.

Results of Operations

    The following table presents the comparative results of our operations for the years ended December 31, 2020 and 2019:

	Years Ended December 31,
	2020		2019		Change
Revenues
Interest income	$	39,392,209	$	40,888,079	$	(1,495,870)
Real estate operating revenue	10,423,563		9,806,507		617,056
Prepayment fee income	—		285,838		(285,838)
Other operating income	505,116		419,101		86,015
	50,320,888		51,399,525		(1,078,637)
Operating expenses
Operating expenses reimbursed to Manager	6,041,075		4,875,153		1,165,922
Asset management fee	4,480,706		3,671,474		809,232
Asset servicing fee	1,008,256		854,096		154,160
Provision for loan losses	3,738,758		—		3,738,758
Real estate operating expenses	4,505,119		3,989,911		515,208
Depreciation and amortization	4,635,980		3,785,977		850,003
Impairment charge	—		1,550,000		(1,550,000)
Professional fees	1,695,876		3,373,554		(1,677,678)
Directors fees	190,000		335,000		(145,000)
Other	371,444		172,232		199,212
	26,667,214		22,607,397		4,059,817
Operating income	23,653,674		28,792,128		(5,138,454)

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	Years Ended December 31,
	2020		2019		Change
Other income and expenses
Interest expense from obligations under participation agreements	$	(8,514,804)	$	(11,773,346)	$	3,258,542
Interest expense on repurchase agreement payable	(3,727,466)		(4,713,440)		985,974
Interest expense on mortgage loan payable	(2,976,913)		(3,093,284)		116,371
Interest expense on revolving credit facility	(1,398,103)		(169,283)		(1,228,820)
Interest expense on term loan payable	(2,137,651)		—		(2,137,651)
Interest expense on secured borrowing	(633,850)		—		(633,850)
Net loss on extinguishment of obligations under participation agreements	(319,453)		—		(319,453)
Realized gains on marketable securities	1,160,162		—		1,160,162
Unrealized gains on marketable securities	111,494		—		111,494
Income from equity investment in a limited partnership	38,640		—		38,640
	(18,397,944)		(19,749,353)		1,351,409
Net income	$	5,255,730	$	9,042,775	$	(3,787,045)

Net Loan Portfolio

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

    The following tables presents a reconciliation of our loan portfolio from a gross basis to net basis for the years ended December 31, 2020 and 2019:

	Year Ended December 31, 2020				Year Ended December 31, 2019
	Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)		Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)
Total portfolio
Gross loans	$	411,157,772	9.2	%	$	363,970,662	10.6	%
Obligations under participation agreements and secured borrowing	(83,248,489)		10.9	%	(95,809,439)		12.0	%
Repurchase agreement payable	(64,382,360)		3.9	%	(64,326,187)		4.3	%
Term loan payable	(34,923,075)		5.3	%	—		—	%
Revolving credit facility	—		—	%	(504,110)		6.1	%
Net loans (3)	$	228,603,848	10.7	%	$	203,330,926	11.9	%
Senior loans
Gross loans	221,461,896		6.7	%	133,437,181		7.7	%
Obligations under participation agreements and secured borrowing	(30,779,483)		9.1	%	(8,832,644)		11.7	%
Repurchase agreement payable	(64,382,360)		3.9	%	(64,326,187)		4.3	%
Term loan payable	(34,923,075)		5.3	%	—		—	%
Net loans (3)	$	91,376,978	8.4	%	$	60,278,350	10.7	%
Subordinated loans (4)
Gross loans	189,695,876		12.1	%	230,533,481		12.3	%
Obligations under participation agreements and secured borrowing	(52,469,006)		12.1	%	(86,976,795)		12.1	%
Revolving credit facility	—		—	%	(504,110)		6.1	%
Net loans (3)	$	137,226,870	12.1	%	$	143,052,576	12.5	%

_______________

(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.

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(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.

    For the year ended December 31, 2020 as compared to the same period in 2019, the decrease in weighted average coupon rate was primarily due to a higher volume of loan originations with lower coupon rates.

Interest Income

    For the year ended December 31, 2020 as compared to the same period in 2019, interest income decreased by $1.5 million, primarily due to a net decrease of $0.7 million in origination and disposition fee income received and a decrease in contractual interest income of $0.9 million. Contractual interest income decreased as a result of a decrease in the weighted average interest rate on gross loans driven by new loan originations having lower coupon rates than those of the loans that were repaid, partially offset by an increase in the weighted average principal balance of gross loans driven by higher volume of new loan originations than repayments.

Real Estate Operating Revenue

For the year ended December 31, 2020 as compared to the same period in 2019, real estate operating revenue increased by $0.6 million, primarily due to lease termination fee income received and the write-off of the unamortized below-market rent intangible liabilities in connection with a lease termination, partially offset by a decrease in parking fee income.

Prepayment Fee Income

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

    For the year ended December 31, 2020, there was no prepayment fee income. For the year ended December 31, 2019, we received prepayment fee income of $0.3 million on the early repayment of a loan.

Operating Expenses Reimbursed to Manager

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

    For the year ended December 31, 2020 as compared to the same period in 2019, operating expenses reimbursed to Manager increased by $1.2 million, primarily due to an increase in our allocation ratio in relation to affiliated funds managed by our Manager and its affiliates as a result of the Merger and Issuance of Common Stock to Terra Offshore REIT transactions described under “Item 1. Business.”

Asset Management Fee

    Under the terms of the management agreement with the Manager, we paid the 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 for each real estate-related investment and cash held by us.

    For the year ended December 31, 2020 as compared to the same period in 2019, asset management fee increased by $0.8 million, primarily due to an increase in total funds under management resulting from new investments we entered into as well as the Merger and Issuance of Common Stock to Terra Offshore REIT transactions.

Asset Servicing Fee

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

    For the year ended December 31, 2020 as compared to the same period in 2019, asset servicing fee increased by $0.2 million, primarily due to an increase in total funds under management.

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Provision for Loan Losses

    The 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.

    As of December 31, 2020, we had three loans with a loan risk rating of “4” and one loan with a loan risk rating of “5” and recorded a general provision for loan losses of $1.3 million for the year ended December 31, 2020. Additionally, as of December 31, 2020, we had one loan that was deemed impaired and recorded a specific provision for loan losses of $2.5 million for the year ended December 31, 2020, as a result of a decline in the fair value of the collateral. There was no provision for loan losses for the year ended December 31, 2019 because we didn't have any loans with a loan risk rating of “4” or “5” as of December 31, 2019. For the years ended December 31, 2020 and 2019, we did not record any specific allowance for loan losses.

Real Estate Operating Expenses

    Real estate operating expenses represent expenses incurred by the multi-tenant office building and the land, which include repairs and maintenances, utilities, real estate taxes, management fees and other operating expenses incurred in connection with the operation of the office building and the maintenance of the land.

    For the year ended December 31, 2020 as compared to the same period in 2019, real estate operating expenses increased by $0.5 million, primarily due to an increase in real estate taxes.

Depreciation and Amortization

For the year ended December 31, 2020 as compared to the same period in 2019, depreciation and amortization expense increased by $0.9 million, as a result of the write off of in-place lease intangible assets in connection with a lease termination.

Impairment Charge

We did not record any impairment charge for the year ended December 31, 2020. For the year ended December 31, 2019, we recorded an impairment charge of $1.6 million on the 4.9 acres of adjacent land that we acquired via deed in lieu of foreclosure 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.

Professional Fees

    For the year ended December 31, 2020 as compared to the same period in 2019, professional fees decreased by $1.7 million, primarily due to $2.4 million of professional fees directly incurred in the second quarter of 2019, and which were previously deferred, in contemplation of us becoming a public entity, partially offset by additional professional fees incurred in connection with financial reporting compliance since becoming a public reporting entity in December 2019.

Directors Fees

For the year ended December 31, 2020 as compared to the same period in 2019, directors fees decreased by $0.1 million, reflecting the reduction in the number of independent directors in connection with the Merger and the Issuance of Common Stock to Terra Offshore REIT transactions.

Other

For the year ended December 31, 2020 as compared to the same period in 2019, other operating expenses increased by $0.2 million, primarily due to an increase in un-reimbursed transaction-related costs.

Interest Expense from Obligations under Participation Agreements

    For the year ended December 31, 2020 as compared to the same period in 2019, interest expense from obligations under participation agreements decreased by $3.3 million, primarily due to a decrease in weighted average outstanding principal balance on obligations under participation agreements as a result of the Merger and Issuance of Common Stock to Terra

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Offshore REIT transactions as well as a decrease in the weighted average coupon rate on obligations under participation agreements.

Interest Expense on Repurchase Agreement Payable

    On December 12, 2018, we entered into a master repurchase agreement that provides for advances of up to $150.0 million in the aggregate, which we use to finance certain secured performing commercial real estate loans. Advances under the master repurchase agreement accrue interest at a per annum pricing rate equal to the sum of (i) the 30-day LIBOR and (ii) the applicable spread. On September 3, 2020, we terminated the master repurchase agreement and replaced it with the indenture and credit agreement.

    For the year ended December 31, 2020 as compared to the same period in 2019, interest expense on repurchase agreement payable decreased by $1.0 million as a result of a decrease in the weighted average amount outstanding.

Interest Expense on Revolving Credit Facility

    On June 20, 2019, we entered into a credit agreement to provide for revolving credit loans of up to $35.0 million in the aggregate, which we use for short term financing needed to bridge the timing of anticipated loans repayments and funding obligations. On October 2, 2020, we amended the credit facility and reduced the commitment to $15.0 million. On March 16, 2021, the credit facility was terminated.

    For the year ended December 31, 2020 as compared to the same period in 2019, interest expense on revolving credit facility increased by $1.2 million, as a result of an increase in the weighted average amount outstanding.

Interest Expense on Term Loan Payable

On September 3, 2020, we entered into an indenture and credit agreement that provides for a floating rate loan of $103.0 million, $3.6 million of additional future advances, and may provide 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 currently bears interest at LIBOR plus 4.25% with a LIBOR floor of 1.0%.

For the year ended December 31, 2020, interest expense on term loan payable was $2.1 million. There was no interest expense on term loan payable for the year ended December 31, 2019 because the indenture and credit agreement was entered into on September 3, 2020.

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.

For the year ended December 31, 2020, interest expense on secured borrowing was $0.6 million. There was no interest expense on secured borrowing for the year ended December 31, 2019.

Net Loss on Extinguishment of Obligations under Participation Agreements

    In March 2020, as a result of the Merger and Issuance of Common Stock to Terra Offshore REIT transactions, we settled an aggregate of $49.8 million of participation interests in loans that we owned with affiliates and recognized a net loss on extinguishment of obligations under participation agreements of $0.3 million, which was primarily related to transaction costs incurred in connection with both transactions.

Realized Gains on Marketable Securities

For the year ended December 31, 2020, we sold $6.0 million of marketable securities, respectively, and recognized realized gains on marketable securities of $1.2 million. There were no sales of marketable securities for the year ended December 31, 2019.

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Net Income

    For the year ended December 31, 2020 as compared to the same period in 2019, the resulting net income decreased by $3.8 million.

Financial Condition, Liquidity and Capital Resources

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

    We may also issue additional equity, equity-related and debt securities to fund our investment strategies. We may issue these securities to unaffiliated third parties or to vehicles advised by affiliates of Terra Capital Partners or third parties. As part of our capital raising transactions, we may grant to one or more of these vehicles certain control rights over our activities including rights to approve major decisions we take as part of our business. In order to qualify as a REIT, we must distribute to our stockholders, each calendar year, 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.

    Our obligations under participation agreements totaling $21.3 million will mature in the next twelve months. We expect to use the proceeds from the repayment of the corresponding investments to repay the participation obligations. Additionally, we expect to fund approximately $64.1 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. Additionally, we had $44.0 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 September 27, 2022.

On September 3, 2020, we entered into an indenture and credit agreement that provides for a floating rate term loan of $103.0 million, $3.6 million of additional future advances, and may provide up to $11.6 million of additional future discretionary advances, in connection with certain outstanding funding commitments under mortgage assets owned by us and financed under the indenture and credit agreement. The floating rate term loan bears interest at a rate equal to LIBOR plus 4.25% with a LIBOR floor of 1.0%, and matures on March 14, 2025. As of December 31, 2020, the amount outstanding under the indenture and credit agreement was $107.6 million. The indenture and credit agreement is a term loan and does not contain any mark-to-market or margin provisions. The indenture and credit agreement replaces the master repurchase agreement, which has been terminated on the same date.

    On June 20, 2019, we entered into a credit agreement that provides for revolving credit loans of up to $35.0 million in the aggregate, which we expect to use for short term financing needed to bridge the timing of anticipated loans repayments and funding obligations. On October 2, 2020, we amended the revolving credit facility, reduced the commitment amount to $15.0 million and extended the maturity to September 2, 2021. On March 16, 2021, the credit facility was terminated. Borrowings under the revolving credit facility can be either prime rate loans or LIBOR rate loans and accrued interest at an annual rate of prime rate plus 1% or LIBOR plus 4% with a floor of 4.5%. As of December 31, 2020, the amount remaining available under the credit facility was $15.0 million.

Cash Flows From Operating Activities

    For the year ended December 31, 2020 as compared to the same period in 2019, cash flows from operating activities decreased by $9.6 million, primarily due to a decrease contractual interest income received in cash, an increase in operating expenses and an increase in interest expense on our borrowings.

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Cash Flows Used In Investing Activities

    For the year ended December 31, 2020, cash flows used in investing activities were $78.2 million, primarily related to payments for investments of $150.4 million, partially offset by proceeds from sales and repayments of investments of $72.2 million.

    For the year ended December 31, 2019, cash flows used in investing activities were $4.4 million, primarily related to origination and purchase of loans of $185.3 million, partially offset by proceeds from repayments of loans of $181.1 million.

Cash Flows From Financing Activities

    For the year ended December 31, 2020, cash flows from financing activities were $52.7 million, primarily due to proceeds from obligations under participation agreements of $22.5 million, proceeds from borrowings under our repurchase agreement of $22.9 million, cash acquired from Terra Property Trust 2 of $16.9 million and cash contributed by Terra Offshore REIT of $8.6 million, partially offset by distributions paid of $21.2 million, a decrease in interest reserve and other deposits held on investments of $6.4 million, payment for repurchase of common stock of $3.6 million and repayments on obligations under participation agreements of $5.9 million. Additionally, we replaced the repurchase agreement with an indenture and credit agreement, and received proceeds from borrowings under the indenture and credit agreement of $107.6 million and made repayments for borrowings under the repurchase agreement of $104.0 million, and made payments for financing costs of $2.4 million. We also received proceeds of $35.0 million from borrowings under revolving credit facility which we repaid in the same period.

    For the year ended December 31, 2019, cash flows from financing activities were $8.9 million, primarily due to proceeds from borrowings under repurchase agreement of $81.1 million, proceeds from obligations under participation agreements of $34.7 million, an increase in interest reserve and other deposits held on investments of $1.2 million and proceeds from issuance of common stock of $3.6 million, partially offset by repayments of borrowings under our repurchase agreement of $34.2 million, repayments on obligations under participation agreements of $46.2 million and distributions paid of $30.4 million. Additionally, we received proceeds of $16.0 million from borrowings under revolving credit facility which we repaid in the same period.

Critical Accounting Policies and Use of Estimates

    Our consolidated financial statements are prepared in conformity with U.S. GAAP, 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

    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,

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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.

    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.

    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”, plus (ii) 5% of the aggregate carrying amount of loans rated as a “5”, plus (iii) impaired loan reserves, if any.

    There may be circumstances where 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.

Income Taxes

    We elected to be taxed as a REIT and to comply with the related provisions of the Internal Revenue Code. Accordingly, we generally are not subject to U.S. federal income tax on income and gains distributed to our stockholders as long as certain asset, income and share ownership tests are met. To maintain our qualification as a REIT, we must annually distribute at least 90% of our net taxable income to our stockholders and meet certain other requirements. We may also be subject to certain state, local and franchise taxes. Under certain circumstances, U.S. federal income and excise taxes may be due on our undistributed taxable income. If we were to fail to meet these requirements, we would be subject to U.S. federal corporate income tax, which could have a material adverse impact on our results of operations and amounts available for distributions to our stockholders. We believe that all of the criteria to maintain our REIT qualification have been met for the applicable period, but there can be no assurance that these criteria will continue to be met in subsequent periods.

    We 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 we have any unrecognized tax benefits as of the periods presented herein. We recognize interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in our consolidated statements of operations. For the years ended December 31, 2020 and 2019, we did not incur any interest or penalties.

    Our 2017-2019 federal tax return remains subject to examination and consequently, the taxability of the distributions and other tax positions taken by us may be subject to change. Distributions to stockholders generally will be taxable as ordinary income or may constitute a return of capital. We will furnish annually to each stockholder a statement setting forth distributions paid during the preceding year and their U.S. federal income tax treatment.

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Contractual Obligations

    The following table provides a summary of our contractual obligations at December 31, 2020:

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Obligations under participation    agreements — principal (1)	$	71,266,303	$	21,309,495	$	49,956,808	$	—	$	—
Secured borrowing — principal (1)	18,281,848		—		18,281,848		—		—
Mortgage loan payable — principal (2)	44,020,225		789,486		43,230,739		—		—
Term loan payable — principal (3)	107,584,451		—		—		107,584,451		—
Interest on borrowings (4)	39,893,632		14,723,571		17,926,263		7,243,798		—
Unfunded lending commitments (5)	67,904,211		64,129,777		3,774,434		—		—
Ground lease commitment (6)	83,193,563		1,264,500		2,529,000		2,529,000		76,871,063
	$	432,144,233	$	102,216,829	$	135,699,092	$	117,357,249	$	76,871,063

___________________________

(1)In the normal course of business, we enter into participation agreements with related parties, and to a lesser extent, unrelated parties, whereby we transfer a portion of the loans to them. Additionally, we may sell a portion of a loan to a third-party. These loan participations and sale do not qualify for sale treatment. As such, the loans remain on our consolidated balance sheets and the proceeds are recorded as obligations under participation agreements or secured borrowing, as applicable. Similarly, interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest or sold interest is recorded within “Interest expense on obligations under participation agreements” or “Interest expense on secured borrowing”, as applicable, in the consolidated statements of operations. We have no direct liability to a participant under our participation agreements with respect to the underlying loan, and the participants’ share of the loan is repayable only from the proceeds received from the related borrower/issuer of the loans.

(2)Amount excludes unamortized origination and exit fees of $0.1 million.

(3)Amount excludes unamortized deferred financing costs of $2.3 million.

(4)Interest was calculated using the applicable annual variable interest rate and balance outstanding at December 31, 2020. Amount represents interest expense through maturity plus exit fee as applicable.

(5)Certain of our loans provide for a commitment to fund the borrower at a future date. As of December 31, 2020, we had eight of such loans with total funding commitments of $285.2 million, of which $217.3 million had been funded.

(6)Represents rental obligation under the ground lease, inclusive of imputed interest, for our office building that it acquired through foreclosure.

The table above does not include our commitment under a subscription agreement with Terra RECO to fund up to $50.0 million to purchase the limited partnership interests in Terra RECO as the subscription agreement does not have fixed or determinable payments. As of December 31, 2020, the unfunded commitment was $14.1 million.

Management Agreement with Terra REIT Advisors

    We currently pay the following fees to Terra REIT Advisors pursuant to a management agreement:

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

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

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

    Disposition Fee. A disposition fee in the amount of 1.0% of the gross sale price received by our company from the disposition of each loan, but not upon the maturity, prepayment, workout, modification or extension of a loan unless there is a

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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.

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

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

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

	Years Ended December 31,
	2020		2019
Origination and extension fee expense (1)(2)	$	1,383,960	$	1,992,492
Asset management fee	4,480,706		3,671,474
Asset servicing fee	1,008,256		854,096
Operating expenses reimbursed to Manager	6,041,075		4,875,153
Disposition fee (3)	504,611		1,408,055
Total	$	13,418,608	$	12,801,270

_______________

(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 year ended December 31, 2020 excluded $0.4 million of origination fee paid to the Manager in connection with our equity investment in a limited partnership. This origination fee was capitalized to the carrying value of the equity investment as transaction cost.

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

Participation Agreements and Secured Borrowing

    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 March 2020, we settled an aggregate of $49.8 million of participation interests in loans held by us with affiliates. In connection with the Merger and Issuance of Common Stock to Terra Offshore REIT, the related participation obligations were settled.

    As of December 31, 2020, the principal balance of our participation obligations totaled $71.3 million, consisting of $40.2 million in participation obligations to Terra Fund 6 and $31.1 million in participation obligations to third-parties. Additionally, as of December 31, 2020, the principal balance of our secured borrowing was $18.3 million.

    Terra Fund 6 is managed by Terra Income Advisors, an affiliate of our Manager. If we enter into participation agreements in the future, we generally expect to enter into such agreements only at the time of origination of the investment. Our Manager may experience conflicts in allocating investments as a result of differing compensation arrangements of the Manager and its affiliates and Terra Fund 6.

    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

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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).

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

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

    For the year ended December 31, 2020, the weighted average outstanding principal balance on obligations under participation agreements and secured borrowing was approximately $83.2 million, and the weighted average interest rate was approximately 10.9%, compared to weighted average outstanding principal balance of approximately $95.8 million, and weighted average interest rate of approximately 12% for the year ended December 31, 2019.

Off-Balance Sheet Arrangements

Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not have any off-balance sheet financings or liabilities.

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

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

    As of December 31, 2020, we had 14 investments with an aggregate principal balance of $292.2 million, net of obligations under participation agreements, that provide for interest income at an annual rate of LIBOR plus a spread, 12 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 $0.1 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 $0.7 million.

    Additionally, we had $44.0 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; and $107.6 million of borrowings outstanding under an indenture and credit facility that bear interest at an annual rate of LIBOR plus 4.25% with a LIBOR floor of 1.0% collateralized by $184.2 million of first mortgages. A decrease of 100 basis points in LIBOR had no impact on our total annual interest expense because the debts are protected by LIBOR floors and an increase of 100 basis points in LIBOR would increase our annual interest expense by approximately $0.2 million.

    At the end of 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR could be discontinued. 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.

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

    We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts, subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. For the years ended December 31, 2020 and 2019, we did not engage in interest rate hedging activities.

Prepayment Risks

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

Extension Risk

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

Real Estate Risk

    The market values of commercial and residential mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and 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. Market volatility has been particularly heightened due to the COVID-19 global pandemic. COVID-19 has disrupted economic activities and could have a continued significant adverse effect on economic and market conditions including limited lending from financial institutions, depressed asset values, and limited market liquidity.

Credit Risk

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

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

    The COVID-19 pandemic has significantly impacted the commercial real estate markets, causing reduced occupancy, requests from tenants for rent deferral or abatement, and delays in construction and development projects currently planned or underway. These negative conditions may persist into the future and impair our borrowers’ ability to pay principal and interest due to us under our loan agreements.

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Item 8. Financial Statements and Supplementary Data.

    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.

    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, 2020. 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 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

    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.

On March 12, 2021, Terra Mortgage Portfolio II, LLC, our indirect wholly-owned subsidiary, entered into a Business Loan and Security Agreement (the “Revolving Line of Credit”) with Western Alliance Bank (“WAB”) to provide for advances up to

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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 matures on March 12, 2023 with an annual 12-month extension available at our’s option, which are subject to certain conditions.

In connection with the Revolving Line of Credit, we entered into a limited guaranty (the “Guaranty”) in favor of WAB, pursuant to which we will guarantee 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, we will be required to maintain (i) a minimum total net worth of $250.0 million; (ii) a $2.0 million quarterly operating profit; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00.

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 our debt obligations or those of Terra Mortgage Portfolio II, LLC. 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, we pledged a $11.5 million first mortgage to the borrowing base and drew down $8.0 million on the Revolving Line of Credit.

The foregoing descriptions of the Revolving Line of Credit and the Guaranty are not complete and are qualified in their entirety by reference to the full text of the Revolving Line of Credit and the Guaranty, copies of which are attached as Exhibits 10.8 and 10.9 of this Annual Report on Form 10-K and are incorporated herein by reference.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

    Set forth below is the information concerning our directors and executive officers.

Board of Directors

    Our board of directors consists of four members. Our board of directors has determined that each of our directors satisfies the listing standards for independence of the New York Stock Exchange (“NYSE”), except for Andrew M. Axelrod, our Chairman and Vikram S. Uppal our and our Manager’s Chief Executive Officer. Our bylaws provide that a majority of the entire board of directors may at any time increase or decrease the number of directors. However, the number of directors may never be less than the minimum number required by the MGCL (which is currently one) nor, unless our bylaws are amended, more than 15.

    The following sets forth certain information with respect to our directors:

Name	Age	Position held
Andrew M. Axelrod	38	Chairman of the Board of Directors
Vikram S. Uppal	37	Chief Executive Officer, Chief Investment Officer and Director
Roger H. Beless	59	Director
Michael L. Evans	68	Director

    Andrew M. Axelrod has served as Chairman of our board of directors and as a member of the board of directors of Terra Capital Partners since February 2018. Mr. Axelrod founded Axar Capital Management in April 2015 and currently serves as its Managing Partner and Portfolio Manager, and is responsible for all investment, risk and business management functions. He has been the Chief Executive Officer and Executive Chairman of the board of directors of Axar Acquisition Corp. since October 2016. Before founding Axar Capital Management in 2015, Mr. Axelrod worked at Mount Kellett Capital Management, a private investment organization from 2009 to 2014. At Mount Kellett Capital Management, he was promoted to Co-Head of North America Investments in 2011 and became a Partner in 2013. Prior to joining Mount Kellett Capital Management, Mr.

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Axelrod worked at Kohlberg Kravis Roberts & Co. L.P. from 2007 to 2008 and The Goldman Sachs Group, Inc. from 2005 to 2006. Mr. Axelrod graduated magna cum laude with a B.S. in Economics from Duke University.

    Vikram S. Uppal has served as one of our directors since February 2018 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 Terra RECO 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 is also the Chief Executive Officer of Terra Income Advisors and Terra Fund 6 since April 2019. 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.

Roger H. Beless has served as one of our independent directors since February 2018. Since May 2016, Mr. Beless has served as Chief Operating Officer at Street Lights Residential, where he oversees capital markets, asset and portfolio management and acquisitions, and company operations. From June 2012 until March 2016, Mr. Beless served as Managing Director for Mount Kellett Capital Management, where he oversaw global real estate asset management. Prior to joining Mount Kellett, Mr. Beless spent nearly 20 years with Goldman Sachs/Archon Group where he held a number of positions, including co-head of US Real Estate and Chief Operating Officer for Archon Residential, where he oversaw acquisitions, asset management, property management and dispositions. Mr. Beless also spent four years in Tokyo, Japan where he led the startup of Goldman Sachs Realty Japan, Ltd. He currently serves on the board of Lion Heart Children’s Academy and the advisory board of Apartment Life. Mr. Beless holds a Bachelor’s of B.A. in Economics and Finance from Baylor University and a M.B.A from Southern Methodist University.

Michael L. Evans has served as one of our independent directors since October 2017. Mr. Evans has served as a member of the board of directors of Terra Fund 6 from March 2015 to April 2019. Since December 2012, Mr. Evans has been the Managing Director and Chief Financial Officer of Newport LLC (formerly known as Newport Board Group), a CEO and board advisory firm. From June 2010 to September 2011, Mr. Evans served as the Interim Country Manager and Advisory Board Member for Concern Worldwide U.S. Inc., a non-profit humanitarian organization. From January 1977 until June 2010, Mr. Evans was with Ernst & Young, LLP (“Ernst & Young”), and served as a partner since 1984. During his nearly 34 years with Ernst & Young, he served as a tax, audit and consulting services partner, specializing in real estate companies and publicly-traded entities. Mr. Evans currently serves on the Advisory Board of Marcus & Millichap, Inc., the Independent Counsel Board of Prologis Targeted U.S. Logistics Fund and the board of directors of Newport LLC and Sen Plex, Inc. Mr. Evans is a licensed attorney and a C.P.A. (inactive) in California. He is currently a contributing business writer for Forbes.com and Allbusiness.com. Mr. Evans received a B.S.B. in accounting from the University of Minnesota, a J.D. from William Mitchell College of Law and an M.B.A. from Golden Gate University.     

Executive Officers

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

Name	Age	Position(s) Held with the Company	Position(s) Held with our Manager
Andrew M. Axelrod	38	Chairman of the Board of Directors	Member of the Board of Managers (1)
Bruce D. Batkin	67	N/A	Member of the Board of Managers (1)
Vikram S. Uppal	37	Chief Executive Officer, Chief Investment Officer	Chief Executive Officer, Chief Investment Officer
Gregory M. Pinkus	56	Chief Operating Officer and Chief Financial Officer	Chief Operating Officer and Chief Financial Officer
Daniel J. Cooperman	46	Chief Originations Officer	Chief Originations Officer

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(1)Our Manager is managed by Terra Capital Partners and does not have a board of managers. Messrs. Axelrod, Batkin and Uppal are members of the board of managers of Terra Capital Partners.

    For biographical information regarding Messrs. Axelrod and Uppal, see “Item 10. — Board of Directors” above.

    Bruce D. Batkin has served as the Vice Chairman of the Terra Capital Partners from its formation in 2001 and its commencement of operations in 2002 until February 2018 and as a member of the Board of Managers of our Manager since

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February 2018. He served as one of our directors from January 2016, and as the Vice Chairman of our board of directors from December 2018, to March 2020. Mr. Batkin also serves as the Vice Chairman of the board of directors (or managers, as applicable) of Terra International, Terra Income Advisors, Terra Fund Advisors and Terra Fund 5 International. He served as our Chief Executive Officer from January 2016 to November 2018. He has also served as Chief Executive Officer of Terra Capital Advisors, Terra Capital Advisors 2, Terra Income Advisors 2, Terra Fund Advisors, Fund 5 International, Terra Fund 6, Terra International and Terra Fund 7 from April 2009, September 2012, October 2016, September 2017, June 2014, March 2015, October 2016 and October 2016, respectively, until November 30, 2018. He has also served as Chief Executive Officer and director of Terra Fund 6, from May 2013 to April 2019, as Chairman of the board of director of Terra Fund 6 from April 2019 to November 2019, and as Chief Executive Officer of Terra Income Advisors from May 2013 to April 2019. As a co-founder of Terra Capital Partners, he served as its President and Chief Executive Officer from its formation in 2001 and its commencement of operations in 2002 to November 2018, managing its real estate debt and equity investment programs. Mr. Batkin has over 40 years’ experience in real estate acquisition, finance, development, management and investment banking. Prior to founding Terra Capital Partners, he held senior management positions at Merrill Lynch & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation (now Credit Suisse (USA) Inc.), ABN AMRO Bank N.V. and several private real estate development partnerships. Mr. Batkin has acquired major commercial properties throughout the United States and has acted as managing partner in over $5 billion of real estate investments for domestic and foreign investors. He is a member of the Harvard Alumni Real Estate Board and the Cornell Real Estate Council and the Committee for Economic Development; he sits on the Advisory Board of the Baker Program in Real Estate at Cornell University and the Dean's Advisory Council of the College of Art, Architecture and Planning at Cornell University; and he is a participant in the semiannual Yale CEO Summit. Mr. Batkin received a Bachelor of Architecture from Cornell University and an M.B.A. from Harvard Business School.

Gregory M. Pinkus has served as the Chief Financial Officer, Treasurer and Secretary of our company and the Chief Financial Officer and Chief Operating Officer of our Manager, Terra Fund Advisors, and Terra Income Advisors since January 2016, October 2017, October 2017, and May 2013, 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, Treasurer and Secretary of Terra Fund 6 since May 2013 and Chief Operating Officer of Terra Fund 6 since July 2014; (v) the Chief Financial Officer and Chief Operating Officer of Fund 5 International, Terra International and Terra Fund 7 since June 2014, October 2016 and October 2016, respectively; and (vi) a director of Terra RECO since October 2020. 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, Terra Fund Advisors and Terra Income Advisors since January 2016, September 2017, September 2017 and February 2015, 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 from June 2014 to June 2014; (iii) Terra Fund 6 since February 2015, 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.

Code of Ethics

    Our Manager has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) pursuant to Rule 17j‑1 of the Advisers Act, which applies to, among others, the senior officers of our Manager, including the Chief Executive Officer and the Chief Financial Officer, as well as every officer, director, employee and “access person” (as defined within the Code of Ethics).

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We will also provide the Code of Ethics, free of charge, to stockholders who request it. Requests should be directed to Bernadette Murphy, at Terra Property Trust, Inc., 550 Fifth Avenue, 6th Floor, New York, New York 10036.

Audit Committee

    We have established an audit committee of the board of directors (the “Audit Committee”) that operates pursuant to a charter and consists of three members. The Audit Committee is responsible for selecting, engaging and supervising our independent accountants, reviewing the plans, scope and results of the audit engagement with our independent accountants, approving professional services provided by our independent accountants (including compensation therefor), reviewing the independence of our independent accountants and reviewing the adequacy of our internal controls over financial reporting. The members of the Audit Committee are Messrs. Beless and Evans, each of whom is independent. Mr. Evans serves as the chairman of the Audit Committee. Our board of directors has determined that Mr. Evans is an “audit committee financial expert” as defined under Item 407 of regulation S-K promulgated under the Exchange Act. Our board of directors has determined that each of Messrs. Beless and Evans meets the current independence and experience requirements of Rule 10A-3 of the Exchange Act.

Item 11. Executive Compensation.

    We have entered into a management agreement with our Manager, pursuant to which our Manager provides certain services to our company and we pay fees associated with such services. The officers of our Manager do not receive any compensation from us. Each of our officers is an employee of our Manager. Because our management agreement provides that our Manager is responsible for managing our affairs, our officers do not receive cash compensation from us for serving as our officers.

    Our Manager is responsible for managing our day-to-day operations and all matters affecting our business and affairs, including responsibility for determining when to buy and sell real estate-related assets. 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 the business. Our officers, in their capacities as officers or personnel of our Manager or its affiliates, will devote such portion of their time to our affairs as is necessary to enable us to operate our business.

Compensation of the Directors

    In 2020, our independent directors earned $60,000 annual base director’s fee. In addition, in 2020, the chairperson of the Audit Committee earned an annual cash retainer of $15,000 and the other members of the Audit Committee earned an annual cash retainer of $10,000. We also reimburse all members of our board of directors for their travel related expenses incurred in connection with their attendance at board and committee meetings.

    We pay directors’ fees only to those directors who are independent under the NYSE listing standards.

    The following table sets forth compensation of our directors for the year ended December 31, 2020:

Name	Fees Earned or Paid in Cash		All Other Compensation		Total
Jeffrey M. Altman (1)	$	17,500	$	—	$	17,500
Roger H. Beless	$	65,000	$	—	$	65,000
Michael L. Evans	$	75,000	$	—	$	75,000
Spencer E. Goldenberg (1)	$	17,500	$	—	$	17,500
John S. Gregorits (1)	$	15,000	$	—	$	15,000

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(1)In connection with the Merger in March 2020, the size of our board of directors was reduced from eight directors to four directors and the directorship of each of Messrs. Altman, Goldenberg and Gregorits was terminated.

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

    The following table sets forth certain information regarding the ownership of shares of our common stock by:

(1)each of our directors;

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(2)each of our executive officers;

(3)holders of more than 5% of our capital stock; and

(4)all of our directors and executive officers as a group.

    Each listed person’s beneficial ownership includes:

(1)all shares the investor actually owns beneficially or of record;

(2)all shares over which the investor has or shares voting or dispositive control (such as in the capacity as a general partner of an investment fund);

(3)all shares the investor has the right to acquire within 60 days; and

    Unless otherwise indicated, all shares are owned directly, and the indicated person has sole voting and investment power. Except as indicated in the footnotes to the table below, the business address of the stockholders listed below is the address of our principal executive office, 550 Fifth Avenue, 6th Floor, New York, NY 10036.

Name	Number of Shares Beneficially Owned	Percentage of All Shares
Andrew M. Axelrod	—	—
Vikram S. Uppal (1)	49,427.63	*
Gregory M. Pinkus	—	—
Daniel J. Cooperman	—	—
Roger H. Beless	—	—
Michael L. Evans	—	—
All directors and executive officers as a group (6 persons)	—	—
5% or Greater Beneficial Owners
Terra JV (2)	17,029,775.95	87.4%
Terra Offshore REIT (2)	2,457,684.59	12.6%

_______________

* Represents beneficial ownership of less than 1%.

(1)On April 6, 2020, Mr. Uppal purchased 22 units of limited liability company interest (the “Units”) of Terra Fund 5 in a secondary market transaction. The Units are held through Lakshmi 15 LLC, a family limited liability company over which Mr. Uppal exercises voting and investment control. The shares of our common stock indicated on this report as being held indirectly by Mr. Uppal are held indirectly by Terra Fund 5 through a controlled subsidiary. Mr. Uppal is the Chief Executive Officer and Chief Investment Officer of Terra Fund Advisors, the manager of Terra Fund 5. Accordingly, Mr. Uppal disclaims beneficial ownership of the shares of our common stock reported herein except to the extent of his pecuniary interest therein, and this report shall not be deemed an admission that he is the beneficial owner of such shares for purposes of Section 16 or for any other purpose.

(2)Terra Fund 5 is managed by Terra Fund Advisors, its managing member. The shares of common stock held by Terra Fund 5 are subject to the provisions of the Voting Agreement and certain related agreements described in greater detail under “Item 13. Certain Relationships and Related Transactions.” The inclusion of these shares of our common stock shall not be deemed an admission of beneficial ownership of the reported securities for purposes of Section 16 or for any other purposes.

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

    Potential conflicts include those set forth below.

The Axar Transaction

    On February 8, 2018, an entity (“Axar”), wholly owned by a pooled investment vehicle advised by Axar Capital Management, a Delaware limited partnership, entered into an investment agreement with Terra Capital Partners and its affiliates

60

(which we refer to collectively as the “Axar Transaction”). As a result of the Axar Transaction, Terra REIT Advisors, a newly formed subsidiary of Terra Capital Partners, became our external manager, Terra Fund Advisors was admitted as the replacement manager of Terra Fund 5, the equity interests in Terra Fund Advisors were distributed to the equity owners of Terra Capital Partners on a pro rata basis, and the equity interests in another subsidiary of Terra Capital Partners, Terra Income Advisors, which serves as the external advisor to Terra Fund 6, were distributed to the equity owners of Terra Capital Partners on a pro rata basis. In addition, as a result of the Axar transaction and subsequent transactions on November 30, 2018 and April 30, 2019, Axar acquired 100% of the equity interests of Terra Capital Partners, 49% of the economic interests in Terra Fund Advisors, and 100% of the equity interests in Terra Income Advisors. The Axar Transaction was approved unanimously by the independent directors of our company and the independent directors of Terra Fund 6, with each having formed a special committee to evaluate the Axar Transaction. In connection with the transaction, Andrew M. Axelrod, Founder of Axar Capital Management, was appointed as Chairman of Terra Capital Partners and as Chairman of the board of directors of our company and Vikram S. Uppal, Head of Real Estate of Axar Capital Management prior to the Axar Transaction, was appointed as Chief Investment Officer of Terra Capital Partners and as a member of the board of directors of Terra Capital Partners and our company. Axar Capital Management received certain approval rights over certain major decisions impacting Terra Fund Advisors and Terra Income Advisors and also arranged for certain nomination and voting rights in respect of the board of directors of our company. At the same time, the prior owners of Terra Capital Partners retained certain approval rights over major decisions impacting Terra Capital Partners (and thereby our Manager).

Terra International Fund 3, L.P.

    On September 30, 2019, we entered into a Contribution and Repurchase Agreement with Terra International Fund 3, L.P. (“Terra International 3”) and Terra Offshore REIT (formerly known as International Fund 3 REIT), a then wholly-owned subsidiary of Terra International 3, which we amended and restated on November 13, 2019.

    Pursuant to this agreement, Terra International 3, through Terra Offshore REIT, contributed cash in the amount of $3,620,000 to us in exchange for 212,690.95 shares of common stock, at a price of $17.02 per share. The shares were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act, and the rules and regulations promulgated thereunder. On April 29, 2020, we repurchased, at a price of $17.02 per share, the 212,690.95 shares of common stock that we had previously sold to Terra Offshore REIT on September 30, 2019. At the same time, Terra International 3 redeemed all of its limited partnership interest and ceased operations.

    Our Manager also serves as adviser to Terra Offshore REIT.

Merger and Issuance of Common Stock to Terra Offshore REIT

    On February 28, 2020, we entered into a merger agreement pursuant to which Terra Property Trust 2 was merged with and into us, with us continuing as the surviving corporation, effective March 1, 2020. In connection with the Merger, each share of common stock, par value $0.01 per share, of Terra Property Trust 2 issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive from us a number of shares of our common stock, par value $0.01 per share, equal to an exchange ratio, which was 1.2031. As a result, Terra Fund 7, the sole stockholder of Terra Property Trust 2, received 2,116,785.76 shares of our common stock as consideration in the Merger. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

    In addition, on March 2, 2020, we entered into two separate contribution agreements, one by and among us, Terra Offshore REIT and Terra Income Fund International, and another by and among us, Terra Offshore REIT and Terra Secured Income Fund 5 International, pursuant to which 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 the Company, $8.6 million in cash and other net working capital. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder.

As of December 31, 2020, Terra JV owns 87.4% of the issued and outstanding shares of our common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.

Voting Agreement

    On March 2, 2020, we, Terra Fund 5, Terra JV and Terra REIT Advisors also entered into the Amended and Restated Voting Agreement (the “Voting Agreement”), pursuant to which Terra Fund 5 assigned its rights and obligations under the

61

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 directors.

    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 Voting Agreement. Other than with respect to the election of directors, the 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 of directors.

Management Agreement

    As part of the Axar Transaction, Terra Income Advisors assigned all of its rights, title and interest in and to its current external management agreement with our company to our Manager and immediately thereafter, we and our Manager amended and restated such management agreement. Such amended and restated management agreement has the same economic terms and is in all material respects otherwise on the same terms as the management agreement between Terra Income Advisors and our company in effect immediately prior to the Axar Transaction, except for the identity of our manager.

Receipt of Fees and Other Compensation by Our Manager and its Affiliates

    We pay substantial fees to our Manager. Further, we must reimburse our Manager for costs incurred by it in managing us and our portfolio of real estate-related loans.

    We have entered into a management agreement with our Manager pursuant to which our Manager provides certain management services to us, subject to oversight by our board of directors. Our Manager’s responsibilities to us include, among others, investing in, and disposing of, assets, borrowing money, entering into contracts and agreements in connection with our business and purpose, providing administrative support and performing such other services as are delegated to our Manager by our board of directors. In performing its duties, our Manager is subject to a fiduciary responsibility for the safekeeping and use of all of our funds and assets. In consideration for providing such services, our Manager is entitled to certain fees from as described below. The original management agreement between Terra Capital Advisors and us was entered into on January 1, 2016. On September 1, 2016, our company terminated the original management agreement and entered a management agreement with Terra Income Advisors. As described above, as part of the Axar Transaction, Terra Income Advisors assigned all of its rights, title and interest in and to its current external management agreement with us to our Manager and immediately thereafter, we and our Manager amended and restated such management agreement. The current management agreement runs co-terminus with Terra Fund 5's amended and restated operating agreement, which terminates on December 31, 2023, unless sooner dissolved in accordance with its terms of our amended and restated operating agreement.

    During the years ended December 31, 2020 and 2019, we paid our Manager in the aggregate the following fees under the management agreement: $4.5 million and $3.7 million in asset management fee, respectively, $1.0 million and $0.9 million in asset servicing fees, respectively, $1.4 million and $2.0 million in origination and extension fees, respectively; $0.5 million and $1.4 million in disposition, respectively, and $6.0 million and $4.9 million of operating expense reimbursements, respectively.

    It is anticipated that our Manager will exercise its discretion through our management agreement with our company. The agreements and arrangements, including those relating to compensation, between us and our Manager and its affiliates are not the result of arm’s-length negotiations and may create conflicts between our Manager and its affiliates, on the one hand, and us on the other.

Our Manager and its Affiliates May Compete With Us

    Our Manager and its affiliates may engage in real estate-related transactions on their own behalf or on behalf of other entities.

    Our Manager and its affiliates have, and in the future will have, legal and financial obligations with respect to its other programs that are similar to our Manager’s obligations to us. For example, our Manager and affiliates of our Manager are the external managers to Terra Fund 6 and Terra RECO, all of which follow investment strategies that are similar to our strategy. Competition for investments among the real estate-related investment programs sponsored by our Manager and its affiliates will create a conflict of interest. In determining which program should receive an investment opportunity, our Manager will first evaluate the objectives of each program to determine if the opportunity is suitable for each program. If the proposed investment

62

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.

Related Party Transactions

    Related party transactions are those where we or our Manager on our behalf, transact with affiliated companies, including companies managed by our Manager or its affiliates. Our Manager and its affiliates are permitted to enter into certain transactions and perform certain services for us. Such transactions, or the potential for such transactions, could cause conflicts for our Manager with respect to performing its duties. Related party transactions will not be the result of an arm’s-length negotiation.

Participation Agreements and Secured Borrowing

    We have diversified our exposure to loans and borrowers by entering into participation agreements in respect of certain of our loans whereby we transferred a portion of the loans on a pari passu basis to related parties, and to a lesser extent, unrelated parties, with the principal balance of participation obligations totaling $71.3 million as of December 31, 2020. Additionally, we sold a portion of a loan with a principal balance of $18.3 million to a third-party that didn’t qualify for sale accounting treatment. However, we do not have direct liability to a participant under our 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). If we enter into participation agreements in the future, we generally expect to enter into such agreements only at the time of origination of the investment. For additional information concerning our participation agreements, see “Item 7— Management’s Discussion and Analysis of Financial Condition and Results of Operations — Participation Agreements and Secured Borrowing.”

Allocation of Our Manager’s Time

    We rely on our Manager to manage our day-to-day activities and to implement our investment strategy. Our Manager is presently, and plans in the future to continue to be, involved with activities that are unrelated to us. As a result of these activities, our Manager, its employees and certain of its affiliates will have conflicts of interest in allocating their time between us and the other activities in which they are or may become involved, including the management of Terra Fund 6 and Terra RECO. The employees of our Manager will devote only as much of its or their time to our business as it and its employees, in their judgment, determine is reasonably required, which may be substantially less than their full time. Therefore, our Manager, its personnel and certain affiliates may experience conflicts of interest in allocating management time, services and functions among us and any other business ventures in which they or any of their key personnel, as applicable, are or may become involved. This could result in actions that are more favorable to other affiliated entities than to us.

    However, we believe that the members of our Manager’s senior management and the other key debt finance professionals performing services for us on behalf of our Manager have sufficient time to fully discharge their responsibilities to us and to the other businesses in which they are involved. We believe that our Manager’s executive officers will devote the time required to manage our business and expect that the amount of time a particular executive officer or affiliate devotes to us will vary during the course of the year and depend on business activities at the given time. We expect that these executive officers and affiliates will generally devote more time to programs raising and investing capital than to programs that have completed their offering stages, though from time to time each program will have its unique demands. Because many of the operational aspects of Terra Capital Partners-sponsored programs are very similar, there are significant efficiencies created by the same team of individuals at our Manager providing services to multiple programs. For example, our Manager has streamlined the structure for financial reporting, internal controls and investment approval processes for the programs.

Competition and Allocation of Investment Opportunities

    Employees of our Manager or its affiliates are simultaneously providing investment advisory or management services to other affiliated entities, including Terra Fund 6 and Terra RECO.

    Our Manager may determine it appropriate for us and one or more other investment programs managed by our Manager or any of its affiliates to participate in an investment opportunity. To the extent we are able to make co-investments with investment programs managed by our Manager or its affiliates, these co-investment opportunities may give rise to conflicts of

63

interest or perceived conflicts of interest among us and the other participating programs. In addition, conflicts of interest or perceived conflicts of interest may also arise in determining which investment opportunities should be presented to us and other participating programs.

    To mitigate these conflicts, our Manager will seek to execute such transactions on a fair and equitable basis and in accordance with its allocation policies, taking into account various factors, which may include: the source of origination of the investment opportunity; objectives and strategies; tax considerations; risk, diversification or investment concentration parameters; characteristics of the security; size of available investment; available liquidity and liquidity requirements; regulatory restrictions; and/or such other factors as may be relevant to a particular transaction.

Receipt of Compensation by Affiliates

    The payments to our Manager and certain of its affiliates have not been determined through arm’s-length negotiations, and are payable regardless of our profitability. Our Manager receives fees for their services, including an origination fee, asset management fee, asset servicing fee, disposition fee and transaction break-up fee.

    To the extent the terms of the management arrangement with our Manager are amended in the future, including if we enter into a new management agreement with our Manager or its affiliates, the terms of any such arrangement will not have been determined through arm’s-length negotiations and may be payable, in whole or in part, regardless of profitability.

Other Conflicts of Interest

    We will be subject to conflicts of interest arising out of our relationship with our Manager and its affiliates. In the future, we may enter into additional transactions with our Manager, Terra Capital Partners or its affiliates. In particular, we may invest in, or acquire, certain of our investments through joint ventures with our Manager, Terra Capital Partners or its affiliates or purchase assets from, sell assets to or arrange financing from or provide financing to its other vehicles. Any such transactions will require approval of our Manager. Any such transactions will require approval of a majority of our independent directors.

    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.

Item 14. Principal Accounting Fees and Services.

During the years ended December 31, 2020 and 2019, KPMG LLP (“KPMG”) served as our independent auditor and provided certain tax and other services. Our board of directors currently anticipates that it will engage KPMG as our independent auditor to audit our financial statements for the year ending December 31, 2021, subject to agreeing on fee estimates for the audit work. Our board of directors reserves the right, however, to select a new auditor at any time in the future in its discretion if it deems such decision to be in the best interests of us and our stockholders. Any such decision would be disclosed to the stockholders in accordance with applicable securities laws.

The following table displays fees for professional services by KPMG for the years ended December 31, 2020 and 2019:

	Years Ended December 31,
	2020		2019
Audit Fees	$	463,000	$	409,500
Audit-Related Fees	—		50,000
Tax Fees	68,380		65,800
All Other Fees	—		—
Total	$	531,380	$	525,300

Audit Fees.  Audit fees include fees for services that normally would be provided by KPMG in connection with statutory and regulatory filings or engagements and that generally only an independent accountant can provide. In addition to fees for the audit of our annual financial statements and the review of our quarterly financial statements in accordance with standards of the Public Company Accounting Oversight Board (“PCAOB”), this category contains fees for comfort letters, statutory audits, consents, and assistance with and review of documents filed with the SEC.

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Audit-Related Fees.  Audit-related services consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards.

Tax Services Fees.  Tax services fees consist of fees billed for professional tax services. These services also include assistance regarding federal, state, and local tax compliance.

All Other Fees.  Other fees would include fees for products and services other than the services reported above.

The Audit Committee’s charter provides that the Audit Committee shall review and pre-approve the engagement fees and the terms of all auditing and non-auditing services to be provided by our external auditors and evaluate the effect thereof on the independence of the external auditors. All audit and tax services provided to us were reviewed and pre-approved by the Audit Committee, which concluded that the provision of such services by KPMG LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

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:

(1) Financial Statements

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

    (2) Financial Statement Schedule

None

(3) Exhibits

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

Exhibit No.	Description and Method of Filing
2.1	Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated January 1, 2016 (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019).
2.2	Amendment No. 1 to the Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated December 31, 2016 (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019).
2.3	Agreement and Plan of Merger, dated February 28, 2020, by and among Terra Property Trust, Inc., Terra Property Trust 2, Inc. and Terra Secured Income Fund 7, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 000-56117) filed with the SEC on March 5, 2020).
3.1	Amended and Restated Bylaws of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).
3.2	Articles of Amendment and Restatement of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).
3.3	Articles of Supplementary of Terra Property Trust, Inc. Designating 12.5% Services A Redeemable Cumulative Preferred Stock (incorporated by reference to Exhibit 3.3 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).
4.1	Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 to Annual Report on Form 10-K filed with the SEC on February 28, 2020).

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Exhibit No.	Description and Method of Filing
10.1	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).
10.2	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).
10.3	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).
10.4	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).
10.5	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).
10.6	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).
10.7	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).
10.8*	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.
10.9*	Limited Guaranty, dated as of March 12, 2021, by and among Terra Property Trust, Inc., as Guarantor, for the benefit of Western Alliance Bank.
21.1 *	Subsidiaries
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH**	Inline XBRL Taxonomy Extension Schema Document
101.CAL**	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File Included as Exhibit 101 (embedded within the Inline XBRL document)

______________

* Filed herewith.

** Furnished herewith.

Item 16. Form 10-K Summary.

    None.

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Terra Property Trust, Inc.

Index to Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2020 and 2019	F-2
Consolidated Statements of Operations for the years ended December 31, 2020 and 2019	F-4
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020 and 2019	F-5
Consolidated Statements of Changes in Equity for the years ended December 31, 2020 and 2019	F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019	F-7
Notes to Consolidated Financial Statements	F-10
Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2020	F-42
Schedule IV — Mortgage Loans on Real Estate as of December 31, 2020	F-43

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.

F-1

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, 2020 and 2019, the related consolidated statements of operations, comprehensive income, 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, 2020 and 2019, 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 18, 2021

F-2

Terra Property Trust, Inc.

Consolidated Balance Sheets

	December 31,
	2020		2019
Assets
Cash and cash equivalents	$	18,607,952	$	29,609,484
Restricted cash	12,145,616		18,542,163
Cash held in escrow by lender	2,166,755		2,398,053
Marketable securities	1,287,500		—
Loans held for investment, net	417,986,462		375,462,222
Loans held for investment acquired through participation, net	4,294,053		3,150,546
Equity investment in a limited partnership	36,259,959		—
Real estate owned, net (Note 6)
Land, building and building improvements, net	63,385,339		64,751,247
Lease intangible assets, net	9,793,600		12,845,228
Operating lease right-of-use assets	16,105,888		16,112,925
Interest receivable	2,509,589		1,876,799
Other assets	3,934,468		2,594,411
Total assets	$	588,477,181	$	527,343,078
Liabilities and Equity
Liabilities:
Term loan payable, net of deferred financing fees	$	105,245,801	$	—
Obligations under participation agreements (Note 8)	71,581,897		103,186,327
Repurchase agreement payable, net of deferred financing fees	—		79,608,437
Mortgage loan payable, net of deferred financing fees and other	44,117,293		44,753,633
Secured borrowing	18,187,663		—
Interest reserve and other deposits held on investments	12,145,616		18,542,163
Operating lease liabilities	16,105,888		16,112,925
Lease intangible liabilities, net (Note 6)	10,249,776		11,424,809
Due to Manager (Note 8)	1,257,098		1,037,168
Interest payable	1,185,502		1,076,231
Accounts payable and accrued expenses	3,968,603		1,749,525
Unearned income	677,856		624,021
Other liabilities	429,123		1,684,106
Total liabilities	285,152,116		279,799,345
Commitments and contingencies (Note 10)
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized and none issued	—		—
12.5% Series A Cumulative Non-Voting Preferred Stock at liquidation preference, 125 shares authorized and 125 shares issued and outstanding at both December 31, 2020 and 2019	125,000		125,000
Common stock, $0.01 par value, 450,000,000 shares authorized and 19,487,460 and 15,125,681 shares issued and outstanding at December 31, 2020 and 2019, respectively	194,875		151,257
Additional paid-in capital	373,443,672		301,727,297
Accumulated deficit	(70,438,482)		(54,459,821)
Total equity	303,325,065		247,543,733
Total liabilities and equity	$	588,477,181	$	527,343,078

See notes to consolidated financial statements.

F-3

Terra Property Trust, Inc.

Consolidated Statements of Operations

	Years Ended December 31,
	2020		2019
Revenues
Interest income	$	39,392,209	$	40,888,079
Real estate operating revenue	10,423,563		9,806,507
Prepayment fee income	—		285,838
Other operating income	505,116		419,101
	50,320,888		51,399,525
Operating expenses
Operating expenses reimbursed to Manager	6,041,075		4,875,153
Asset management fee	4,480,706		3,671,474
Asset servicing fee	1,008,256		854,096
Provision for loan losses	3,738,758		—
Real estate operating expenses	4,505,119		3,989,911
Depreciation and amortization	4,635,980		3,785,977
Impairment charge	—		1,550,000
Professional fees (1)	1,695,876		3,373,554
Directors fees	190,000		335,000
Other	371,444		172,232
	26,667,214		22,607,397
Operating income	23,653,674		28,792,128
Other income and expenses
Interest expense from obligations under participation agreements	(8,514,804)		(11,773,346)
Interest expense on repurchase agreement payable	(3,727,466)		(4,713,440)
Interest expense on mortgage loan payable	(2,976,913)		(3,093,284)
Interest expense on revolving credit facility	(1,398,103)		(169,283)
Interest expense on term loan payable	(2,137,651)		—
Interest expense on secured borrowing	(633,850)		—
Net loss on extinguishment of obligations under participation agreements	(319,453)		—
Realized gains on marketable securities	1,160,162		—
Unrealized gains on marketable securities	111,494		—
Income from equity investment in a limited partnership	38,640		—
	(18,397,944)		(19,749,353)
Net income	$	5,255,730	$	9,042,775
Preferred stock dividend declared	(15,624)		(15,624)
Net income allocable to common stock	$	5,240,106	$	9,027,151
Earnings per share — basic and diluted	$	0.28	$	0.60
Weighted-average shares — basic and diluted	18,813,066		14,967,183
Distributions declared per common share	$	1.16	$	2.03

_______________

(1)Amount for the year ended December 31, 2019 included $2.4 million of professional fees directly incurred, and which were previously deferred, in contemplation of the Company becoming a public entity. In the second quarter of 2019, Management decided to postpone indefinitely the Company’s public offering.

See notes to consolidated financial statements.

F-4

Terra Property Trust, Inc.

Consolidated Statements of Comprehensive Income

	Years Ended December 31,
	2020		2019
Comprehensive income, net of tax
Net income	$	5,255,730	$	9,042,775
Other comprehensive income
Net unrealized gains on marketable securities	192,919		—
Reclassification of net realized gains on marketable securities into earnings	(192,919)		—
	—		—
Total comprehensive income	$	5,255,730	$	9,042,775
Preferred stock dividend declared	(15,624)		(15,624)
Comprehensive income attributable to common shares	$	5,240,106	$	9,027,151

See notes to consolidated financial statements.

F-5

Terra Property Trust, Inc.

Consolidated Statements of Changes in Equity

	Preferred Stock		12.5% Series A Cumulative Non-Voting Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income
						$0.01 Par Value
			Shares	Amount		Shares	Amount								Total equity
Balance at January 1, 2020	$	—	125	$	125,000	15,125,681	$	151,257	$	301,727,297	$	(54,459,821)	$	—	$	247,543,733
Issuance of common stock (Note 3)	—		—	—		4,574,470	45,745		75,334,248				—		75,379,993
Repurchase of common stock						(212,691)	(2,127)		(3,617,873)						(3,620,000)
Distributions declared on common shares ($1.16 per share)	—		—	—		—	—		—		(21,218,767)		—		(21,218,767)
Distributions declared on preferred shares	—		—	—		—	—		—		(15,624)		—		(15,624)
Comprehensive income:
Net income	—		—	—		—	—		—		5,255,730		—		5,255,730
Net unrealized gains on marketable securities	—		—	—		—	—		—		—		192,919		192,919
Reclassification of net realized gains on marketable securities into earnings	—		—	—		—	—		—		—		(192,919)		(192,919)
Balance at December 31, 2020	—		125	$	125,000	19,487,460	$	194,875	$	373,443,672	$	(70,438,482)	$	—	$	303,325,065

	Preferred Stock		12.5% Series A Cumulative Non-Voting Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income
						$0.01 Par Value
			Shares	Amount		Shares	Amount								Total equity
Balance at January 1, 2019	$	—	125	$	125,000	14,912,990	$	149,130	$	298,109,424	$	(33,091,195)	$	—	$	265,292,359
Issuance of common stock	—		—	—		212,691	2,127		3,617,873		—		—		3,620,000
Distributions declared on common shares ($2.03 per share)	—		—	—		—	—		—		(30,395,777)		—		(30,395,777)
Distributions declared on preferred shares	—		—	—		—	—		—		(15,624)		—		(15,624)
Comprehensive income:
Net income	—		—	—		—	—		—		9,042,775		—		9,042,775
Net unrealized gains on marketable securities	—		—	—		—	—		—		—		—		—
Reclassification of net realized gains on marketable securities into earnings	—		—	—		—	—		—		—		—		—
Balance at December 31, 2019	—		125	$	125,000	15,125,681	$	151,257	$	301,727,297	$	(54,459,821)	$	—	$	247,543,733

See notes to consolidated financial statements.

F-6

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2020		2019
Cash flows from operating activities:
Net income	$	5,255,730	$	9,042,775
Adjustments to reconcile net income to net cash provided by operating activities:
Paid-in-kind interest income, net	(2,937,909)		(1,682,721)
Depreciation and amortization	4,635,980		3,785,977
Provision for loan losses	3,738,758		—
Impairment charge	—		1,550,000
Lease termination fee income	(236,000)		—
Amortization of net purchase premiums on loans	57,155		81,642
Straight-line rent adjustments	(714,334)		(681,920)
Amortization of deferred financing costs	1,644,944		1,993,486
Net loss on extinguishment of obligations under participation agreements	319,453		—
Amortization of above- and below-market rent intangibles	(1,027,129)		(446,997)
Amortization and accretion of investment-related fees, net	(4,140)		(85,764)
Amortization of above-market rent ground lease	(130,348)		(130,348)
Realized gains on marketable securities	(1,160,162)		—
Unrealized gains on marketable securities	(111,494)		—
Income from equity investment in a limited partnership	(38,640)		—
Changes in operating assets and liabilities:
Interest receivable	(632,790)		575,627
Other assets	(956,735)		1,639,202
Due to Manager	(409,927)		(213,485)
Unearned income	(490,233)		553,539
Interest payable	109,271		(135,511)
Accounts payable and accrued expenses	2,245,242		725,749
Other liabilities	(1,229,232)		931,549
Net cash provided by operating activities	7,927,460		17,502,800
Cash flows from investing activities:
Origination and purchase of loans	(108,488,411)		(185,327,219)
Proceeds from repayments of loans	66,144,729		181,131,959
Purchase of partnership interest in a limited partnership	(35,862,692)		—
Purchase of marketable securities	(6,039,567)		—
Proceeds from sale of marketable securities	6,023,723		—
Capital expenditures on real estate	—		(242,071)
Net cash used in investing activities	(78,222,218)		(4,437,331)
Cash flows from financing activities:
Proceeds from borrowings under the term loan	107,584,451		—
Proceeds from borrowings under revolving credit facility	35,000,000		16,000,000
Proceeds from borrowings under repurchase agreement	22,860,134		81,134,436
Proceeds from issuance of common stock in the Merger	16,897,074		—
Proceeds from issuance of common stock to Terra Offshore REIT	8,600,000		—
Proceeds from secured borrowing	18,281,848		—
Distributions paid	(21,234,391)		(30,411,401)
Proceeds from obligations under participation agreements	22,498,765		34,665,630
Repayment of borrowings under repurchase agreement	(103,994,570)		(34,200,000)
Payment for repurchase of common stock	(3,620,000)		—
Repayment of borrowings under revolving credit facility	(35,000,000)		(16,000,000)
Proceeds from issuance of common stock	—		3,620,000
Change in interest reserve and other deposits held on investments	(6,396,547)		1,171,501
Repayment of mortgage principal	(594,255)		(385,520)
Payment of financing costs	(2,361,369)		(405,673)
Repayments of obligations under participation agreements	(5,855,759)		(46,243,595)
Net cash provided by financing activities	52,665,381		8,945,378
Net (decrease) increase in cash, cash equivalents and restricted cash	(17,629,377)		22,010,847
Cash, cash equivalents and restricted cash at beginning of year	50,549,700		28,538,853
Cash, cash equivalents and restricted cash at end of year (Note 2)	$	32,920,323	$	50,549,700

F-7

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

	Years Ended December 31,
	2020		2019
Supplemental Disclosure of Cash Flows Information:
Cash paid for interest	$	16,317,378	$	17,308,592

Supplemental Non-Cash Financing Activities:

Merger

    On February 28, 2020, Terra Property Trust, Inc. (the “Company”) entered into certain Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Terra Property Trust 2, Inc. (“TPT2”) and Terra Secured Income Fund 7, LLC (“Terra Fund 7”), the sole stockholder of TPT2, pursuant to which, effective March 1, 2020, TPT2 was merged with and into the Company, with the Company continuing as the surviving corporation (the “Merger”). In connection with the Merger, the Company issued 2,116,785.76 shares of common stock, par value $0.01 per share, were issued to Terra Fund 7 (Note 3). The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Merger:

Total Consideration
Equity issued in the Merger	$	34,630,615
Proceeds from equity issued in the Merger	16,897,074
	$	17,733,541
Net assets exchanged
Settlement of obligations under participation agreements	$	17,688,741
Interest receivable	134,543
Other assets	18,384
Accounts payable and accrued expenses	(57,433)
Due to Manager	(50,694)
	$	17,733,541

Non-cash Proceeds from Issuance of Common Stock to Terra Offshore REIT

    In addition, on March 2, 2020, the Company entered into two separate contribution agreements, one by and among the Company, Terra Offshore Funds REIT, LLC (formerly known as Terra International Fund 3 REIT, LLC) (the “Terra Offshore REIT”) and Terra Income Fund International, and another by and among the Company, Terra Offshore REIT and Terra Secured Income Fund 5 International, pursuant to which the Company issued an aggregate of 2,457,684.59 shares of common stock in exchange for the settlement of $32.1 million of participation interests in loans held by the Company, $8.6 million in cash, and other net working capital (“Issuance of Common Stock to Terra Offshore REIT”) (Note 3). The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Issuance of Common Stock to Terra Offshore REIT:

Total Consideration
Equity issued to Terra Offshore REIT	$	40,749,378
Proceeds from equity issued to Terra Offshore REIT	8,600,000
	$	32,149,378
Net Assets exchanged
Settlement of obligations under participation agreements	$	32,112,257
Interest receivable	270,947
Due to Manager	(233,826)
Net assets acquired excluding cash and cash equivalents	$	32,149,378

F-8

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

Supplemental Non-Cash Investing Activities:

Lease Termination

In June 2020, the Company received a notice from a tenant occupying a portion of the office building that the Company acquired in July 2018 via foreclosure of their intention to terminate the lease (Note 6). The following table presents a summary of assets received and written off in connection with the lease termination effective September 4, 2020:

Lease Termination Fees:
Cash	$	142,620
Furniture & Fixture	236,000
	$	378,620
Assets and Liabilities Write-offs:
In-place lease intangible assets	$	869,694
Below-market rent liabilities	(616,392)
Rent receivable	125,318
	$	378,620

Deed in Lieu of Foreclosure

    On January 9, 2019, the Company acquired 4.9 acres of adjacent land encumbering a $14.3 million first mortgage via deed in lieu of foreclosure in exchange for the payment of the first mortgage and related fees and expenses (Note 6). The following table summarizes the carrying value of the first mortgage and the fair value of asset acquired in the transaction as of the date of the deed in lieu of foreclosure:

Carrying Value of First Mortgage
Loan held for investment	$	14,325,000
Interest receivable	439,300
Restricted cash applied against loan principal amount	(60,941)
	$	14,703,359
Assets Acquired at Fair Value
Land	$	14,703,359

See notes to consolidated financial statements.

F-9

Terra Property Trust, Inc.

Notes to Consolidated Financial Statements

December 31, 2020

Note 1. Business

    Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) was incorporated under the general corporation laws of the State of Maryland on December 31, 2015. Terra Property Trust is a real estate credit focused company that originates, structures, funds and manages commercial real estate investments, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments. The Company’s loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. The Company focuses on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties in primary and secondary markets. The Company believes these loans are subject to less competition and offer higher risk adjusted returns than larger loans with similar risk/return metrics.

    On January 1, 2016, Terra Secured Income Fund 5, LLC (“Terra Fund 5”), the Company’s then parent, contributed its consolidated portfolio of net assets to the Company pursuant to a contribution agreement in exchange for shares of the Company’s common stock. Upon receipt of the contribution of the consolidated portfolio of net assets from Terra Fund 5, the Company commenced its operations on January 1, 2016. On March 2, 2020, the Company engaged in a series of transactions pursuant to which the Company issued an aggregate of 4,574,470.35 shares of its common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by the Company, cash of $25.5 million and other working capital. As of December 31, 2020, Terra JV, LLC (“Terra JV”) held 87.4% of the issued and outstanding shares of the Company's common stock with the remainder held by Terra Offshore REIT (Note 3).

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

    The Company’s investment activities are externally managed by Terra REIT Advisors, LLC (“Terra REIT Advisors” or the “Manager”), a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC, pursuant to a management agreement (the “Management Agreement”), under the oversight of the Company’s board of directors (Note 8). The Company does not currently have any employees and does not expect to have any employees. Services necessary for the Company’s business are provided by individuals who are employees of the Manager or by individuals who were contracted by the Company or by the Manager to work on behalf of the Company pursuant to the terms of the Management Agreement.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

    The consolidated financial statements include all of the Company’s accounts and those of its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

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

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

VIE Model

An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make

F-10 (Preliminary and Confidential V1)

Notes to Consolidated Financial Statements

decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights.

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

Loans Held for Investment

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

Allowance for Loan Losses

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

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

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

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

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

    There may be circumstances where the Company modifies a loan by granting the borrower a concession that it might not otherwise consider when a borrower is experiencing financial difficulty or is expected to experience financial difficulty in the

F-11

Notes to Consolidated Financial Statements

foreseeable future. Such concessionary modifications are classified as troubled debt restructurings (“TDR”s) unless the modification solely results in a delay in a payment that is insignificant. Loans classified as TDRs are considered impaired loans for reporting and measurement purposes.

Equity Investment in a Limited Partnership

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

Marketable Securities

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

Real Estate Owned, Net

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

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

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

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

Leases

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

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

F-12

Notes to Consolidated Financial Statements

Revenue Recognition

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

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

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

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

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

Cash, Cash Equivalents and Restricted Cash

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

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

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

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

	December 31,
	2020		2019
Cash and cash equivalents	$	18,607,952	$	29,609,484
Restricted cash	12,145,616		18,542,163
Cash held in escrow by lender	2,166,755		2,398,053
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	32,920,323	$	50,549,700

 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

F-13

Notes to Consolidated Financial Statements

participation has been granted, the interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations. Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes doubtful. See “Obligations under Participation Agreements” in Note 9 for additional information.

Term Loan

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

Repurchase Agreement

The Company financed certain of its senior loans through repurchase transactions under a master repurchase agreement. The Company accounted for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees.

Fair Value Measurements

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

Deferred Financing Costs

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

Income Taxes

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

     As of December 31, 2020, the Company has satisfied all the requirements for a REIT. No provision for federal income taxes has been included in the consolidated financial statements for the years ended December 31, 2020 and 2019.

    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, 2020 and 2019, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s 2017-2019 federal tax returns remain subject to examination by the Internal Revenue Service.

F-14

Notes to Consolidated Financial Statements

Earnings Per Share

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

Use of Estimates

    The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. As of December 31, 2020, there has been an ongoing global outbreak of a novel coronavirus (“COVID-19”), which has spread to over 200 countries and territories, including the United States, and has spread to every state in the United States. The World Health Organization has designated COVID-19 as a pandemic, and numerous countries, including the United States, have declared national emergencies with respect to COVID-19. The global impact of the pandemic has been rapidly evolving, and as cases of COVID-19 have continued to be identified in additional countries, many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading and operations of non-essential offices and retail centers. Such actions are creating disruption in global supply chains, and adversely impacting many industries. The pandemic could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2020, however uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of December 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates.

Segment Information

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

Recent Accounting Pronouncements

    In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. In April 2019, the FASB issued additional amendments to clarify the scope of ASU 2016-13 and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. In May 2019, the FASB issued ASU 2019-05 — Targeted Transition Relief, which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In October 2019, the FASB decided that for smaller reporting companies, ASU 2016-13 and related amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company meets the definition of a smaller reporting company under the regulation of the Securities and Exchange Commission. As such, the Company will adopt this ASU and related amendments on January 1, 2023. Management is currently evaluating the impact this change will have on the Company’s consolidated financial statements and disclosures.

    In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of information required by U.S. GAAP. The amendments in ASU 2018-13 added, removed and modified certain fair value measurement disclosure requirements. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year

F-15

Notes to Consolidated Financial Statements

of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted ASU 2018-13 on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on its consolidated financial statements and disclosures.

    London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. At the end of 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR could be discontinued. Other interest rates used globally could also be discontinued for similar reasons. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The provisions of optional relief include: (i) contract modifications - account for the modification as a continuation of the existing contract without additional analysis; (ii) hedging accounting - continue hedge accounting when certain critical terms of a hedging relationship change; and (iii) held-to-maturity (HTM) debt securities - one-time sale and/or transfer to available for sale or trading may be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. Companies can apply the amendments in ASU 2020-04 immediately. However, ASU 2020-04 will only be available for a limited time (generally through December 31, 2022). The Company is currently evaluating the impact of the reference rate reform and ASU 2020-04 on its consolidated financial statements and disclosures.

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

Merger

    On February 28, 2020, the Company entered into the Merger Agreement pursuant to which TPT2 was merged with and into the Company, with the Company continuing as the surviving corporation, effective March 1, 2020. In connection with the Merger, each share of common stock, par value $0.01 per share, of TPT2 issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive from the Company a number of shares of common stock, par value $0.01 per share, of the Company equal to an exchange ratio, which was 1.2031. The exchange ratio was based on the relative net asset values of the Company and TPT2 as of December 31, 2019 as adjusted to reflect changes in the net working capital of each of the Company and TPT2 during the period from January 1, 2020 through March 1, 2020, the effective time for the Merger. For purposes of determining the respective fair values of the Company and TPT2, the value of the loans (or participation interests therein) held by each of the Company and TPT2 was the value of such loans (or participation interests) as set forth in the audited financial statements of the Company as of and for the year ended December 31, 2019. As a result, Terra Fund 7, the sole stockholder of TPT2, received 2,116,785.76 shares of common stock of the Company as consideration in the Merger. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder.

    The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Merger:

Total Consideration
Equity issued in the Merger	$	34,630,615
	$	34,630,615
Net Assets of TPT2 Received in the Merger
Loans held for investment acquired through participation	$	17,688,741
Cash and cash equivalents	16,897,074
Interest receivable	134,543
Other assets	18,384
Accounts payable and accrued expenses	(57,433)
Due to Manager	(50,694)
Total identifiable net assets	$	34,630,615

F-16

Notes to Consolidated Financial Statements

    The fair value of the 2,116,785.76 shares of the Company’s stock issued in the Merger as consideration paid for TPT2 was derived from the fair value per share of the Company as of December 31, 2019 as adjusted to reflect the change in the net working capital of the Company during the period from January 1, 2020 through March 1, 2020, the effective time of the Merger.

    In connection with the Merger, the size of the board of directors of the Company was reduced from eight directors to four directors, with Andrew M. Axelrod, Vikram S. Uppal, Roger H. Beless and Michael L. Evans continuing as directors of the Company.

Issuance of Common Stock to Terra Offshore REIT

    In addition, on March 2, 2020, the Company entered into two separate contribution agreements, one by and among the Company, Terra Offshore REIT and Terra Income Fund International, and another by and among the Company, Terra Offshore REIT and Terra Secured Income Fund 5 International, pursuant to which the Company issued 2,457,684.59 shares of common stock of the Company to Terra Offshore REIT in exchange for the settlement of $32.1 million of participation interests in loans also held by the Company, $8.6 million in cash and other net working capital. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder.

    The fair value of the 2,457,684.59 shares of the Company’s stock issued in the transaction as consideration paid for Terra Offshore REIT was derived from the fair value per share of the Company as of December 31, 2019, which was the most recently determined fair value per share of the Company.

    The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Issuance of Common Stock to Terra Offshore REIT:

Total Consideration
Equity issued to Terra Offshore REIT	$	40,749,378
	$	40,749,378
Net Assets of Terra Offshore REIT Received
Investments through participation interest, at fair value	$	32,112,257
Cash and cash equivalents	8,600,000
Interest receivable	270,947
Due to Manager	(233,826)
Total identifiable net assets	$	40,749,378

On April 29, 2020, the Company repurchased 212,691 shares of common stock at a price of $17.02 per share that the Company had previously sold to Terra Offshore REIT on September 30, 2019 (Note 8).

Terra JV, LLC

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

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

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

F-17

Notes to Consolidated Financial Statements

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

    As of December 31, 2020, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.

Net Loss on Extinguishment of Obligations Under Participation Agreements

    As discussed in Note 8, in the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties. The obligations under participation agreements were released as a result of the Merger and the Issuance of Common Stock to Terra Offshore REIT. In connection with these transactions, the Company recognized a net loss of $0.3 million for the three months ended March 31, 2020, which was primarily related to transaction costs incurred in connection with both transactions.

Note 4. Loans Held for Investment

Portfolio Summary

The following table provides a summary of the Company’s loan portfolio as of December 31, 2020 and 2019:

	December 31, 2020									December 31, 2019
	Fixed Rate			Floating Rate (1)(2)(3)			Total			Fixed Rate			Floating Rate (1)(2)(3)			Total
Number of loans	6			14			20			8			15			23
Principal balance	$	56,335,792		$	367,838,966		$	424,174,758		$	70,692,767		$	306,695,550		$	377,388,317
Carrying value	$	56,464,310		$	365,816,205		$	422,280,515		$	71,469,137		$	307,143,631		$	378,612,768
Fair value	$	56,284,334		$	363,122,860		$	419,407,194		$	71,516,432		$	307,643,983		$	379,160,415
Weighted-average coupon rate	12.17		%	7.95		%	8.51		%	11.93		%	9.13		%	9.65		%
Weighted-average remaining term (years)	1.78			1.44			1.48			2.28			2.09			2.13

_______________

(1)These loans pay a coupon rate of LIBOR plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.14% and 1.76% as of December 31, 2020 and 2019, respectively.

(2)As of December 31, 2020, amounts included $184.2 million of senior mortgages used as collateral for $107.6 million of borrowings under a term loan (Note 9). These borrowings bear interest at an annual rate of LIBOR plus 4.25% with a LIBOR floor of 1.00% as of December 31, 2020. As of December 31, 2019, amounts included $114.8 million of senior mortgages used as collateral for $81.1 million of borrowings under a repurchase agreement (Note 9). These borrowings bore interest at an annual rate of LIBOR plus a spread ranging from 2.25% to 2.50% as of December 31, 2019. The repurchase agreement was terminated in September 2020.

(3)As of both December 31, 2020 and 2019, twelve of these loans are subject to a LIBOR floor.

F-18

Notes to Consolidated Financial Statements

Lending Activities

The following table presents the activities of the Company’s loan portfolio for the years ended December 31, 2020 and 2019:

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2020	$	375,462,222	$	3,150,546	$	378,612,768
New loans made	107,359,299		1,129,112		108,488,411
Principal repayments received	(66,144,729)		—		(66,144,729)
PIK interest (1)	4,442,759		—		4,442,759
Net amortization of premiums on loans	(61,391)		—		(61,391)
Accrual, payment and accretion of investment-related fees and other, net	667,060		14,395		681,455
Provision for loan losses	(3,738,758)		—		(3,738,758)
Balance, December 31, 2020	$	417,986,462	$	4,294,053	$	422,280,515

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2019	$	388,243,974	$	—	$	388,243,974
New loans made	182,206,332		3,120,887		185,327,219
Principal repayments received	(181,131,959)		—		(181,131,959)
Foreclosure of collateral (2)	(14,325,000)		—		(14,325,000)
PIK interest (1)	2,476,355		—		2,476,355
Net amortization of premiums on loans	(104,426)		—		(104,426)
Accrual, payment and accretion of investment-related fees, net (3)	(1,903,054)		29,659		(1,873,395)
Balance, December 31, 2019	$	375,462,222	$	3,150,546	$	378,612,768

_______________

(1)Certain loans in the Company’s portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted to $1.5 million and $0.8 million for the years ended December 31, 2020 and 2019, respectively.

(2)On January 9, 2019, the Company acquired 4.9 acres of adjacent land encumbering a $14.3 million first mortgage via deed in lieu of foreclosure in exchange for the relief of the first mortgage and related fees and expenses (Note 6).

(3)Amount for the year ended December 31, 2019 included $0.5 million of deferred origination fees that were previously recorded as unearned income.

F-19

Notes to Consolidated Financial Statements

Portfolio Information

    The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of December 31, 2020 and 2019:

	December 31, 2020						December 31, 2019
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	254,042,847	$	255,093,989	60.5	%	$	178,130,623	$	178,203,675	47.1	%
Preferred equity investments	141,590,632		142,002,144		33.6	%	157,144,040		157,737,763		41.6	%
Mezzanine loans	28,541,279		28,923,140		6.8	%	42,113,654		42,671,330		11.3	%
Allowance for loan losses	—		(3,738,758)		(0.9)	%	—		—		—	%
Total	$	424,174,758	$	422,280,515	100.0	%	$	377,388,317	$	378,612,768	100.0	%

	December 31, 2020						December 31, 2019
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	182,698,225	$	183,053,751	43.3	%	$	142,055,845	$	141,870,355	37.5	%
Multifamily	87,978,759		88,627,207		21.0	%	76,640,369		77,136,016		20.4	%
Student housing	55,294,414		55,643,591		13.2	%	58,049,717		58,553,496		15.5	%
Hotel	53,392,809		53,687,304		12.7	%	46,598,011		46,731,939		12.3	%
Infill land	27,210,551		27,305,496		6.5	%	36,444,375		36,624,375		9.7	%
Condominium	10,600,000		10,701,924		2.5	%	10,600,000		10,696,587		2.8	%
Industrial	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.8	%
Allowance for loan losses	—		(3,738,758)		(0.9)	%	—		—		—	%
Total	$	424,174,758	$	422,280,515	100.0	%	$	377,388,317	$	378,612,768	100.0	%

	December 31, 2020						December 31, 2019
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	200,279,688	$	200,990,328	47.6	%	$	150,988,463	$	151,108,109	39.9	%
New York	79,187,004		79,310,276		18.8	%	79,734,323		79,896,663		21.1	%
Georgia	74,116,787		74,505,752		17.6	%	61,772,764		61,957,443		16.4	%
North Carolina	33,242,567		33,438,806		7.9	%	32,592,767		32,766,311		8.7	%
Washington	23,500,000		23,682,536		5.6	%	23,500,000		23,661,724		6.2	%
Massachusetts	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.8	%
Texas	3,848,712		3,887,200		0.9	%	3,500,000		3,531,776		0.9	%
Illinois	—		—		—	%	8,004,877		8,071,562		2.1	%
Kansas	—		—		—	%	6,200,000		6,251,649		1.7	%
Other (1)	3,000,000		3,204,375		0.8	%	4,095,123		4,367,531		1.2	%
Allowance for loan losses	—		(3,738,758)		(0.9)	%	—		—		—	%
Total	$	424,174,758	$	422,280,515	100.0	%	$	377,388,317	$	378,612,768	100.0	%

_______________

(1)Other includes a $3.0 million loan with collateral located in South Carolina at both December 31, 2020 and 2019. Other also includes $1.1 million of the unused portion of a credit facility at December 31, 2019.

Loan Risk Rating

    As described in Note 2, 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.

F-20

Notes to Consolidated Financial Statements

    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, 2020 and 2019:

	December 31, 2020							December 31, 2019
Loan Risk Rating	Number of Loans	Principal Balance		Carrying Value		% of Total		Number of Loans	Principal Balance		Carrying Value		% of Total
1	0	$	—	$	—	—	%	—	$	—	$	—	—	%
2	1	7,000,000		7,000,000		1.6	%	5	50,000,000		50,284,751		13.3	%
3	14	323,696,475		325,284,285		76.4	%	17	322,648,317		323,588,017		85.4	%
4 (1)	3	72,861,587		73,079,804		17.2	%	—	—		—		—	%
5 (1)	1	3,848,712		3,887,200		0.9	%	—	—		—		—	%
Other (2)	1	16,767,984		16,767,984		3.9	%	1	4,740,000		4,740,000		1.3	%
	20	$	424,174,758	426,019,273		100.0	%	23	$	377,388,317	378,612,768		100.0	%
Allowance for loan losses				(3,738,758)							—
Total, net of allowance for loan losses				$	422,280,515						$	378,612,768

_______________

(1)The increase in number of loans with a loan risk rating of “4” and “5” was due to the higher risk in select loans as a result of asset-specific factors that are particularly negatively impacted by the COVID-19 pandemic.

(2)These loans were deemed impaired and removed from the pool of loans on which a general allowance is calculated. For the year ended December 31, 2020, the Company recorded a specific allowance of $2.5 million on this loan as a result of a decline in the fair value of the collateral. For the year ended December 31, 2019, no specific reserve for loan losses was recorded on this loan because the fair value of the collateral was greater than carrying value of the loan. In March 2020, this loan was repaid in full.

    As of December 31, 2020, the Company had three loans with a loan risk rating of “4” and one loan with a loan risk rating of “5”, and recorded a general allowance for loan losses of $1.3 million.

     The following table presents the activity in the Company’s allowance for loan losses for the years ended December 31, 2020 and 2019:

	Years Ended December 31,
	2020		2019
Allowance for loan losses, beginning of period	$	—	$	—
Provision for loan losses	3,738,758		—
Charge-offs	—		—
Recoveries	—		—
Allowance for loan losses, end of period	$	3,738,758	$	—

    The allowance for loan losses reserve reflects the macroeconomic impact of the COVID-19 pandemic on commercial real estate markets generally and is not specific to any loan losses or impairments in our portfolio. See Note 2 for further discussion of COVID-19.

Note 5. Equity Investment in a Limited Partnership

On August 3, 2020, the Company entered into a subscription agreement with Terra Real Estate Credit Opportunities Fund, LP (“Terra RECO”) whereby the Company committed to fund up to $50.0 million to purchase a limited partnership interest in Terra RECO. Terra RECO’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. Terra RECO may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). The general partner of Terra RECO is Terra Real Estate Credit Opportunities Fund GP, LLC, which is a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC. As of December 31, 2020, the unfunded commitment was $14.1 million.

F-21

Notes to Consolidated Financial Statements

The Company evaluated its equity interest in Terra RECO and determined it does not have a controlling financial interest and is not the primarily beneficiary. Accordingly, the equity interest in Terra RECO is accounted for as an equity method investment. As of December 31, 2020, the Company owned a 90.3%, or $36.3 million, of equity interest in Terra RECO. For the year ended December 31, 2020, the Company recorded equity income from Terra RECO of $38,640 and did not receive any distributions from Terra RECO.

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

	December 31, 2020
Investments at fair value (cost of $44,174,031)	$	44,715,979
Other assets	5,331,840
Total assets	50,047,819
Obligations under participation agreement (proceeds of $6,222,830)	6,347,478
Other liabilities	4,204,147
Total liabilities	$	10,551,625
Partners’ capital	$	39,496,194

	Year Ended December 31, 2020
Total investment income	$	239,837
Total expenses	614,362
Net investment loss	(374,525)
Unrealized appreciation on investments	417,300
Net increase in partners' capital resulting from operations	$	42,775

Note 6. Real Estate Owned, Net

Real Estate Activities

2020 — In June 2020, the Company received a notice from a tenant occupying a portion of the office building that the Company acquired in July 2018 via foreclosure of their intention to terminate the lease. In connection with the lease termination effective September 4, 2020, the Company received from the tenant lease termination fee of $0.4 million, which included approximately $0.2 million of cash and $0.2 million of the furniture and fixtures in the office space. The furniture and fixtures have a remaining useful life of 2.5 years and are being depreciated on a straight-line basis over the remaining useful life. Additionally, the Company wrote off the related unamortized in-place lease intangible assets of $0.9 million, unamortized below-market rent intangible liabilities of $0.6 million and rent receivable of $0.1 million. There was no gain or loss recognized on the lease termination.

2019 —    On January 9, 2019, the Company acquired 4.9 acres of adjacent land encumbering a first mortgage via deed in lieu of foreclosure in exchange for the payment of the first mortgage and related fees and expenses.

    The following table summarizes the carrying value of the first mortgage prior to the deed in lieu of foreclosure on January 9, 2019:

Carrying Value of First Mortgage
Loan held for investment	$	14,325,000
Interest receivable	439,300
Restricted cash applied against loan principal amount	(60,941)
	$	14,703,359

    The table below summarizes the allocation of the estimated fair value of the real estate acquired on January 9, 2019 based on the policy described in Note 2:

F-22

Notes to Consolidated Financial Statements

Assets Acquired
Real estate owned:
Land	$	14,703,359

    The Company capitalized transaction costs of approximately $0.2 million to land.

For the year ended December 31, 2019, the Company recorded an impairment charge of $1.6 million on the land in order to reduce the carrying value of the land to its estimated fair value, which was the estimated selling price less the cost of sale.

Real Estate Owned, Net

    Real estate owned is comprised of 4.9 acres of adjacent 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:

	December 31, 2020						December 31, 2019
	Cost		Accumulated Depreciation/Amortization		Net		Cost		Accumulated Depreciation/Amortization		Net
Real estate:
Land	$	13,395,430	$	—	$	13,395,430	$	13,395,430	$	—	$	13,395,430
Building and building improvements	51,725,969		(3,125,143)		48,600,826		51,725,969		(1,831,980)		49,893,989
Tenant improvements	1,854,640		(670,090)		1,184,550		1,854,640		(392,812)		1,461,828
Furniture and fixtures	236,000		(31,467)		204,533		—		—		—
Total real estate	67,212,039		(3,826,700)		63,385,339		66,976,039		(2,224,792)		64,751,247
Lease intangible assets:
In-place lease	15,852,232		(6,172,747)		9,679,485		15,852,232		(3,138,675)		12,713,557
Above-market rent	156,542		(42,427)		114,115		156,542		(24,871)		131,671
Total intangible assets	16,008,774		(6,215,174)		9,793,600		16,008,774		(3,163,546)		12,845,228
Lease intangible liabilities:
Below-market rent	(3,371,314)		1,702,800		(1,668,514)		(3,371,314)		658,115		(2,713,199)
Above-market ground lease	(8,896,270)		315,008		(8,581,262)		(8,896,270)		184,660		(8,711,610)
Total intangible liabilities	(12,267,584)		2,017,808		(10,249,776)		(12,267,584)		842,775		(11,424,809)
Total real estate	$	70,953,229	$	(8,024,066)	$	62,929,163	$	70,717,229	$	(4,545,563)	$	66,171,666

F-23

Notes to Consolidated Financial Statements

Real Estate Operating Revenues and Expenses

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

	Years Ended December 31,
	2020		2019
Real estate operating revenues:
Lease revenue	$	8,150,041	$	7,683,843
Other operating income	2,273,522		2,122,664
Total	$	10,423,563	$	9,806,507
Real estate operating expenses:
Utilities	$	166,003	$	191,657
Real estate taxes	1,925,999		1,194,192
Repairs and maintenances	659,934		618,755
Management fees	224,732		252,164
Lease expense, including amortization of above-market ground lease	1,134,152		1,135,096
Other operating expenses	394,299		598,047
Total	$	4,505,119	$	3,989,911

Leases

    On July 30, 2018, the Company foreclosed on a multi-tenant office building in full satisfaction of a first mortgage and related fees and expenses. In connection with the foreclosure, the Company assumed four leases whereby the Company is the lessor to the leases. These four tenant leases had remaining lease terms ranging from 6.3 years to 8.8 years as of July 30, 2018 and provide for annual fixed rent increase. Three of the tenant leases each provides two options to renew the lease for five years each and the remaining tenant lease provides one option to renew the lease for five years.

    In addition, the Company assumed 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 68.3 years 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 was scheduled for November 1, 2020, however the Company is currently negotiating with the landlord to determine the fair value of the land, on which the ground rent is based. Since future rent increase on the ground lease is unknown, the Company did not include the future rent increase in calculating the present value of future rent payments. The ground lease does not provide for renewal options.

    On the date of foreclosure, the Company performed lease classification test on the tenant leases as well as the ground lease in accordance with ASC 840. The result of the lease classification test indicated that the tenant leases and the ground lease shall be classified as operating leases on the date of foreclosure.

    On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) using a modified retrospective transition approach and chose not to adjust comparable periods (Note 2). The Company elected to use the package of practical expedients for its existing leases whereby the Company did not need to reassess whether a contract is or contains a lease, lease classification and initial direct costs. As a result, the leases continue to be classified as operating leases under ASC 842, Leases. The adoption of ASU 2016-02 did not have any impact on the tenant leases; however, for the ground lease, the Company recognized $16.1 million of both operating lease right-of-use assets and operating lease liabilities on its consolidated balance sheets. No cumulative effect adjustment was recorded because there was no change to operating lease cost. In addition, as of January 1, 2019, the Company had $0.5 million of unamortized leasing commission (initial direct costs) on the tenant leases. The Company elected to continue to amortize the remaining leasing commission through the end of the lease terms.

F-24

Notes to Consolidated Financial Statements

Scheduled Future Minimum Rent Income 

    Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at December 31, 2020 are as follows: 

Years Ending December 31,	Total
2021	$	6,628,573
2022	7,132,812
2023	7,363,647
2024	7,600,861
2025	4,111,257
Thereafter	1,199,623
Total	$	34,036,773

Scheduled Annual Net Amortization of Intangibles 

    Based on the intangible assets and liabilities recorded at December 31, 2020, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows:

Years Ending December 31,	Net Decrease in Real Estate Operating Revenue (1)		Increase in Depreciation and Amortization (1)		Decrease in Rent Expense (1)		Total
2021	(338,220)		2,062,060		(130,348)		1,593,492
2022	(338,220)		2,062,060		(130,348)		1,593,492
2023	(338,220)		2,062,060		(130,348)		1,593,492
2024	(338,220)		2,062,060		(130,348)		1,593,492
2025	(181,608)		1,431,245		(130,348)		1,119,289
Thereafter	(19,911)		—		(7,929,522)		(7,949,433)
Total	$	(1,554,399)	$	9,679,485	$	(8,581,262)	$	(456,176)

_______________

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

Supplemental Ground Lease Disclosures

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

	December 31,
	2020			2019
Operating lease
Operating lease right-of-use assets	$	16,105,888		$	16,112,925
Operating lease liabilities	$	16,105,888		$	16,112,925
Weighted average remaining lease term — operating lease (years)	65.8			66.8
Weighted average discount rate — operating lease	7.9		%	7.9		%

F-25

Notes to Consolidated Financial Statements

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

	Years Ended December 31,
	2020		2019
Operating lease cost	$	1,264,500	$	1,265,445

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

	Years Ended December 31,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,264,500	$	1,265,445
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	1,264,500	$	1,265,445

    Maturities of operating lease liabilities are as follows:

Years Ending December 31,	Operating Lease
2021	1,264,500
2022	1,264,500
2023	1,264,500
2024	1,264,500
2025	1,264,500
Thereafter	76,871,063
Total lease payments	83,193,563
Less: Imputed interest	(67,087,675)
Total	$	16,105,888

Note 7. Fair Value Measurements

    The Company adopted the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:

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

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

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

F-26

Notes to Consolidated Financial Statements

financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment.

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

As of December 31, 2020 and 2019, 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, term loan payable, mortgage loan payable, repurchase agreement payable and revolving credit facility payable. 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.

Financial Instruments Carried at Fair Value on a Recurring Basis

    From time to time, the Company may invest in short-term debt and equity securities which are classified as available-for-sale securities, which are presented at fair value 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, as of December 31, 2020, according to the fair value hierarchy:

	December 31, 2020
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Equity securities	$	1,287,500	$	—	$	—	$	1,287,500
Debt securities	—		—		—		—
Total	$	1,287,500	$	—	$	—	$	1,287,500

    The following table presents the activities of the marketable securities for the periods presented.

	Years Ended December 31,
	2020		2019
Beginning balance	$	—	$	—
Purchases	6,039,567		—
Proceeds from sale	(6,023,723)		—
Realized gains on marketable securities	1,160,162		—
Unrealized gains on marketable securities	111,494		—
Ending balance	$	1,287,500	$	—

F-27

Notes to Consolidated Financial Statements

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 fees, and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets:

		December 31, 2020						December 31, 2019
	Level	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Loans:
Loans held for investment, net	3	$	419,924,758	$	421,725,220	$	415,113,225	$	374,267,430	$	375,462,222	$	375,956,154
Loans held for investment acquired through participation, net	3	4,250,000		4,294,053		4,293,969		3,120,887		3,150,546		3,204,261
Allowance for loan losses		—		(3,738,758)		—		—		—		—
Total loans		$	424,174,758	$	422,280,515	$	419,407,194	$	377,388,317	$	378,612,768	$	379,160,415
Liabilities:
Term loan payable	3	$	107,584,451	$	105,245,801	$	107,248,555	$	—	$	—	$	—
Obligations under participation agreements	3	71,266,303		71,581,897		70,693,207		102,564,795		103,186,327		103,188,783
Mortgage loan payable	3	44,020,225		44,117,293		44,348,689		44,614,480		44,753,633		44,947,378
Secured borrowing	3	18,281,848		18,187,663		17,037,032		—		—		—
Repurchase agreement payable	3	—		—		—		81,134,436		79,608,437		81,134,436
Total liabilities		$	241,152,827	$	239,132,654	$	239,327,483	$	228,313,711	$	227,548,397	$	229,270,597

    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, 2020 and 2019 due to their short-term nature.

Valuation Process for Fair Value Measurement

    The fair value of the Company’s investment in equity securities is determined based on quoted prices in an active market and is classified as Level 1 of the fair value hierarchy.

    Market quotations are not readily available for the Company’s real estate-related loan investments, all of which are included in Level 3 of the fair value hierarchy, and therefore these investments are valued utilizing a yield approach, i.e. a discounted cash flow methodology to arrive at an estimate of the fair value of each respective investment in the portfolio using an estimated market yield. In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, including 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.

F-28

Notes to Consolidated Financial Statements

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

The following table summarizes the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of December 31, 2020 and 2019. 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, 2020		Primary Valuation Technique	Unobservable Inputs	December 31, 2020
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	415,113,225	Discounted cash flow	Discount rate	5.29	%	20.05	%	10.38	%
Loans held for investment acquired through participation, net	4,293,969		Discounted cash flow	Discount rate	12.89	%	12.89	%	12.89	%
Total Level 3 Assets	$	419,407,194
Liabilities:
Term loan payable	$	107,248,555	Discounted cash flow	Discount rate	5.25	%	5.25	%	5.25	%
Obligations under Participation Agreements	70,693,207		Discounted cash flow	Discount rate	9.75	%	20.05	%	12.58	%
Mortgage loan payable	44,348,689		Discounted cash flow	Discount rate	6.08	%	6.08	%	6.08	%
Secured borrowing	17,037,032		Discounted cash flow	Discount rate	11.25	%	11.25	%	11.25	%
Total Level 3 Liabilities	$	239,327,483

	Fair Value at December 31, 2019		Primary Valuation Technique	Unobservable Inputs	December 31, 2019
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	375,956,154	Discounted cash flow	Discount rate	4.71	%	14.95	%	9.77	%
Loans held for investment acquired through participation, net	3,204,261		Discounted cash flow	Discount rate	11.90	%	11.90	%	11.90	%
Total Level 3 Assets	$	379,160,415
Liabilities:
Obligations under Participation Agreements	$	103,188,783	Discounted cash flow	Discount rate	9.00	%	14.95	%	11.99	%
Mortgage loan	44,947,378		Discounted cash flow	Discount rate	6.08	%	6.08	%	6.08	%
Repurchase agreement payable	81,134,436		Discounted cash flow	Discount rate	4.11	%	4.75	%	4.33	%
Total Level 3 Liabilities	$	229,270,597

Note 8. Related Party Transactions

Management Agreement

The Company entered into a 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,
	2020		2019
Origination and extension fee expense (1)(2)	$	1,383,960	$	1,992,492
Asset management fee	4,480,706		3,671,474
Asset servicing fee	1,008,256		854,096
Operating expenses reimbursed to Manager	6,041,075		4,875,153
Disposition fee (3)	504,611		1,408,055
Total	$	13,418,608	$	12,801,270

_______________

(1)Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred

F-29

Notes to Consolidated Financial Statements

and amortized to interest income over the term of the loan.

(2)Amount for the year ended December 31, 2020 excluded $0.4 million of origination fee paid to the Manager in connection with the Company’s equity investment in a limited partnership. This origination fee was capitalized to the carrying value of the equity investment as transaction cost.

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

Origination and Extension Fee Expense

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

Asset Management Fee

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

Asset Servicing Fee

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

Transaction Breakup Fee

    In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of December 31, 2020 and 2019, 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.

Distributions Paid

    For the year ended December 31, 2020, the Company made distributions to Terra Fund 5, Terra JV and Terra Offshore REIT in the aggregate $21.2 million, of which $16.0 million were returns of capital (Note 11). For the year ended December 31, 2019, the Company made distributions to Terra Fund 5 and Terra Offshore REIT totaling $30.4 million, of which $21.4 million were returns of capital (Note 11).

F-30

Notes to Consolidated Financial Statements

Due to Manager

    As of December 31, 2020 and 2019, approximately $1.3 million and $1.0 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.

Merger and Issuance of Common Stock to Terra Offshore REIT

    As discussed in Note 3, on March 1, 2020, TPT2 merged with and into the Company with the Company continuing as the surviving company. In connection with the Merger, the Company issued 2,116,785.76 shares of common stock of the Company to Terra Fund 7, the sole stockholder of TPT2, as consideration in the Merger. In addition, on March 2, 2020, Terra Offshore REIT contributed cash and released obligations under the participation agreements to the Company (Note 3) in exchange for the issuance of 2,457,684.59 shares of common stock of the Company. As described in Note 3, Terra Fund 7 contributed the shares of the Company’s common stock received as consideration in the Merger to Terra JV and became a co-managing member of Terra JV pursuant to the JV Agreement. The JV Agreement and related stockholders agreement between Terra JV and the Company, dated March 2, 2020, provide for the joint approval of Terra Fund 5 and Terra Fund 7 with respect to certain major decisions that are taken by Terra JV and the Company. As of December 31, 2020, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT; and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.

Terra Real Estate Credit Opportunities Fund, LP

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

Terra International Fund 3, L.P.

    On September 30, 2019, the Company entered into a Contribution and Repurchase Agreement with Terra International Fund 3, L.P. (“Terra International 3”) and Terra Offshore REIT, a wholly-owned subsidiary of Terra International 3.

    Pursuant to this agreement, Terra International 3, through Terra Offshore REIT, contributed cash in the amount of $3.6 million to the Company in exchange for 212,691 shares of common stock, at a price of $17.02 per share. In addition, Terra International 3 agreed to contribute to the Company future cash proceeds, if any, raised from time to time by it, and the Company agreed to issue shares of common stock to Terra International 3 in exchange for any such future cash proceeds, in each case pursuant to and in accordance with the terms and conditions specified in the agreement. The shares were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder.

    Under Cayman securities law, when there is a change in the terms of the offering, previously admitted partners have rights to rescind their subscription. On September 24, 2019, Terra International 3 amended its private placement memorandum to change its term from finite life to perpetual life with limited opportunity for liquidity, as well as to change the selling commission structure and to provide for a dividend reinvestment plan. As a result of the change in the terms of the offering, Terra International 3 received requests to rescind all of the units of its limited partnership interest at a price of $100,000 per unit. On April 29, 2020, the Company repurchased, at a price of $17.02 per share, the 212,691 shares of common stock that the Company had previously sold to Terra Offshore REIT on September 30, 2019. Terra International 3 honored all of the rescission requests that it had received with proceeds from the repurchase.

Participation Agreements

In the normal course of business, the Company may enter into participation agreements (“PAs”) with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the “Participants”). The purpose of the PAs 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

F-31

Notes to Consolidated Financial Statements

secured borrowings under ASC 860 (See “Participation interests” in Note 2 and “Obligations under Participation Agreements” in Note 9).

Participation Interests Purchased by the Company

The below table lists the loan interests participated in by the Company via PAs as of December 31, 2020 and 2019. In accordance with the terms of each PA, 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.

	December 31, 2020			December 31, 2019
	Participating Interests	Principal Balance	Carrying Value	Participating Interests	Principal Balance	Carrying Value
LD Milpitas Mezz, LP (1)	25.00%	4,250,000	4,294,053	25.00%	3,120,887	3,150,546

________________

(1)On June 27, 2018, the Company entered into a participation agreement with Terra Income Fund 6, Inc. (“Terra Fund 6”) to purchase a 25% participation interest, or $4.3 million, in a $17.0 million mezzanine loan. As of December 31, 2020, all of the commitment has been funded.

Transfers of Participation Interest by the Company

    The following tables summarize the loans that were subject to PAs with affiliated entities as of December 31, 2020 and 2019:

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2020
	Principal Balance		Carrying Value		% Transferred		Principal Balance (6)		Carrying Value (6)
14th & Alice Street Owner, LLC (5)	$	32,625,912	$	32,877,544	80.00	%	$	26,100,729	$	26,211,548
370 Lex Part Deux, LLC (2)	53,874,507		53,912,363		35.00	%	18,856,078		18,856,077
City Gardens 333 LLC (2)	28,303,628		28,307,408		14.00	%	3,962,509		3,963,010
Orange Grove Property Investors, LLC (2)	10,600,000		10,701,924		80.00	%	8,480,000		8,561,523
RS JZ Driggs, LLC (2)	8,544,513		8,629,929		50.00	%	4,272,257		4,314,965
Stonewall Station Mezz LLC (2)	10,442,567		10,537,512		44.00	%	4,594,730		4,635,937
The Bristol at Southport, LLC (5)	23,500,000		23,682,536		21.28	%	5,000,000		5,038,837
	$	167,891,127	$	168,649,216			$	71,266,303	$	71,581,897

F-32

Notes to Consolidated Financial Statements

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2019
	Principal Balance		Carrying Value		% Transferred		Principal Balance (6)		Carrying Value (6)
14th & Alice Street Owner, LLC (5)	$	12,932,034	$	12,957,731	80.00	%	$	10,345,627	$	10,387,090
2539 Morse, LLC (1)(3)(7)	7,000,000		7,067,422		40.00	%	2,800,001		2,825,519
370 Lex Part Deux, LLC (2)(4)(7)	48,349,948		48,425,659		47.00	%	22,724,476		22,724,476
Austin H. I. Owner LLC (1)(7)	3,500,000		3,531,776		30.00	%	1,050,000		1,059,532
City Gardens 333 LLC (1)(2)(3)(4)(7)	28,049,717		28,056,179		47.00	%	13,182,584		13,184,648
High Pointe Mezzanine Investments,    LLC (3)(7)	3,000,000		3,263,285		37.20	%	1,116,000		1,217,160
NB Private Capital, LLC (1)(2)(3)(4)(7)	20,000,000		20,166,610		72.40	%	14,480,392		14,601,021
Orange Grove Property Investors, LLC (2)	10,600,000		10,696,587		80.00	%	8,480,000		8,557,205
RS JZ Driggs, LLC (2)	8,200,000		8,286,629		50.00	%	4,100,000		4,142,264
SparQ Mezz Borrower, LLC (1)(3)(7)	8,700,000		8,783,139		36.81	%	3,202,454		3,231,689
Stonewall Station Mezz LLC (2)	9,792,767		9,875,162		44.00	%	4,308,817		4,344,635
The Bristol at Southport, LLC (1)(3)(4)(7)	23,500,000		23,661,724		42.44	%	9,974,444		10,043,088
TSG-Parcel 1, LLC (1)(2)(7)	18,000,000		18,180,000		37.78	%	6,800,000		6,868,000
	$	201,624,466	$	202,951,903			$	102,564,795	$	103,186,327

________________

(1)Participant was Terra Secured Income Fund 5 International, an affiliated fund advised by the Manager.

(2)Participant is Terra Fund 6, an affiliated fund advised by Terra Income Advisors.

(3)Participant was Terra Income Fund International, an affiliated fund advised by the Manager.

(4)Participant was TPT2, an affiliated fund managed by the Manager.

(5)Participant is a third-party.

(6)Amounts transferred may not agree to the proportionate share of the principal balance and fair value due to the rounding of percentage transferred.

(7)As discussed in Note 3, in March 2020, the Company settled an aggregate of $49.8 million of participation interests in loans held by the Company with TPT2 and Terra Offshore REIT, which Terra Offshore REIT received from Terra Secured Income Fund 5 International and Terra Income Fund International. In connection with the Merger and the Issuance of Common Stock to Terra Offshore REIT, the related participation obligations were settled.

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 PA. 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 PAs 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.

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 are recorded as secured borrowing. For the loan for which a portion is transferred, the 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.

F-33

Notes to Consolidated Financial Statements

The following table summarizes the loan that was transferred to a third-party that was accounted for as secured borrowing as of December 31, 2020.

					Transfers Treated as Secured Borrowing as of December 31, 2020
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
Windy Hill PV Five CM, LLC	$	26,454,910	$	26,407,494	69.11	%	$	18,281,848	$	18,187,663
	$	26,454,910	$	26,407,494			$	18,281,848	$	18,187,663

Co-investment

In January 2018, the Company and Terra Fund 6 co-invested in an $8.9 million mezzanine loan that bears interest at an annual fixed rate of 12.75% and matured on March 31, 2019. In March 2019, the maturity of this loan was extended to July 1, 2019. In June 2019, the maturity of this loan was further extended to September 30, 2019. In August 2019, the loan was repaid in full.

Note 9. Debt

Term Loan

On September 3, 2020, Terra Mortgage Capital I, LLC (the “Issuer” or the “Seller” ), 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 provides 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 Class B Holder is the parent of the Issuer and a wholly-owned subsidiary of the Company, and the sole holder of the Class B Notes. The Class B Holder is consolidated by the Company and the Term Loan represents amount due to Goldman under the Indenture and Credit Agreement. In addition, pursuant to the terms and conditions of the Indenture and Credit Agreement, Goldman has agreed to provide $3.6 million of additional future advances (the “Committed Advances”), and may provide up to $11.6 million of additional future discretionary advances, in connection with certain outstanding funding commitments under mortgage assets owned by the Issuer and financed under the Indenture and Credit Agreement (the “Mortgage Assets”).

The stated maturity date of the Debt is March 14, 2025. The Term Loan bears 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 Benchmark Rate will convert to an alternate index rate following the occurrence of certain transition events (the “Alternate Benchmark Rate”). Except as described below, and provided there is no default under the Indenture and Credit Agreement, the Class B Notes are entitled to residual amounts collected by the Issuer in respect of Mortgage Assets, after payment of debt service on the Term Loan.

The Indenture and Credit Agreement is a term loan and does not contain any mark-to-market or margin provisions. Within a specified period following a monetary or material non-monetary default under a Mortgage Asset, the Class B Holder is required to prepay the portion of the Term Loan that is allocable to such Mortgage Asset (such prepayment is without premium, yield maintenance or other penalty). In connection with entering into the Indenture and Credit Agreement, the Company incurred $2.4 million of deferred financing costs, including a $1.3 million upfront fee paid to Goldman, which are being amortized to interest expense over the term of the facility. The Issuer also pays, with respect to the Committed Advances, an annual fee, payable monthly, equal to the Benchmark Rate or Alternate Benchmark Rate, as applicable, subject to a floor of 1.0% per annum, plus 4.25%.

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 guarantees the payment of certain losses, damages, costs, expenses, and other obligations incurred by Goldman in connection with the occurrence of fraud, intentional misrepresentation,

F-34

Notes to Consolidated Financial Statements

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 guarantees the payment of the aggregate outstanding amount of the Term Loan upon the occurrence of certain bankruptcy events. Under the Guaranty, the Company is 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. As of December 31, 2020, the Company is in compliance with these covenants.

The Term Loan is secured by first-priority security interests in substantially all of the assets of the Issuer, including all of the Mortgage Assets (other than excluded property and subject to certain permitted liens), including specified cash accounts that include the accounts into which Mortgage Asset proceeds are or will be paid. The Mortgage Assets are serviced and administered by an independent third-party servicer.

The principal and interest on the Term Loan are repaid before repayment of the principal on the Class B Notes on each payment date of each month in accordance with the priority of payments as set forth in the Indenture and Credit Agreement, beginning in September 2020. Such payments are subject to certain fees for taxes, filings and administrative expenses. Upon the occurrence of a Term Loan Principal Trigger Event (as defined below), 100% of the payment of the principal proceeds are applied to the Term Loan principal after payment of certain fees and other amounts as described in the Indenture and Credit Agreement. A “Term Loan Principal Trigger Event” means as of any date of determination, an event that will be deemed to have occurred on the first date on which the aggregate principal balance of the Mortgage Assets is less than or equal to the product of (x) 75% multiplied by (y) the aggregate principal balance of the Mortgage Assets as of the closing date, plus any future advances made on such Mortgage Assets prior to such date of determination. As of December 31, 2020, there was no Term Loan Principal Trigger Event. The Class B Notes and the Term Loan are redeemable by the Issuer upon the occurrence of certain tax events in accordance with the terms and provisions of the Indenture and Credit Agreement.

The following tables present detailed information with respect to each borrowing under the Term Loan as of December 31, 2020:

	December 31, 2020
	Mortgage Assets						Borrowings Under the Term Loan (1)(2)
	Principal Amount		Carrying Value		Fair Value
330 Tryon DE LLC	$	22,800,000	$	22,901,294	$	22,869,879	13,680,000
1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP	50,808,453		51,068,554		50,982,247		29,897,848
AGRE DCP Palm Springs, LLC	45,294,097		45,506,051		45,519,030		24,894,939
MSC Fields Peachtree Retreat, LLC	23,308,334		23,437,198		23,428,860		13,985,001
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,039,456		17,994,495		10,800,000
University Park Berkeley, LLC	23,990,786		24,131,808		24,162,710		14,326,663
	$	184,201,670	$	185,084,361	$	184,957,221	$	107,584,451

_______________

(1)Borrowings under the Term Loan bear interest at LIBOR plus 4.25% with a LIBOR floor of 1.00%, or 5.25% as of December 31, 2020 using LIBOR of 0.14%.

(2)The maturity of the Term Loan is March 14, 2025, however the maturity of each borrowing under the Term Loan matches the maturity of the respective Mortgage Asset.

For the year ended December 31, 2020, the Company received proceeds from the Term Loan of $107.6 million, including $2.4 million of Committed Advances and $2.2 million of discretionary advances, and made no repayments. There was no Term Loan for the year ended December 31, 2019. As of December 31, 2020, the remaining amount for Committed Advances and discretionary advances was $1.2 million and $9.4 million, respectively.

Repurchase Agreement

    On December 12, 2018, Terra Mortgage Capital I, LLC entered into an Uncommitted Master Repurchase Agreement (the “Master Repurchase Agreement”) with Goldman Sachs Bank USA. The Master Repurchase Agreement provided for advances

F-35

Notes to Consolidated Financial Statements

of up to $150.0 million in the aggregate, which the Company used to finance certain secured performing commercial real estate loans.

    Advances under the Master Repurchase Agreement accrued interest at a per annum pricing rate equal to the sum of (i) the 30-day LIBOR and (ii) the applicable spread, and had a maturity date of December 12, 2020. The actual terms of financing for each asset was determined at the time of financing in accordance with the Master Repurchase Agreement.

The Master Repurchase Agreement contained margin call provisions that provide Goldman with certain rights in the event of a decline in the market value of the assets purchased under the Master Repurchase Agreement. Upon the occurrence of a margin deficit event, Goldman required the Seller to make a payment to reduce the outstanding obligation to eliminate any margin deficit. For the period from January 1, 2020 to the date of the termination of the Master Repurchase Agreement on September 3, 2020, the Company received a margin call on one of the borrowings and as a result, made a repayment of $3.4 million to reduce the outstanding obligation under the Master Repurchase Agreement.

    In connection with the Master Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of Goldman (the “Guarantee Agreement”), pursuant to which the Company would guarantee the obligations of the Seller under the Master Repurchase Agreement. Subject to certain exceptions, the maximum liability under the Master Repurchase Agreement would not exceed 50% of the then currently outstanding repurchase obligations under the Master Repurchase Agreement.

On September 3, 2020, the Company terminated the Master Repurchase Agreement and replaced it with the Term Loan as described above. In connection with the termination of the Master Repurchase Agreement, the Issuer repurchased all of its assets sold to Goldman pursuant to the Master Repurchase Agreement with the proceeds from the Term Loan, and Goldman released all security interests in such assets. In addition, Goldman unconditionally released the Company from, and terminated, the Guarantee Agreement in favor of Goldman, dated as of December 12, 2018, which provided for the guarantee by the Company of the obligations of the Issuer under the Master Repurchase Agreement, subject to certain exceptions and limitations.

The Master Repurchase Agreement and the Guarantee Agreement contained 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 contained financial covenants, which required the Company to maintain: (i) liquidity of at least 10% of the then-current outstanding amount under the Master Repurchase Agreement; (ii) cash liquidity of at least the greater of $5 million or 5% of the then-current outstanding amount under the Master Repurchase Agreement; (iii) tangible net worth at an amount equal to or greater than 75% of the Company’s tangible net worth as of December 12, 2018, 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 3.00 to 1.00. As of December 31, 2019, the Company was in compliance with these covenants.

    In connection with entering into the Master Repurchase Agreement, the Company incurred $2.8 million of deferred financing costs, which were being amortized to interest expense over the term of the facility. In connection with the termination of the Master Repurchase Agreement, the remaining $0.5 million of unamortized deferred financing costs were carried over to the Term Loan to be amortized over the term of the Term Loan. As of December 31, 2019, unamortized deferred financing costs were $1.5 million.

    The following table presents summary information with respect to the Company’s outstanding borrowing under the Master Repurchase Agreement as of December 31, 2019:

	December 31, 2019
Arrangement	Weighted Average Rate (1)		Amount Outstanding		Amount Remaining Available		Weighted Average Term (2)
Master Repurchase Agreement	4.3	%	$	81,134,436	$	68,865,564	1.55 years

_______________

(1)Amount is calculated using LIBOR of 1.76% as of December 31, 2019.

(2)The weighted average term is determined based on the current maturity of the corresponding loan. Each transaction under the facility has its own specific term. The Company may extend the maturity date of the Master Repurchase Agreement for a period of one year, subject to satisfaction of certain conditions.

F-36

Notes to Consolidated Financial Statements

    The following table presents detailed information with respect to each borrowing under the Master Repurchase Agreement as of December 31, 2019:

	December 31, 2019
	Collateral						Borrowings Under Master Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
330 Tryon DE LLC	$	22,800,000	$	22,891,149	$	22,906,207	2/15/2019	$	17,100,000	LIBOR+2.25% (LIBOR floor of 2.49%)
1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP	38,464,429		38,510,650		38,655,000		3/7/2019	24,040,268		LIBOR+2.35%
AGRE DCP Palm Springs, LLC	30,184,357		30,174,455		30,326,076		12/23/2019	22,638,268		LIBOR+2.50% (LIBOR floor of 1.8%)
MSC Fields Peachtree Retreat, LLC	23,308,335		23,446,793		23,418,996		3/25/2019	17,355,900		LIBOR+2.25% (LIBOR floor of 2.00%)
	$	114,757,121	$	115,023,047	$	115,306,279		$	81,134,436

    For the years ended December 31, 2020 and 2019, the Company borrowed $22.9 million and $81.1 million under the Master Repurchase Agreement, respectively, for the financing of new and follow-on investments, and made repayments of $104.0 million and $34.2 million, respectively.

Revolving Credit Facility

    On June 20, 2019, Terra LOC Portfolio I, LLC, a special-purpose indirect wholly-owned subsidiary of the Company, entered into a credit agreement with Israel Discount Bank of New York to provide for revolving credit loans of up to $35.0 million in the aggregate (“Revolving Credit Facility”), which the Company expects to use for short term financing needed to bridge the timing of anticipated loans repayments and funding obligations. Borrowings under the Revolving Credit Facility can be either prime rate loans or LIBOR rate loans and accrue interest at an annual rate of prime rate plus 1% or LIBOR plus 4% with a floor of 6%. The Revolving Credit Facility was scheduled to mature on June 20, 2020. The Revolving Credit Facility was amended to extend the maturity to October 2, 2020. On October 2, 2020, the Company amended the Revolving Credit Facility and reduced the commitment amount to $15.0 million. In connection with this amendment, the interest rate was changed to prime rate plus 1% or LIBOR plus 4% with a floor of 4.5% and the maturity was extended to September 2, 2021. On March 16, 2021, the Revolving Credit Facility was terminated. In connection with obtaining the Revolving Credit Facility, the Company incurred deferred financing costs of $0.3 million, which was amortized over the original term of the facility. As of December 31, 2020, there was no amount outstanding under the Revolving Credit Facility.

    The Revolving Credit Facility required the Company to maintain: (i) an EBITDA to interest expense ratio of not less than 1.00; (ii) cash liquidity of at least $7.0 million; (iii) tangible net worth of at least $200.0 million; and (iii) a total indebtedness to tangible net worth ratio of not more than 1.75 to 1.00. Additionally, the Revolving Credit Facility required Terra LOC Portfolio I, LLC to maintain a tangible net worth of at least $100.0 million. As of December 31, 2020 and 2019, both the Company and Terra LOC Portfolio I, LLC were in compliance with these covenants.

    For the years ended December 31, 2020 and 2019, the Company borrowed $35.0 million and $16.0 million under the Revolving Credit Facility, respectively, and made repayments of $35.0 million and $16.0 million, respectively.

F-37

Notes to Consolidated Financial Statements

Mortgage Loan Payable

    As of December 31, 2020, the Company had a $44.0 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, 2020 and 2019:

					December 31, 2020				December 31, 2019
Lender	Current Interest Rate	Maturity Date (1)	Principal Amount		Carrying Value		Carrying Value of Collateral		Carrying Value		Carrying Value of Collateral
Centennial Bank	LIBOR + 3.85% (LIBOR Floor of 2.23%)	September 27, 2022	$	44,020,225	$	44,117,293	$	49,533,733	$	44,753,633	$	52,776,236

_______________

(1)In September 2020, the Company exercised the option to extend the maturity of the mortgage loan payable by two years.

Scheduled Debt Principal Payments

    Scheduled debt principal payments for each of the five calendar years following December 31, 2020 are as follows:

Years Ending December 31,	Total
2021	—
2022	44,020,225
2023	—
2024	—
2025	107,584,451
Thereafter	—
	151,604,676
Unamortized deferred financing costs	(2,241,582)
Total	$	149,363,094

     At December 31, 2020 and 2019, the unamortized deferred financing costs were $2.2 million and $1.4 million, respectively.

Obligations Under Participation Agreements and Secured Borrowing

As discussed in Note 2, 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, as applicable. As of December 31, 2020 and 2019, obligations under participation agreements had a carrying value of approximately $71.6 million and $103.2 million, respectively, and the carrying value of the loans that are associated with these obligations under participation agreements was approximately $168.6 million and $203.0 million, respectively, (see “Participation Agreements” in Note 8). Additionally, as of December 31, 2020, secured borrowing had a carrying value of approximately $18.2 million and the carrying value of the loan that is associated with the secured borrowing was $26.4 million. The weighted-average interest rate on the obligations under participation agreements and secured borrowing was approximately 10.2% and 11.8% as of December 31, 2020 and 2019, respectively.

Note 10. Commitments and Contingencies

Impact of COVID-19

    As further discussed in Note 2, the full extent of the impact of COVID-19 on the global economy generally, and the Company’s business in particular, is uncertain. As of December 31, 2020, no contingencies have been recorded on the Company’s consolidated balance sheet as a result of COVID-19, however as the global pandemic continues and the economic implications worsen, it may have long-term impacts on the Company’s financial condition, results of operations, and cash flows. Refer to Note 2 for further discussion of COVID-19.

F-38

Notes to Consolidated Financial Statements

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 $67.9 million and $116.7 million as of December 31, 2020 and 2019, respectively. The Company expects to maintain sufficient cash on hand to fund such unfunded commitments, primarily through matching these commitments with principal repayments on outstanding loans.

Unfunded Investment Commitment

As discussed in Note 8, On August 3, 2020, the Company entered into a subscription agreement with Terra RECO whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in Terra RECO. As of December 31, 2020, the unfunded investment commitment was $14.1 million.

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.

The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company 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. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material adverse effect upon its financial condition or results of operations.

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

Note 11. Equity

Earnings Per Share

The following table presents earnings per share for the years ended December 31, 2020 and 2019:

	Years Ended December 31,
	2020		2019
Net income	$	5,255,730	$	9,042,775
Preferred stock dividend declared	(15,624)		(15,624)
Net income allocable to common stock	$	5,240,106	$	9,027,151
Weighted-average shares outstanding — basic and diluted	18,813,066		14,967,183
Earnings per share — basic and diluted	$	0.28	$	0.60

Preferred Stock Classes

Preferred Stock

    The Company’s charter gives it authority to issue 50,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”). The Company’s board of directors 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, 2020 and 2019, there were no Preferred Stock issued or outstanding.

Series A Preferred Stock

    On November 30, 2016, the Company’s board of directors 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

F-39

Notes to Consolidated Financial Statements

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.

    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 Stock holders’ 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

As discussed in Note 3, on March 1, 2020, TPT2 merged with and into the Company with the Company continuing as the surviving corporation. In connection with the Merger, the Company issued 2,116,785.76 shares of common stock of the Company to Terra Fund 7, the sole stockholder of TPT2, as consideration in the Merger. In addition, on March 2, 2020, the Company issued 2,457,684.59 shares of common stock of the Company in exchange for the settlement of certain participation interests in loans held by the Company and cash. As described in Note 3, Terra Fund 7 contributed the shares of the Company’s common stock received as consideration in the Merger to Terra JV and became a co-managing member of Terra JV pursuant to the JV Agreement. The JV Agreement and related stockholders agreement between Terra JV and the Company, dated March 2, 2020, provide for the joint approval of Terra Fund 5 and Terra Fund 7 with respect to certain major decisions that are taken by Terra JV and the Company. As of December 31, 2020, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.    

    On September 30, 2019, the Company issued 212,691 shares of its common stock to Terra Offshore REIT at a price of $17.02 per share for total proceeds of $3.6 million. On April 29, 2020, the Company repurchased, at a price of $17.02 per share, the 212,691 shares it previously sold to Terra Offshore REIT (Note 7).

Distributions

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

    For the year ended December 31, 2020, the Company made distributions to Terra Fund 5, Terra JV and Terra Offshore REIT in the aggregate of $21.2 million, of which $16.0 million were returns of capital. For the year ended December 31, 2019, the Company made distributions to Terra Fund 5 and Terra Offshore REIT totaling $30.4 million, of which $21.4 million were returns of capital. Additionally, for both the years ended December 31, 2020 and 2019, 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, 2020 and 2019, 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,
	2020		2019
Ordinary income	$	0.48	$	0.78
Return of capital	0.68		1.25
	$	1.16	$	2.03

F-40

Notes to Consolidated Financial Statements

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 one below that would require adjustment to, or disclosure in, the Company’s consolidated financial statements.

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 matures on March 12, 2023 with an annual 12-month extension available at the Company’s option, which are subject to certain conditions.

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 will guarantee 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 will be required to maintain (i) a minimum total net worth of $250.0 million; (ii) a $2.0 million quarterly operating profit; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00.

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 pledged a $11.5 million first mortgage to the borrowing base and drew down $8.0 million on the Revolving Line of Credit.

F-41

Terra Property Trust, Inc.

Schedule III – Real Estate and Accumulated Depreciation

As of December 31, 2020

			Initial Costs				Cost Capitalized Subsequent to Acquisition		Decrease in Net Investment (1)		Gross Amount at Period End
Description	Encumbrance		Land		Building, Building Improvements and Furniture and Fixtures						Land		Building, Building Improvements and Furniture and Fixtures		Total		Accumulated Depreciation		Date of Construction	Date Acquired	Life Used for Depreciation
Office building in Santa Monica, CA	$	44,020,225	$	—	$	51,308,076	$	2,508,533	$	—	$	—	$	53,816,609	$	53,816,609	$	3,826,700	2002-2004	July 30, 2018	40 years
Land in Conshohocken, PA	—		14,703,359		—		242,071		(1,550,000)		13,395,430		—		13,395,430		—		N/A	January 9, 2019	N/A
	$	44,020,225	$	14,703,359	$	51,308,076	$	2,750,604	$	(1,550,000)	$	13,395,430	$	53,816,609	$	67,212,039	$	3,826,700

___________________________

(1)For the year ended December 31, 2019, the Company recorded an impairment charge of $1.6 million on the 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.

At December 31, 2020, the aggregate cost of real estate for federal income tax purposes was $57.6 million.

    The changes in total real estate assets and accumulated depreciation for the year ended December 31, 2020 are as follows:

	Real Estate Asset			Accumulated Depreciation
	Year Ended December 31, 2020			Year Ended December 31, 2020
Balance, beginning of year	$	66,976,039	Balance, beginning of year	$	2,224,792
Acquisition through foreclosure	—		Depreciation for the year	1,601,908
Improvements	236,000		Balance, end of year	$	3,826,700
Impairment charge	—
Balance, end of year	$	67,212,039

F-42

Terra Property Trust, Inc.

Schedule IV – Mortgage Loans on Real Estate

As of December 31, 2020

Portfolio Company (1)

Collateral Location

Property Type

Interest Payment Rates

Maximum Maturity Date (2)

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

$

—

$

7,000,000

$

7,000,000

Austin H. I. Owner LLC (3)

US - TX

Hotel

12.5

%

10/6/2020

Interest Only

—

3,848,712

3,887,200

High Pointe Mezzanine Investments, LLC (4)

US - SC

Student housing

15.0

%

1/6/2024

Interest Only

—

3,000,000

3,204,375

LD Milipitas Mezz, LLC (5)

US - CA

Hotel

LIBOR +10.25% (2.75% Floor)

6/27/2023

Interest Only

—

4,250,000

4,294,053

Stonewall Station Mezz LLC (4)(6)(7)

US - NC

Land

12.0% current 2.0% PIK

5/31/2023

Interest Only

—

10,442,567

10,537,512

—

28,541,279

28,923,140

First Mortgages:

14th & Alice Street Owner, LLC (6)(8)

US - CA

Multifamily

LIBOR + 5.75% (3.25% Floor)

3/5/2022

Interest Only

—

32,625,912

32,877,544

1389 Peachtree St, LP; 1401 Peachtree St, LP;    1409 Peachtree St, LP (9)

US - GA

Office

LIBOR + 4.5%

3/10/2024

Interest Only

—

50,808,453

51,068,554

330 Tryon DE LLC (9)

US - NC

Office

LIBOR + 3.85% (2.51% Floor)

3/1/2024

Interest Only

—

22,800,000

22,901,294

870 Santa Cruz, LLC

US - CA

Office

LIBOR + 6.75% (0.5% Floor)

12/15/2025

Interest Only

—

10,760,355

10,724,590

AGRE DCP Palm Springs, LLC (9)(10)

US - CA

Hotel

LIBOR +4.75% (1.8% Floor)

1/1/2025

Interest Only

—

45,294,097

45,506,051

MSC Fields Peachtree Retreat, LLC (9)

US - GA

Multifamily

LIBOR + 3.85% (2.0% Floor)

4/1/2024

Interest Only

—

23,308,334

23,437,198

Patrick Henry Recovery Acquisition, LLC (9)

US - CA

Office

LIBOR + 2.95% (1.5% Floor)

12/1/2024

Interest Only

—

18,000,000

18,039,456

University Park Berkeley, LLC (9)(11)

US - CA

Student housing

LIBOR + 4.2% (1.5% Floor)

3/5/2025

Interest Only

—

23,990,786

24,131,808

Windy Hill PV Five CM, LLC (12)

US - CA

Office

LIBOR + 6.0% (2.05% Floor)

9/20/2023

Interest Only

—

26,454,910

26,407,494

—

254,042,847

255,093,989

F-43

Terra Property Trust, Inc.

Schedule IV – Mortgage Loans on Real Estate (Continued)

As of December 31, 2020

Portfolio Company (1)	Collateral Location	Property Type	Interest Payment Rates		Maximum Maturity Date (2)	Periodic Payment Terms	Prior Liens		Face Amount		Carrying Amount
Preferred equity investments:
370 Lex Part Deux, LLC (6)(7)	US - NY	Office	LIBOR + 8.25% (2.44% Floor)		1/9/2025	Interest Only	—		53,874,507		53,912,363
City Gardens 333 LLC (6)(7)	US - CA	Student housing	LIBOR + 9.95% (2.0% Floor)		4/1/2023	Interest Only	—		28,303,628		28,307,408
Orange Grove Property Investors, LLC (6)(7)	US - CA	Condominium	LIBOR + 8.0% (4.0% Floor)		6/1/2022	Interest Only	—		10,600,000		10,701,924
REEC Harlem Holdings Company LLC	US - NY	Land	LIBOR + 12.5%		3/9/2025	Interest Only	—		16,767,984		16,767,984
RS JZ Driggs, LLC (6)(7)(13)	US - NY	Multifamily	12.3	%	8/1/2021	Interest Only	—		8,544,513		8,629,929
The Bristol at Southport, LLC (6)(8)	US - WA	Multifamily	12.0	%	9/22/2022	Interest Only	—		23,500,000		23,682,536
							—		141,590,632		142,002,144
Allowance for loan losses							—		—		(3,738,758)
Total investments							$	—	$	424,174,758	$	422,280,515

___________________________

(1)All of the Company’s loans have a prepayment penalty provision.

(2)Maximum maturity date assumes all extension options are exercised.

(3)This loan is currently past due. The Company is currently evaluating the options of recovering the principal amount, including foreclosing on the collateral. The latest appraisal the Company received in August 2020 indicates that the value of the collateral is sufficient to recover the principal amount.

(4)The Company entered into a forbearance agreement with the borrower to allow for more time to make the interest payment.

(5)On June 27, 2018, the Company entered into a participation agreement with Terra Income Fund 6, Inc. to purchase a 25% interest, or $4.3 million, in a mezzanine loan.

(6)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 Agreements” in Note 9 and “Transfers of Participation Interest by the Company” in Note 8 in the accompanying notes to the consolidated financial statements.

(7)The Company sold a portion of its interest in this loan through a participation agreement to Terra Income Fund 6, Inc., an affiliated fund advised by the Terra Income Advisors, an affiliate of the Company’s sponsor and Manager (Note 8).

(8)The Company sold a portion of its interest in this loan to a third-party through a participation agreement (Note 8).

(9)These loans were used as collateral for $107.6 million borrowing under a term loan (Note 9).

(10)In July 2020, the Company amended the loan agreement to change the interest rate to PIK 15% for the period from July 2020 through January 2021.

(11)In December 2020, the Company entered into a forbearance agreement with the borrower pursuant to which interest is accrued on the loan during the 90-day forbearance period from November 2020 to January 2021. In connection with entering into the forbearance agreement, the spread on the interest rate was increased to 4.2% and the exit fee was increased to 0.75%.

(12)In March 2020, the Company entered into a financing transaction where a third-party purchased an A-note position. However, the sale did not qualify for sale accounting and therefore, the gross amount of the loan remains in the consolidated balance sheets. The liability is reflected as secured borrowing in the consolidated balance sheets.

(13)This loan is currently past due. Given the loan is in default, the Company issued a demand notice and is currently in control of the sale process. The Company expects the sales proceeds to repay the principal in full.

F-44

Terra Property Trust, Inc.

Notes to Schedule IV - Mortgage Loans on Real Estate

December 31, 2020

	Reconciliation of Mortgage Loans on Real Estate
	Year Ended December 31, 2020
Balance, beginning of year	$	378,612,768
Additions during period:
New mortgage loans	108,488,411
PIK interest	4,442,759
Accrual, payment and accretion of exit fees, net	681,455
Deductions during the period:
Collections of principals	(66,144,729)
Amortization of premium	(61,391)
Provision for loan losses	(3,738,758)
Balance, end of year	$	422,280,515

F-45

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 18, 2021

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.

Signature	Title	Date
/s/ Andrew M. Axelrod	Chairman of the Board	March 18, 2021
Andrew M. Axelrod
/s/ Vikram S. Uppal	Director and Chief Executive Officer	March 18, 2021
Vikram S. Uppal	(Principal Executive Officer)
/s/ Gregory M. Pinkus	Chief Financial Officer, Chief Operating Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)	March 18, 2021
Gregory M. Pinkus
/s/ Roger H. Beless	Director	March 18, 2021
Roger H. Beless
/s/ Michael L. Evans	Director	March 18, 2021
Michael L. Evans

67

EX-10.8

Exhibit 10.8

BUSINESS LOAN AND SECURITY AGREEMENT

(REVOLVING LINE OF CREDIT)

This Business Loan and Security Agreement (Revolving Line of Credit) (this “Agreement”) is made as of March 12, 2021, by and between TERRA MORTGAGE PORTFOLIO II, LLC, a Delaware limited liability company (the “Borrower”), on the one hand, and WESTERN ALLIANCE BANK, an Arizona corporation (“Lender”), on the other hand:

A.    Borrower is engaged in the business of making and acquiring loans to certain eligible borrowers.

B.    Borrower has applied to Lender for credit in the form of a revolving line of credit in an amount not to exceed the principal sum of Seventy-Five Million and No/100 Dollars ($75,000,000.00).

C.    Lender has agreed to extend credit to Borrower upon and subject to all covenants, terms, and conditions hereinafter provided.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1.

DEFINITIONS

The definitions set forth in the Recitals are incorporated herein by reference. Capitalized terms not defined in this Agreement have the meanings given them in the Arizona Uniform Commercial Code. For purposes of this Agreement, the following terms shall have the following meanings:

    “Advance” means any advance or disbursement of Loan Proceeds pursuant to this Agreement.

    “Advance Rate” shall mean, as set forth in detail in the advance rate schedule attached hereto as Exhibit E, and incorporated by reference herein, for each Eligible Receivable, the lesser of (i) an amount equal to a percentage of, the lesser of, (a) the acquisition cost of such Eligible Receivable to Borrower, or (b) the unpaid principal balance of such Eligible Receivable (“LTB”) or (ii) an amount equal to a percentage of the appraised value (as reflected in the most recent Appraisal of the underlying real property collateral delivered by Borrower to, and accepted and approved by, Lender) of the underlying real property collateral securing such Eligible Receivable (“LTV”).

    “Agreement” means this Business Loan and Security Agreement (Revolving Line of Credit), as originally executed or as it may be modified, supplemented, extended, renewed or amended from time to time.

4085694.5 | 100775-0196

    “Affiliate” of any Person means any other Person, directly or indirectly controlling, or controlled by, or under common control with such Person. For the purposes of this definition, “control” means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting equity, by contract or otherwise.

    “Allonge” means an attachment to a Collateral Loan Note (and included in the Collateral Loan Document Package) containing the endorsement by Borrower of the Collateral Loan Note, substantially in the form attached hereto as Exhibit A and incorporated herein by this reference.

    “Anti-Money Laundering Laws” means the USA Patriot Act of 2001, the Bank Secrecy Act, as amended through the date hereof, Executive Order 1 3324—Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism, as amended through the date hereof, and other federal laws and regulations and executive orders administered by OFAC which prohibit, among other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals (such individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanction and embargo programs), and such additional laws and programs administered by OFAC which prohibit dealing with individuals or entities in certain countries regardless of whether such individuals or entities appear on any of the OFAC lists.

    “Appraisal” means an appraisal of the Underlying Collateral, or such other report acceptable to Lender, performed and prepared for Lender at Borrower’s sole expense by a duly licensed or certified appraiser approved by Lender and possessing all qualifications required by Lender and applicable Laws, setting forth the appraiser’s opinion and determination of the fair market value of the Underlying Collateral; said Appraisal shall be prepared in full narrative form meeting all requirements and approaches to value as shall be necessary or appropriate in order to comply with all customary and generally accepted appraisal standards within the appraisal industry and in accordance with Lender’s requirements, and to Lender’s satisfaction and all applicable Laws governing Lender’s operations (including, but not limited to, the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and Uniform Standards of Professional Appraisal Practice (USPAP)).

    “Assets” has the meaning usually given that term in accordance with GAAP, including subordinated debts owed by a Person to holders of equity in the Person if the Person is a business entity, but excluding sums due to the Person from Affiliates to the extent such sums are eliminated in consolidation in accordance with GAAP.

    “Assignment of Mortgage” means each Collateral Assignment of Mortgage or Deed of Trust and Related Documents, if required by Lender, executed and delivered by Borrower to Lender in connection with any Collateral Loan to be secured by real property and included in the Collateral Loan Document Package, substantially in the form attached hereto as Exhibit B and incorporated herein by this reference (with such modifications to such form as may be required in order for such form to be recorded in the real property records of the applicable jurisdiction).

2

    “Authorized Person” means any person duly authorized by a general borrowing resolution of the Borrower, or in the absence of such a resolution, board minutes. As of the date hereof, the following persons currently, individually or collectively, are authorized to request Advances and authorize payments until the Lender receives from the Borrower, at the Lender’s address, written notice of revocation of their authority: Vik Uppal and/or Greg Pinkus.

    “Availability” means the lesser of (a) the Credit Limit and (b) the Borrowing Base.

    “Borrower Loans” means loans originated by Borrower to third-party borrowers and secured by real property collateral located in the United States of America (excluding territories and protectorates) that are the subject of an Advance hereunder, subject to the limitations set forth in this Agreement.

    “Borrower’s Loan Portfolio” means those Borrower Loans held by Borrower for Borrower’s own account.

    “Borrowing Base” shall mean the aggregate sum of the amounts calculated for each individual Eligible Receivable based on its Advance Rate.

    “Borrowing Base Certificate” means a Borrowing Base Certificate substantially in the form of Exhibit C attached hereto.

    “Business Day” means Monday through Friday, excluding any day of the year on which banks are required or authorized to close in Arizona.

    “Collateral” means all real property and personal property security for the Loan, including as more particularly described in Sections 4.9 and 5.

    “Collateral Loan” means, individually and collectively, any Borrower Loan i which Borrower has granted to Lender a security interest and which has been pledged to Lender as Collateral.

    “Collateral Loan Documents” means all instruments, agreements, and documents evidencing and securing all covenants, terms, and conditions of a Collateral Loan, duly executed by a Collateral Loan Obligor to and in favor of Borrower and pledged to Lender as security for Advances by Lender to Borrower and the other obligations of Borrower hereunder and under the other Loan Documents, as the Collateral Loan Documents may be amended from time to time in accordance with the provisions of this Agreement.

    “Collateral Loan Document Package” means: all instruments, agreements, and documents described in Schedule 1 attached to this Agreement and incorporated herein by reference either in original or photocopy form as therein provided, evidencing and/or securing the Advance therein requested and/or the Collateral Loan therein described.

    “Collateral Loan Note” means the promissory note executed or to be executed by each Collateral Loan Obligor to evidence a Collateral Loan, as the Collateral Loan Note may be amended from time to time in accordance with the provisions of this Agreement.

3

    “Collateral Loan Obligor” means a Person which is obligated by contract or by operation of law to pay and/or perform any or all of the indebtedness and other obligations of the borrower under and arising out of a Collateral Loan and Collateral Loan Documents evidencing and securing the same, including, without limitation, a Person designated as borrower or co-borrower thereunder and a Person guaranteeing said indebtedness and/or other obligations, whether by pledge of collateral or by agreeing to be personally liable therefor.

    “Collateral Mortgage” means any deed of trust or mortgage, as applicable, and assignment of rents executed and delivered by a Collateral Loan Obligor to secure repayment of a Collateral Loan, as the Collateral Mortgage may be amended from time to time in accordance with the provisions of this Agreement.

    “Commitment Term” means that period during which Loan Proceeds may be disbursed under this Agreement, which is a period commencing on the date of this Agreement and expiring March 12, 2023, subject to extension pursuant to Section 4.12 of this Agreement.

    “Compensating Balance Account(s)” means checking, savings or money market accounts maintained at Lender by Borrower and/or Guarantor, in aggregate (including without limitation all reserve or escrow accounts maintained at Lender pursuant to the Collateral Loan Documents), but shall not include certificates of deposit.

    “Conversion Fee” means the sum of one quarter of one percent (0.25%) of the then outstanding principal balance of the Loan for an extension of the Initial Maturity Date if requested and given in accordance with the provisions of Section 4.13, below.

    “Credit Limit” means Seventy-Five Million and No/100 Dollars ($75,000,000.00).

    “Dwell Time” means the number of months that a Collateral Loan may be included in calculating the Borrowing Base, as set forth in the Exhibit E.

    “E-Sign” means the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq.

    “Eligible Receivables” means those Collateral Loans that Lender, in its sole and absolute opinion and judgment, shall deem eligible for borrowing pursuant to the terms hereof; provided that once Lender has accepted an Eligible Receivable for financing hereunder, such approval cannot be revoked unless such Eligible Receivable becomes an Ineligible Receivable.

    “Event of Default” means any of those occurrences specified in Section 7 of this Agreement, or as otherwise specified in the Loan Documents.

    “Financial Statements” means balance sheets, income statements, reconciliations of capital structure and statements of sources and applications of funds, all prepared in accordance with GAAP.

    “Financing Statement” means one or more financing statements (Form UCC-1) given by Borrower to Lender covering the Collateral.

4

    “GAAP” means generally accepted accounting principles consistently applied and maintained throughout the period indicated and consistent with the prior financial practice of the Person providing such financial information, except for changes mandated by the Financial Accounting Standards Board, the SEC, or any similar accounting authority of comparable standing.

    “Governmental Agency” means any federal, state or local governmental or quasi-governmental agency.

    “Guarantor” means Terra Property Trust, Inc., a Maryland corporation

    “Guaranty” means the Limited Guaranty from Guarantor, in form and content satisfactory to Lender in its sole opinion and judgment, guarantying certain obligations of Borrower to Lender, as more specifically provided therein.

    “Ineligible Receivable” means any Collateral Loan that (a) meets any of the clauses, as more particularly described on Schedule 2, with the result that it is not accepted by Lender at any time as an Eligible Receivable, or (b) that was previously accepted by Lender as an Eligible Receivable that subsequently would not have qualified as an Eligible Receivable because of any one or more of the applicable clauses on Schedule 2, but subject to the provisions of Section 4.6.3.

    “Initial Advance” means that certain advance or disbursement of Loan Proceeds by Lender to Borrower, in the amount specified in a Request for Advance, upon satisfaction of the terms and conditions in this Agreement for the making of the Initial Advance, including without limitation pledging the Initial Loan Collateral to Lender.

    “Initial Loan Collateral” means those Borrower Loans set forth on Exhibit D attached hereto, which shall be pledged to Lender as Collateral for the Loan.

    “Initial Loan Collateral Document Package” means, for the Initial Loan Collateral: all instruments, agreements, and documents described in Schedule 1 attached to this Agreement and incorporated herein by reference, either in original or photocopy form as therein provided, evidencing and securing the Initial Loan Collateral therein described.

    “Initial Maturity Date” means March 12, 2023, subject to extension pursuant to Section 4.12 of this Agreement or earlier acceleration upon the terms and conditions set forth in the Note.

    “Laws” means all federal, state, and local laws, rules, regulations, ordinances, and codes.

    “Liabilities” shall have the meaning usually given that term in accordance with GAAP.

    “Loan” means the total amount of Advances, as described in Section 4 of this Agreement in a principal amount not to exceed the Availability at any one time.

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    “Loan Closing” means the date on which the Initial Advance is disbursed, upon and subject to satisfaction and performance of all covenants and conditions of the Loan as hereinafter provided.

    “Loan Collateral” means all of the following real and personal property and related rights of Borrower, whether now existing or hereafter acquired or arising, whether now owned or hereafter acquired, and wherever located: (1) each Collateral Loan and all Collateral Loan Documents, (2) all of Borrower’s right, title and interest in and to all Underlying Collateral, including, without limitation, all Underlying Collateral repossessed and acquired by Borrower by foreclosure or by transfer or retention in lieu of foreclosure, (3) the books, records and files pertaining to the Collateral Loan Documents and Underlying Collateral, and (4) all proceeds of the foregoing, including, without limitation, all proceeds in the form of accounts, instruments, chattel paper, contract rights, general intangibles, deposit accounts, insurance policies, insurance proceeds and returned premiums for insurance.

    “Loan Documents” means this Agreement, the Note, and such other documents as Lender may require Borrower to give to Lender as evidence of and/or security for the Loan, together with each Assignment of Mortgage, Allonge, Financing Statement, and all other instruments, agreements, and documents evidencing and securing the Advances made and to be made by Lender hereunder and all obligations of Borrower hereunder and herein described, including, without limitation, all those documents described in Section 4.5 below, and in Schedule 1 hereto, as applicable.

    “Loan Fee” means the sum of One Hundred Eighty-Seven Thousand Five Hundred and No/100 Dollars ($187,500.00) payable by Borrower to Lender for the making of the Loan, which shall be fully earned by Lender at Loan Closing and funded as part of the Initial Advance.

    “Loan Proceeds” means all funds advanced by Lender as an Advance to Borrower under this Agreement.

    “Maturity Date” means the Initial Maturity Date, and any extension in connection with Section 4.12 of this Agreement or the conversion of the Loan to a term loan as provided in Section 4.13 of this Agreement, subject to the terms and conditions of the Note.

“Minor Modifications” means any of the following in relation to any Collateral Loan Document:

1.(i) the use of then-existing reserve account balances (except for taxes and insurance reserves) for a Collateral Loan to cover operating expenses, debt service and/or other reserve deposit shortfalls and (ii) the waiver, suspension, deferral, increase or reduction of funding or replenishing reserve account balances (except for taxes and insurance reserves );

2.Approval of budgets, space leases, management agreements and other matters requiring Borrower’s consent under the Collateral Loan Documents, and amendments to the foregoing, all in accordance with the Servicing Standard;

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3.Approval of (i) equipment leases and/or capital leases, in each case, in an amount less than 5% of the original principal amount of the applicable Mortgage Loan, and (ii) trade payables and/or operational debt, in each case, in an amount less than 10% of the original principal amount of the applicable Mortgage Loan, and (iii) property easements, licenses, rights of way, boundary line adjustments and similar encumbrances (including, without limitation, utility and related easements, easements granted to governmental authorities for roadway or access purposes, easements with adjoining landowners and pledges or deposits to secure workmen’s compensation and other deposits), and other approvals that are commercially reasonable and granted in accordance with the Servicing Standard;

4.Waiver of non-monetary defaults (defined for this purpose as defaults other than payments of principal and/or non-default interest due to the Borrower and other material monetary defaults pursuant to the Collateral Loan Documents), and amendments of such non-monetary provisions of the Collateral Loan Documents; provided, (i) such waivers or amendments are consistent with the Servicing Standard and no such waiver or amendment materially adversely affects Borrower’s ability to perform its payment obligations to Lender pursuant to the Loan Documents, and (ii) as used herein, waivers and amendments expressly permitted to be made pursuant to other paragraphs of this definition of Minor Modifications without Lender consent will be deemed to be non-material waivers/amendments of non-material provisions, and amounts permitted to be waived/amended thereunder shall be deemed to be non-material monetary amounts, for purposes of this paragraph); or

5.Waiver, deferral, accrual or forbearance of late fees, other fees, default interest, prepayment premiums or make-whole amounts, or repayment of protective advances or payment of interest thereon (for avoidance of doubt, (i) the items for which waiver is expressly permitted under this paragraph are deemed by the parties not to constitute material monetary obligations for purposes of this Agreement, and (ii) this paragraph does not apply to any waiver, deferral, accrual or forbearance of principal or interest at the non-default rate).

6.Deferral or forbearance of the payment by Collateral Loan Obligors of non-default interest, amortization of principal or any other material monetary obligation for up to 60 days after its due date under the applicable Collateral Loan Document (but in any case not past the maturity date of the Collateral Loan); provided, that for purposes of paragraph (g) of Schedule 2, in determining the number of days a payment is “past due,” such number will be based on the original due date for such payment without regard to any deferral or forbearance under this paragraph.

“Mortgage” means each mortgage, assignment of rents, security agreement and fixture filing, or deed of trust, assignment of rents, security agreement and fixture filing, deed to secure

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debt, assignment of rents, security agreement and fixture filing, or similar instrument creating and evidencing a first lien on real property and other property and rights incidental thereto.

    “Note” means the Promissory Note of even date herewith, in the face amount of the Loan, executed by Borrower in favor of and payable to Lender, or order, which shall be in form and content satisfactory to Lender, in its sole discretion.

    “Obligations” means all obligations and indebtedness evidenced by the Loan and Loan Documents.

    “OFAC” means the United States Department of the Treasury, Office of Foreign Assets Control.

    “OFAC Prohibited Person” means a country, territory, individual or person (i) listed on, included within or associated with any of the countries, territories, individuals or entities referred to on The Office of Foreign Assets Control’s List of Specially Designated Nationals and Blocked Persons or any other prohibited person lists maintained by governmental authorities, or otherwise included within or associated with any of the countries, territories, individuals or entities referred to in or prohibited by OFAC or any other Anti-Money Laundering Laws, or (ii) which is obligated or has any interest to pay, donate, transfer or otherwise assign any property, money, goods, services, or other benefits from the Property directly or indirectly, to any countries, territories, individuals or entities on or associated with anyone on such list or in such laws.

    “Operating Account” means, individually and collectively, Borrower’s demand deposit accounts with Lender, bearing the account numbers to be advised by Lender, into which all of Borrower’s receipts from its operations are deposited and from which all of Borrower’s disbursements for its operations are made.

    “Person” means an individual, corporation, partnership, limited liability company, joint venture, trust or unincorporated organization or a Governmental Agency.

    “Power of Attorney” means a Power of Attorney dated the date hereof executed by Borrower for the benefit of Lender in substantially the form of Exhibit F attached hereto, which shall expire upon the satisfaction in full of all of the Obligations of Borrower to Lender.

    “REIT” means real estate investment trust.

    “Request for Advance” means each request either written or via electronic mail, for an Advance under this Agreement delivered by Borrower to Lender in the form and with the information requested by Lender, which request shall be deemed to constitute Borrower’s representation and warranty to Lender that all conditions to the Advance therein requested have been satisfied.

    “SEC” means the United States Securities and Exchange Commission.

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    “Section” means a numbered or lettered paragraph, sub-paragraph or other division of this Agreement, and all references in this Agreement to a Section (other than references to statutes) are to Sections of this Agreement.

    “Servicer” means (i) Terra REIT Advisors, LLC, a Delaware limited liability company, or any Affiliate thereof (with Borrower providing not less than thirty (30) days prior written notice of any change to an Affiliate), or (ii) any third-party servicer or subservicer approved, in writing, by Lender, in its sole discretion.

“Servicing Agreement” means each servicing agreement or subservicing agreement entered into among the Borrower and either (i) Terra REIT Advisors, LLC or any Affiliate thereof, or (ii) a third-party Servicer, in either case in the form and substance acceptable to Lender and Borrower in their sole discretion, as the same may be amended, restated, supplemented (including, without limitation by a servicer notice and acknowledgment in favor of Lender) or otherwise modified from time to time.

“Servicing Standard” has the meaning set forth in Section 5.2.

“Specified Lender” means any Person identified on Schedule 9.9, together with its Affiliates.

“UETA” means the Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999.

    “Underlying Collateral” means the real property and any and all other assets of any Collateral Loan Obligor, or of other Persons, pledged or otherwise assigned to Borrower as collateral security for repayment of any Collateral Loan, as more fully described in the Collateral Loan Documents; and including all land and improvements described in the Collateral Loan Document Package, including, without limitation, all fixtures, rights, rights of way, easements, rents, income, and profits, and all policies and proceeds of insurance and other interests appurtenant thereto which shall be encumbered by a Collateral Deed of Trust constituting a valid and enforceable trust deed or mortgage lien of record thereon.

    “Unused Credit Limit” means, for the subject calendar quarter, the amount by which the average daily unpaid principal amount of Advances is less than fifty percent (50%) of the Credit Limit.

    “Unused Line Fee” means one-quarter of one percent (0.25%) per annum times the Unused Credit Limit. The Unused Line Fee shall be payable as provided in Section 4.1.1(d).

SECTION 2.

INTERPRETATIONS

2.1. NUMBER, GENDER. Any defined terms used in the plural shall include the singular and such terms shall encompass all members of the relevant class.

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2.2. SCHEDULES AND EXHIBITS. All schedules and exhibits to this Agreement are incorporated herein by reference.

2.3. OTHER TERMS. Capitalized terms other than accounting terms, and not defined herein, have the meanings given them in the Arizona Uniform Commercial Code. Capitalized accounting terms not otherwise defined herein have the meaning provided by GAAP. The term “document” is used in its broadest sense and encompasses agreements, certificates, opinions, consents, instruments and other written material of every kind. The terms “including” and “include” mean “including (include), without limitation.”

SECTION 3.

REPRESENTATIONS AND WARRANTIES OF BORROWER

    Borrower hereby represents and warrants to Lender as of the date of this Agreement, the date any Loan Proceeds are disbursed to Borrower, and each and every date during the term of the Loan, or any portion thereof, as the context admits or requires, that:

3.1. BORROWER’S CAPACITY. Borrower is a limited liability company duly formed under the laws of the State of Delaware, and is duly qualified to transact business and is in good standing in all jurisdictions where the nature and extent of its business and property requires the same. Borrower does not conduct business under any trade name or other name.

3.2. VALIDITY OF LOAN DOCUMENTS. The Loan Documents are and shall continue to be in all respects valid and binding upon Borrower according to their terms. The execution and delivery by Borrower of and the performance by Borrower of all its obligations under the Loan Documents have been duly authorized by all necessary action and do not and will not:

3.2.1 Require any consent or approval not heretofore obtained.

3.2.2 Violate any provision of other agreements to which Borrower is bound.

3.2.3 Result in or require the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest, claim, charge, right of others or other encumbrance of any nature (other than under the Loan Documents) upon or with respect to any property now owned or leased or hereafter acquired by Borrower.

3.2.4 Violate any provision of any Laws, or of any order, writ, judgment, injunction, decree, determination, or award.

3.2.5 Result in a breach of or constitute a default under, cause or permit the acceleration of any obligation owed under, or require any consent under any indenture or loan or credit agreement or any other agreement, lease, or instrument to which Borrower is a party or by which Borrower or any property of Borrower is bound or affected

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3.3. BORROWER NOT IN DEFAULT OR VIOLATION. Borrower is not in default under or in violation of any Laws, order, writ, judgment, injunction, decree, determination or award or under any obligation, agreement, instrument, loan, or indenture, whether to Lender or otherwise, or any lease, and no event has occurred and is continuing, or would result from the making of any Advance, which constitutes an Event of Default, or would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

3.4. NO GOVERNMENTAL APPROVALS REQUIRED. Borrower does not require any authorization, consent, approval, order, license, exemption from, or filing, registration, or qualification with, any Governmental Agency in connection with the execution and delivery by Borrower, and the performance by Borrower, of all or any of its obligations under the Loan Documents.

3.5. TAX LIABILITY. Borrower has filed all income and other tax and related information returns (federal, state, and local) required to be filed and has paid all taxes shown thereon to be due and all property taxes due, including interest and penalties, if any.

3.6. FINANCIAL STATEMENTS. All Financial Statements, tax returns and other financial information of Borrower and Guarantor which are submitted to Lender fairly present the financial positions of Borrower and Guarantor at the respective dates of their preparation. As for the Financial Statements, tax returns and other financial information submitted prior to the Loan Closing, there has been no material adverse change in the financial condition of Borrower and Guarantor.

3.7. PENDING LITIGATION. There are no actions, suits, or proceedings pending, or to the knowledge of Borrower threatened, against or affecting the Borrower, or involving the validity or enforceability of any of the Loan Documents, except actions, suits, and proceedings that are fully covered by insurance or which, if adversely determined, would not substantially impair the ability of Borrower to perform its obligations under the Loan Documents, and Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any Governmental Agency.

3.8. VIOLATION OF LAWS. Borrower has no knowledge of any violations or notices of violations of any Laws relating to the Loan Collateral.

3.9. COMPLIANCE WITH ENVIRONMENTAL LAWS. Borrower does not presently, and will not in the future, use, store, manufacture, generate, transport to or from, or dispose of any toxic substances, hazardous materials, hazardous wastes, radioactive materials, flammable explosives or related material on or in connection with any property or the business of Borrower on any property, except in accordance with all applicable Laws. Borrower does not presently, and will not in the future, permit any lessee on any property to use, including any Collateral Loan Obligor and any other occupant of any Underlying Collateral real property, store, manufacture, generate, transport to or from, or dispose of any hazardous materials on or in connection with any property or the business on any property, except in accordance with all applicable Laws. “Hazardous materials,” and “hazardous waste” shall include, but not be limited

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to, such substances, materials and wastes which are or become regulated under applicable Laws or which are classified as hazardous or toxic under applicable Laws.

3.10. SOLVENCY. Borrower is able to pay its debts as they mature and the realizable value of its Assets is sufficient to satisfy any and all obligations hereunder.

3.11. PRINCIPAL PLACE OF BUSINESS. If Borrower hereafter intends to move its principal place of business, it shall first give at least thirty (30) days’ prior written notice to Lender of its intention so to move, the date that such move is anticipated, and its new address.

3.12. PERMITS. Borrower possesses all material licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, that are necessary to conduct its business and Borrower is not in violation of any valid rights of others with respect to any of the foregoing.

3.13. NO ERISA PLAN. Borrower does not maintain a plan under the Employee Retirement Income Security Act of 1974, as amended from time to time.

3.14. FULL DISCLOSURE. All information in the loan application, financial statements, certificates, or other documents and all information prepared and delivered by Borrower or its Affiliates to Lender in obtaining the Loan is correct and complete in all material respects, and there are no omissions therefrom that result in such information being incomplete, incorrect, or misleading in any material adverse respect as of the date thereof. All information in any loan application, financial statement, certificate or other document prepared and delivered to Lender on behalf of Borrower by Persons other than Borrower or its Affiliates, and all other information prepared and delivered to Lender on behalf of Borrower by Persons other than Borrower or its Affiliates in applying for the Loan is correct and complete in all material respects, and there are no omissions therefrom that result in any such information being incomplete, incorrect, or misleading in any material adverse respect as of the date thereof.

3.15. USE OF PROCEEDS; MARGIN STOCK. The proceeds of each Advance will be used by Borrower solely for the purposes specified in this Agreement. None of such proceeds will be used for the purpose of purchasing or carrying any “margin stock” as defined in Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221 and 207), or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin stock or for any other purpose which might constitute this transaction a “purpose credit” within the meaning of such Regulation U. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock. Neither Borrower nor any Person acting on behalf of Borrower has taken or will take any action which might cause any Loan Documents to violate Regulation U or any other regulations of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act of 1934, or any rule or regulation thereunder, in each case as now in effect or as the same may hereafter be in effect. Borrower and Borrower’s Affiliates own no “margin stock”.

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3.16. GOVERNMENTAL REGULATION. Borrower is not subject to regulation under the Federal Power Act, the Investment Company Act of 1940, the Interstate Commerce Act (as any of the preceding have been amended), or any other Law which regulates the incurring by Borrower of indebtedness, including but not limited to Laws relating to common or contract carriers or the sale of electricity, gas, steam, water, or other public utility services.

3.17. NO PROHIBITED PERSONS. Neither (i) Borrower; (ii) any Guarantor; (iii) any Person controlled by Borrower; (iv) nor any Person for whom Borrower is acting as agent or nominee in connection with this transaction, is an OFAC Prohibited Person.

3.18. NO FURTHER ENCUMBRANCE. There is not any mortgage, deed of trust, pledge, lien, hypothecation, charge (fixed or floating), security interest or other encumbrance whatsoever on any of the Collateral Loans or any interest therein, except as permitted pursuant to this Agreement.

SECTION 4.

THE LOAN

4.1. REVOLVING LINE OF CREDIT.

4.1.1    Revolving Line of Credit. Upon the request of Borrower, in the form of a Request for Advance, made at any time and from time to time during the Commitment Term, and so long as there is no Event of Default under the Loan Documents (and no event has occurred that, with notice or the lapse of time, or both, would constitute an Event of Default), Lender shall make Advances to Borrower, subject to the covenants, terms and conditions of the Loan Documents; provided, however, that Lender shall not be obligated to make Advances to Borrower whenever the aggregate principal amount of all Advances outstanding at any time exceeds or would exceed, at any one time, the Availability. Borrower may repay Advances and obtain new Advances within the Availability, subject to the provisions of this Agreement, provided such Advances are requested and complete Collateral Loan Document Packages are submitted to Lender prior to the expiration of the Commitment Term. This is a revolving line of credit providing for Advances. During the Commitment Term, Borrower may repay principal amounts and re-borrow them. Borrower agrees not to permit the outstanding principal balance of Advances under the line of credit to exceed the Availability. Subject to the other terms and conditions of this Agreement, Borrower agrees as follows:

                (a)    The total amount of Advances available to Borrower is limited to the Borrowing Base, which shall be calculated by Lender, in Lender’s sole determination, upon receipt of the Borrowing Base Certificate as set forth herein. Borrower acknowledges that an Eligible Receivable may become an Ineligible Receivable as a result of events occurring after an Advance is made. In the event that any Eligible Receivable used in calculating the Borrowing Base becomes an Ineligible Receivable, Lender may, at its option, and in its sole discretion, re-calculate the Borrowing Base. At no time shall the aggregate outstanding Advances exceed the Availability. If, at any time, the aggregate outstanding amount of Advances exceeds the Borrowing Base or the Availability, then Borrower shall repay Lender immediately such amount as may be necessary to eliminate such excess (and if such repayment is

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attributable to an Eligible Receivable becoming an Ineligible Receivable, then Lender will release all security in the associated Collateral Loan and Collateral Loan Documents).

                (b)    Each Request for an Advance under the Loan shall be made by an Authorized Person completing and delivering a Request for Advance and Borrowing Base Certificate to Lender. Each Request for Advance shall be deemed delivered only upon actual receipt by Lender at the address specified in Section 9.4 hereof of such Request for Advance, which receipt may be in the form of an e-mail communication. Lender shall have the right, but not the obligation to conduct any preliminary due diligence desired by Lender, all at Borrower’s expense. If Lender makes a preliminary determination in Lender’s sole and absolute opinion that (a) the requested Advance does not satisfy Lender’s underwriting criteria or (b) any of the conditions precedent set forth in Section 4 or elsewhere in this Agreement have not been satisfied, Lender shall have no obligation to make the requested Advance. From the Loan Closing to the end of the Commitment Term, Borrower may borrow and repay the Advances in whole or in part, and re-borrow, all in accordance with the terms and conditions of this Agreement. The Lender shall incur no liability to Borrower in acting upon any request referred to herein which the Lender believes to have been made by an Authorized Person.

                (c)    Upon satisfaction of the terms and conditions as required hereunder for the making of the Initial Advance and the pledging of the Initial Loan Collateral, including without limitation, satisfaction of the conditions precedent as set forth in Section 4.4 and Section 4.5, Lender shall disburse the Initial Advance to Borrower.

                (d)     Commencing with the calendar quarter ending September 30, 2021, for each calendar quarter during which the aggregate average daily unpaid principal amount of outstanding Advances is less than fifty percent (50%) of the Credit Limit, Borrower shall pay to Lender, from its own funds, the Unused Line Fee. The Unused Line Fee shall be calculated on a calendar quarterly basis by Bank for the preceding calendar quarter, and shall be due and payable by Borrower to Lender in arrears on the tenth (10th) Business Day following the last day of each March, June, September and December during the Commitment Term. The Unused Line Fee shall be non-refundable, and shall be deemed fully earned by Lender upon the expiration of each calendar quarter during the Commitment Term of the Loan.

                (e)    From and after the expiration of the Commitment Term, Borrower shall not be entitled to request or obtain any Advances of Loan Proceeds.

4.2. NOTE; PAYMENTS; INTEREST RATE.

4.2.1 Each Advance shall be evidenced by the Note, and shall accrue interest at the rate provided therein.

4.2.2 Compensating Balances. Borrower and Guarantor shall maintain the Compensating Balance Account(s) with an average daily aggregate balance in such Account(s) of not less than $5,000,000.00 at all times (“Compensating Balance Amount”) during the term of the Loan, to be reviewed quarterly, beginning with the calendar quarter ending June 30, 2021. Should the Compensating Balance Requirement fail to be maintained during any

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calendar quarter during the term of the Loan (“Quarter”), such will not constitute an Event of Default, but the interest rate that is applicable on the Note during the next Quarter shall automatically be increased by one-quarter of one percent (0.25%) (“Increased Spread”) over the interest rate that would otherwise be applicable on the Note for such Quarter had the Compensating Balance Requirement been satisfied. For the avoidance of doubt, in any Quarter that the Compensating Balance Requirement is satisfied, Borrower will not be charged the Increased Spread on the applicable Note rate in the next succeeding Quarter. In any Quarter that the Compensating Balance Requirement is not satisfied, Borrower will be charged the Increased Spread on the applicable Note rate for the next succeeding Quarter.

4.2.3 Borrower shall timely make all payments of principal and interest when due under the terms of the Note.

4.2.4 Borrower will repay in full any and all outstanding principal under the Note and all interest accrued thereon on or before the Maturity Date, subject to earlier acceleration upon the terms and conditions set forth in the Note.

4.3. PURPOSE OF ADVANCES; LOAN FEE.

            4.3.1    Loan Proceeds of each Advance under this Agreement shall be used by Borrower exclusively to fund one or more Collateral Loans, or to reimburse Borrower for actual amounts expended by Borrower to fund one or more Collateral Loans.

            4.3.2    The Loan Fee shall be paid by Borrower to Lender at Loan Closing as part of the Initial Advance. The Loan Fee will be in addition to all other fees mentioned in this Agreement, and shall be deemed fully earned and nonrefundable when paid, whether or not any Loan Proceeds, are disbursed at any time.

4.4. CONDITIONS PRECEDENT. In addition to all other conditions of the effectiveness of this Agreement, the obligations of Lender pursuant to this Agreement to make the Initial Advance shall be subject to the satisfaction or waiver by Lender of the following conditions:

4.4.1Borrower, at its sole expense, shall deliver to Lender, at its office located at 2701 E. Camelback Road, Suite #110, Phoenix, Arizona 85016, on or before the date of the Initial Advance the following, in form and substance satisfactory to Lender, in Lender’s sole opinion and judgment:

a.This Agreement;

b.The Note;

c.The Guaranty;

d.A Request for Advance in respect of the Initial Advance;

e.The Initial Loan Collateral Document Package;

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f.The Financing Statement;

g.The Power of Attorney;

h.The Servicing Agreement, with acknowledgment by Servicer;

i.Resolutions, certifications and/or other authorizations of Borrower, Borrower’s trustees and such other Persons as Lender shall request, evidencing, without limitation, approval and authorization of the transactions contemplated hereunder and the documents and instruments to be executed by Borrower in connection herewith;

j.Borrower shall have provided Lender with an opinion from Borrower’s counsel, in such form and content as may be required by Lender in its sole discretion, to confirm the authority of Borrower to execute the Loan Documents to which they are a party, the authority of the individuals executing the Loan Documents on their behalf, and the due execution and delivery of the Loan Documents to Lender; and

k.Such additional assignments, agreements, certificates, reports, approvals, instruments, documents, financing statements, consents, and opinions as Lender may request;

4.4.2 Borrower shall have opened the Operating Account and the Compensating Balance Account(s) with Lender;

4.4.3 Lender shall have approved the Financial Statements of Borrower and Guarantor;

4.4.4 No suit, action, or other proceeding of material consequence shall be pending or threatened which seeks to restrain or prohibit the consummation of the transactions contemplated by this Agreement, or to obtain damages or other relief in connection therewith;

4.4.5 Borrower shall have paid (which shall be pursuant to the Initial Advance) to Lender the Loan Fee and any and all other fees and charges due under the terms of the Loan Documents;

4.4.6 Lender shall have conducted, or caused to be conducted by an independent professional satisfactory to Lender, (i) a field audit of Borrower (including, without limitation, of Borrower’s processes, practices and regulatory compliance), the results of which must be satisfactory to Lender, in Lender’s sole and absolute opinion and judgment, and (ii) background checks of Borrower, Guarantor and such other Persons as Lender shall require, the results of which must be satisfactory to Lender, in Lender’s sole and absolute opinion and judgment;

4.4.7 Lender’s security interest in all Collateral then in existence shall have been perfected by the filing of the Financing Statement, the delivery of the original Collateral Loan Documents, and the recording of any recordable Collateral Loan Documents,

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and shall be and remain a first priority perfected security interest in and to all such Collateral, subject only to such action as may be required under applicable law to perfect Lender’s security interest in collateral subsequently acquired by Borrower pursuant to each Collateral Loan;

4.4.8 There shall be no breach of any warranty or representation of Borrower; and

4.4.9 There shall be no event or circumstance which constitutes, or would upon the giving of notice or passage of time, constitute an Event of Default under this Agreement.

4.5. CONDITIONS OF ADVANCES. Lender’s obligation to make each Advance (including the Initial Advance) shall be subject to the following additional conditions precedent, in addition to all other conditions of each Advance provided elsewhere in this Agreement and in the other Loan Documents:

4.5.1 All conditions to this Agreement under Section 4.4, above, shall be satisfied in full;

4.5.2 Borrower shall have delivered to Lender a Request for Advance;

4.5.3 Concurrent with each Request for an Advance, Borrower shall execute and deliver to Lender (i) a fully complete and executed Borrowing Base Certificate and (ii) an updated summary, in form and detail satisfactory to Lender, of the Collateral Loans and other Borrower Loans in Borrower’s Loan Portfolio detailing the status of such Collateral Loans and other Borrower Loans, including without limitation, outstanding amounts due, status of performance, status of real property collateral and other information that may be required by Lender for each Borrower Loan;

4.5.4 Borrower shall have paid to Lender, in addition to any other fees required under this Agreement or any of the other Loan Documents, a Collateral Loan review fee of $250.00 for each Collateral Loan (including, without limitation, each of the Collateral Loans included in the Initial Loan Collateral). In addition, in the event Lender retains an appraiser to perform a review of any Appraisal of the Underlying Collateral for a Collateral Loan, Borrower shall pay an Appraisal review fee not to exceed $1,000.00;

4.5.5 No event or circumstance shall have occurred or be continuing which constitutes, or would upon the giving of notice or passage of time, constitute an Event of Default or failure of any condition under the Loan Documents;

4.5.6. Lender shall have received payment of the fees and costs of Lender in connection with each Advance and the preparation of the Loan Documents, including, but not limited to, reasonable attorneys’ fees; and

4.5.7. Lender shall have approved the Collateral Loans that have qualified as Eligible Receivables (as provided in Section 4.6) in connection with the Request for Advance;

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4.6. ELIGIBLE RECEIVABLES

i.Approval of Eligible Receivables. Lender shall have no obligation to consider any Collateral Loan (including any Borrower Loan that in connection with the approval thereof as an Eligible Receivable will be a Collateral Loan) for approval as an Eligible Receivable unless and until the following conditions precedent are satisfied in Lender’s sole and absolute opinion and judgment, in addition to all other conditions to approval of any Eligible Receivable provided elsewhere in this Agreement and in the other Loan Documents:

a.Borrower shall prepare and deliver to Lender, for Lender’s review and approval, a complete Collateral Loan Document Package, in form and content acceptable to Lender in its sole opinion and judgment evidencing and otherwise pertaining to the Collateral Loan between Borrower and its Collateral Loan Obligor;

b.All terms and conditions of the Collateral Loan and all Collateral Loan Documents pertaining thereto shall comply with all requirements for Collateral Loans as provided in this Agreement;

c.Borrower’s security interest in all Underlying Collateral shall then, or thereafter concurrently with actual disbursement of Loan Proceeds to or for the account of a Collateral Loan Obligor, constitute a valid, enforceable, and duly perfected security interest in the Underlying Collateral in a first priority position (subject to the exception to the representations and warranty contained in Section 5.3.10), and all proceeds and products thereof;

d.No event or circumstance shall have occurred or be continuing which constitutes, or would upon the giving of notice or passage of time, constitute an Event of Default or failure of any condition under the Loan Documents;

e.Borrower shall deliver to Lender the Collateral Loan Document Package, including, without limitation, an executed Assignment of Mortgage, Allonge and all other items set forth in Schedule 1 attached hereto;

f.Borrower shall execute and deliver to Lender an Allonge and an Assignment of Mortgage (which shall be retained by Lender and not recorded unless an Event of Default occurs under this Agreement or any other Loan Document, or Lender otherwise decides to record the Assignment of Mortgage, in its sole discretion) for each Collateral Loan, and Lender’s security interest in all Loan Collateral and related rights of Borrower with respect to each Collateral Loan shall then, or thereafter concurrently with actual disbursement of Loan Proceeds to or for the account of Borrower, be a valid, enforceable and first priority perfected security interest in and to all such Loan Collateral, and all proceeds thereof;

g.Any title policy included within any Collateral Loan Document Package shall include such endorsement(s) as Lender deems necessary or appropriate, in its sole and absolute judgment, including, without limitation, mechanic’s lien coverage,

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insuring the validity, priority and enforceability of Borrower’s security interest in the Collateral Mortgage; and

h.All conditions to the funding of the portion of the Collateral Loan to be funded at the closing of such Collateral Loan shall have been satisfied in accordance with the provisions of the Collateral Loan Documents and either (i) the Collateral Loan shall be fully funded, or (ii) the Loan Proceeds shall be used to fund the Collateral Loan, to the extent required at such Collateral Loan’s closing.

4.6.2 Review of Collateral Loan Document Package; Approval of Eligible Receivables. Lender shall have a period of five (5) Business Days following submission by Borrower of a completed Collateral Loan Document Package for any Collateral Loan within which to review and approve, or not approve, Borrower’s request to approve such Collateral Loan as an Eligible Receivable. If, within such five (5) Business Day period, Lender has not notified Borrower in writing that such Collateral Loan is approved as an Eligible Receivable, then Lender shall be deemed to have not approved such Collateral Loan and such Collateral Loan shall not be an Eligible Receivable.

4.6.3 Withdrawal and Termination of Approval of Eligible Receivables. Notwithstanding any approval by Lender of any Collateral Loan as an Eligible Receivable, any such approval shall be deemed withdrawn and terminated if, at any time, any such Collateral Loan becomes an Ineligible Receivable; provided,however, if Lender approves a Collateral Loan as an Eligible Receivable after Borrower provides written notice to Lender of any matter that would render such Collateral Loan an Ineligible Receivable (“Notice of Ineligible Receivable”), such Eligible Receivable will not become an Ineligible Receivable as a consequence of any matter that was previously disclosed to Lender in the Notice of Ineligible Receivable and approval by Lender prior to making the associated Advance. For the avoidance of doubt, the Notice of Ineligible Receivable regarding any Collateral Loan shall specifically identify the line item in Schedule 2 attached hereto that would render such Collateral Loan an Ineligible Receivable, and such Collateral Loan shall not become an Eligible Receivable unless and until Lender responds to the Notice of Ineligible Receivable with its approval in writing. Upon an Eligible Receivable becoming an Ineligible Receivable, the applicable Collateral Loan shall automatically cease to be an Eligible Receivable and be removed from the Borrowing Base and, Borrower shall repay the Advances in such amount as may be required pursuant to Section 4.1.1(a). Notwithstanding the removal of any such Collateral Loan from the Borrowing Base, such Collateral Loan shall remain a “Collateral Loan” until, and unless, such Collateral Loan is released pursuant to Section 4.7, upon which Lender will reconvey its security interest in the associated Collateral Loan Documents for such Collateral Loan to Borrower.

4.6.4 Appraisals. The initial Appraisal of any underlying real property collateral securing any Borrower Loan (including, without limitation, any Appraisals of the underlying real property collateral securing the Borrower Loans comprising the Initial Loan Collateral) shall be provided by Borrower to Lender, at Borrower’s expense.

4.7 RELEASE OF COLLATERAL LOANS. Borrower may at any time and from time to time request that any Borrower Loan constituting a Collateral Loan be released as a

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Collateral Loan, and the liens and security interests of Lender therein be released, and, that such Borrower Loan shall cease to be an Eligible Receivable, provided, that:

4.7.1 Borrower shall provide Lender a written request to remove such Borrower Loan as a Collateral Loan, which request shall specify the requested date for the removal of such Borrower Loan as a Collateral Loan;

4.7.2 Lender shall have received at least five (5) Business Days prior to the requested date of removal of such Borrower Loan as a Collateral Loan, a Borrowing Base Certificate presenting Borrower’s computation of the Borrowing Base as of the requested date of removal and after giving effect to the removal of such Borrower Loan as a Collateral Loan and an Eligible Receivable;

4.7.3 After giving effect to the removal of such Borrower Loan as a Collateral Loan and, such Collateral Loan ceasing to be an Eligible Receivable, the outstanding Advances shall not exceed the Borrowing Base (any payment by Borrower in connection therewith shall be without premium or penalty);

4.7.4 No event or circumstance which constitutes, or would upon the giving of notice or passage of time, constitute an Event of Default under this Agreement shall exist prior to or after giving effect to the removal of such Borrower Loan as a Collateral Loan; provided that the following events and circumstances shall not be taken into account for purposes of this subparagraph: (i) a non-material default, or (ii) an event or circumstance that would be cured upon such release of such Collateral Loan;

4.7.5 Lender shall have received a certificate signed by an authorized officer of Borrower certifying that, to the best of her or his knowledge, the conditions in subsections 4.7.1 through 4.7.4 of this Section 4.7 are satisfied;

4.7.6 Borrower shall have provided to Lender such documents, in form and substance reasonably satisfactory to Lender, as may be necessary to release Lender’s liens and security interests in the Collateral Loan Documents; and

4.7.7 Lender agrees that, if a Collateral Loan Obligor exercises its right to pay off in full a Collateral Loan, then Borrower shall be entitled to obtain the release of such Collateral Loan from Lender notwithstanding any restriction herein to the contrary, provided that (i) if no event or circumstance which constitutes, or upon the giving of notice or passage of time would constitute, an Event of Default under this Agreement will exist upon giving effect to the removal of such Borrower Loan as a Collateral Loan, then the Advance (or so much thereof as then remains outstanding) attributable to such Borrower Loan shall be paid to Lender, (ii) otherwise, the full amount of the payment made by the Collateral Loan Obligor to Borrower shall be paid to Lender, and (iii) in either event Lender shall have received from Borrower a certificate signed by an authorized officer of Borrower certifying as to (a) the Collateral Loan being repaid, (b) the amount of payment to be made by Borrower to Lender hereunder, and (c) whether to the best of the knowledge of the certifying officer any event or circumstance exists which constitutes, or upon the giving of notice or passage of time would constitute, an Event of Default

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under this Agreement will exist upon giving effect to the removal of such Borrower Loan as a Collateral Loan.

4.8 REPAYMENT. In addition to other provisions set forth herein, repayment of the Loan will be required as follows:

4.8.1 Interest and principal payments under the Loan shall be due and payable to Lender pursuant to the provisions of the Note.

4.8.2 Borrower hereby authorizes Lender, if and to the extent any payment of principal or interest or sum otherwise due hereunder is not timely made pursuant to the Note, and to the extent of any obligation of Borrower to Lender under this Agreement or any other agreement, to charge against any account of Borrower with Lender an amount equal to the principal and accrued interest from time to time due and payable to Lender under the Note or otherwise; provided, however, that the foregoing shall not limit in any way Borrower’s obligation to pay such amounts as and when due.

4.8.3 All payments hereunder or under the Note shall be made by Borrower without any offset or deduction for or on account of any present or future taxes, imposts or duties, of whatever nature, imposed or levied by or on behalf of any Governmental Agency. If at any time, whether by reason of any present or future Law or other requirement, Borrower shall be compelled by such Law or other requirement to deduct or withhold such taxes, imposts or duties (other than items in respect of income or other taxes of Lender), Borrower shall pay such additional amounts to Lender as may be necessary such that every net payment under this Agreement and the Note on which Borrower is obligated, after such deduction or withholding, will not be less than the amount required hereunder or thereunder.

4.8.4 Whenever any payment to be made under this Agreement and the Note shall be due on a day other than a Business Day of Lender, such payment may be made on the next succeeding Business Day, and such extension of time shall in such cases be included in the computation of payment of interest hereunder and under the Note.

4.9. DEPOSIT ACCOUNTS. Borrower hereby grants, assigns, pledges and hypothecates to Lender all of Borrower’s right, title and interest in and to all deposit accounts maintained by Borrower with Lender, as security for each and all of the obligations of Borrower to Lender under the Loan Documents, including without limitation, the Operating Account and any and all Compensating Balance Accounts.

4.10. NO AUTOMATIC SET-OFF. The existence of any sum or sums being on deposit with Lender shall in no way constitute a set off against or be deemed to compensate the obligations of the Loan or any payment or performance due under the Loan Documents or this Agreement, unless and until Lender, by affirmative action, shall so apply said accounts or any portion thereof, and then only to the extent thereof as so designated by Lender.

4.11 RELIANCE BY LENDER AND ACQUITTANCE. Lender may conclusively assume that the statements, facts, information, and representations contained herein

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and/or in any affidavits, orders, receipts, or other written instrument(s) that are filed with Lender or exhibited to it, are true and correct in all material respects, and Lender may rely thereon without any investigation or inquiry, and any payment made by Lender in reliance thereon shall be a complete release in its favor for all sums so paid.

4.12 EXTENSION OPTION. On or before February 10, 2023, provided no Event of Default (or event which, with the giving of notice or the passage of time, or both, would become an Event of Default) shall exist under any of the Loan Documents and Borrower is in full compliance with each term, condition and covenant contained in this Agreement and the other Loan Documents, Borrower may submit a written request to extend the Commitment Term for an additional twelve (12) month period. In the event Borrower requests an extension of the Commitment Term for an additional twelve (12) month period, Lender may, in its sole discretion, determine whether or not to grant such request and, if so, the terms and conditions for the granting of such request. Borrower shall execute such documents and instruments required by Lender if it grants such request, and shall reimburse Lender for any fees and costs incurred by Lender in the granting and documenting of any extension (if Borrower does not approve any such documents or instruments, then Borrower and Lender agree that the extension shall not be granted by Lender). In the event that Lender grants an extension of the Commitment Term for an additional twelve (12) month period, Borrower shall have the option, in its sole discretion, to request an additional extension of the Commitment Term prior to the end of that twelve (12) month period, subject to the provisions of this Section 4.12. Borrower understands that under no circumstances is Lender required to grant any extension of the Commitment Term if a request is made, and Borrower assumes the risk that no extension of the Commitment Term will be granted by Lender.

4.13 CONVERSION TO TERM LOAN. Upon expiration of the Commitment Term (“Conversion Date”), Borrower shall have the option of converting the Loan to a term loan in an amount not to exceed the then outstanding principal balance of the Loan as of the Conversion Date, and, in connection therewith, obtaining an extension of the Maturity Date to the two (2) year anniversary of the Conversion Date, provided, however, that such conversion of the Loan to a term loan and such extension of the Maturity Date shall be subject to the occurrence or satisfaction (or waiver by Lender in writing), as applicable, of each and all of the following conditions by no later than the Conversion Date:

4.13.1 As of the Conversion Date, no Event of Default (or event which, with the giving of notice or the passage of time, or both, would become an Event of Default) shall exist under any of the Loan Documents and Borrower shall be in full compliance with each term, condition and covenant contained in this Agreement and the other Loan Documents;

4.13.2 Borrower shall have provided Lender a written request for extension of the Maturity Date no later than thirty (30) days prior to the Conversion Date;

4.13.3 There shall have occurred no material adverse change in the financial conditions of Borrower or Guarantor from that which existed as of Loan Closing;

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4.13.4 Borrower shall not be entitled to any new Advance of Loan Proceeds, and shall not request the same from and after the Conversion Date;

4.13.5 Borrower shall provide Lender with such additional assignments, agreements, promissory notes, security agreements, certificates, reports, approvals, instruments, documents, subordination agreements, financing statements, consents and opinions as Lender may reasonably request in connection with conversion of the Loan to a term loan;

4.13.6 Borrower shall pay to Lender, from Borrower’s own funds, all costs and expenses of Lender arising from or relating to the conversion of the Loan to a term loan, including, without limitation, Lender’s legal fees and expenses; and

4.13.7 Borrower shall have paid the Conversion Fee to Lender, from Borrower’s own funds, which Conversion Fee shall be deemed fully earned and non-refundable to Borrower upon receipt by Lender.

SECTION 5.

THE COLLATERAL LOANS

Borrower hereby assigns, pledges, transfers, hypothecates and sets over to Lender all of its right, title and interest in and to the Collateral Loans and Collateral Loan Documents, including, without limitation, the right to receive all payments, proceeds, and recoveries thereunder, collections and cash collateral of the Collateral Loan Documents, any casualty insurance or condemnation proceeds payable to Borrower thereunder, any and all policies of title insurance issued in connection with any Collateral Mortgage, and the proceeds and products of any of the foregoing, as collateral security for Borrower’s obligations under the Loan Documents. From and after the occurrence of an Event of Default and during the continuance thereof, Lender shall have the exclusive right to (a) receive and enforce the Collateral Loan Documents, (b) exercise the Borrower's decision-making authority as lender thereunder, and (c) collect all payments and recoveries thereon and all proceeds thereof, to be applied by Lender to payment of the Loan and all fees, costs, and expenses incurred by Lender in connection with the Loan. Lender’s rights hereunder shall include, from and after the occurrence of an Event of Default and only during the continuance thereof, the exclusive right to collect and receive all payments, proceeds, and recoveries under and with respect to the Collateral Loan Documents, including, without limitation, the exclusive right to enforce the provisions of the Collateral Loan Documents in any manner Lender shall determine to be necessary or appropriate, including, without limitation, by judicial action or nonjudicial proceedings, and to otherwise bill for and account to Borrower for any and all payments, proceeds, and recoveries thereon as herein provided. Notwithstanding the foregoing assignment, Borrower, alone, and not Lender, shall be obligated to fulfill all of the monetary and non-monetary obligations of the lender to Collateral Loan Obligor under the Collateral Note, Collateral Mortgage and additional Collateral Loan Documents.

Borrower shall fully and faithfully perform and satisfy all covenants and conditions of the Collateral Loan Documents, and Borrower shall, as of the closing of each Collateral Loan, take all steps necessary and appropriate in order to perfect Borrower’s security interest in and lien

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upon all Underlying Collateral and to perfect Lender’s security interest in and lien upon all Loan Collateral. Borrower shall not make any Collateral Loan to any Person other than a Collateral Loan Obligor without Lender’s prior written consent. Borrower shall service (or caused to be serviced) the Collateral Loans in accordance with this Agreement and all applicable Laws and, to the extent not expressly governed thereby, will, at a minimum, exercise the same degree of care as Borrower exercises with respect to the servicing and administration of loans held by Borrower for its own account.

Each Collateral Loan shall be identified by Lender with (i) the date and amount of each Collateral Note, (ii) the name of the Collateral Loan Obligor, (iii) the identification of the Collateral Mortgage, and (iv) the identification of the Collateral. Such records of Collateral Loans shall be maintained at Lender’s office, and the records of Lender shall, absent manifest error, be binding and conclusive upon Borrower.

5.1. COLLECTION. Borrower or Servicer shall use commercially reasonable efforts in accordance with the Servicing Standard to cause all Collateral Loan Obligors to make full and timely payment of all obligations due under the Collateral Loan Documents.

5.2. MONITORING COMPLIANCE; MODIFICATIONS. Borrower shall at all times, in accordance with the Servicing Standard, monitor and verify compliance by Collateral Loan Obligors with all obligations under the Collateral Loan Documents. Borrower shall service and administer (or caused to be serviced and administered by an Affiliate or by a third party Servicer under the Servicing Agreement) the Collateral Loans in accordance with servicing practices and procedures (including collection procedures) that are in all respects legal, proper and customary in the mortgage servicing industry in accordance with (a) the accepted mortgage servicing practices of prudent mortgage lending institutions that service mortgage loans of the same type as the Collateral Loans in the jurisdiction where the real Property secured by the related Collateral Mortgage is located, (b) applicable law, (c) the terms of the related Collateral Loan Documents, and (d) the servicing practices that Borrower and its Affiliates customarily employ and exercise in servicing and administering mortgage loans of the same type as the Collateral Loans for their own account (to the extent not conflicting with clauses (a) through (c) above) (the foregoing standard, “Servicing Standard”) and shall have full power and authority, acting alone or through subservicers or agents, without the consent of Lender, to do or cause to be done any and all things in connection with such servicing and administration which Borrower may deem necessary or desirable and consistent with the terms of this Agreement, including without limitation making Minor Modifications to any Collateral Loan Documents. Borrower hereby authorizes Lender, in Lender’s sole discretion, to perform a collateral audit on any Collateral Loan at any time during the term of the Loan, utilizing an auditor acceptable to Lender, and the audit shall be at Borrower’s sole expense; provided, however, unless an Event of Default has occurred and is continuing, (i) any property or loan appraisals shall be at Lender’s expense, (ii) any audits conducted by Lender beyond one (1) such audit per calendar year shall be at Lender’s expense, (iii) the expense of any audit (without appraisals) for which Borrower is responsible hereunder shall not exceed $5,000.00, and (iv) the only expenses for which Borrower will be responsible hereunder are expenses to third parties reasonably incurred.

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5.3. REPRESENTATIONS AND WARRANTIES REGARDING COLLATERAL LOANS. Borrower makes the following representations and warranties to Lender with respect to each Collateral Loan as of the date such Collateral Loan is pledged as Collateral, except to the extent of deviations expressly disclosed to Lender in a written document as part of the Collateral Loan Package which references the specific representations and warranties as to which a deviation is noted:

5.3.1 The Mortgage creates a first lien or a first priority ownership interest in an estate in fee simple estate in real property securing the related Collateral Loan Note (subject to the exception to the representations and warranty contained in Section 5.3.10).

5.3.2 All buildings and improvements which were included for the purpose of determining the appraised value of the Underlying Collateral lie wholly within the boundaries and building restriction lines of the Underlying Collateral and no buildings or improvements on adjoining properties encroach upon the Mortgaged Property. No improvement located on or being part of the Underlying Collateral is in violation of any applicable zoning law, subdivision law, ordinance or regulation in any material respect.

5.3.3 The Collateral Loan is covered by an American Land Title Association or California Land Title Association mortgage title insurance policy, or such other generally acceptable form of policy or insurance pursuant to insurance policies, and the issuer thereof is qualified to do business in the jurisdiction where the Underlying Collateral is located, and which insures the holder of such Collateral Loan, its successors and assigns, as to the first priority lien of the mortgage (subject to the exception to the representations and warranty contained in Section 5.3.10) in the original principal amount of the Collateral Loan and against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the mortgage. Additionally, such title insurance policy affirmatively insures ingress and egress, and against encroachments by or upon the Underlying Collateral or any interest therein. The title policy does not contain any special exceptions (other than the standard exclusions) for zoning and uses and has been marked to delete the standard survey exception or to replace the standard survey exception with a specific survey reading.

5.3.4 The Underlying Collateral (including all buildings and improvements thereon) are insured by an insurer acceptable to Lender (Lender will reasonably cooperate to accept or reject an insurer in a reasonably prompt manner), against loss by fire, hazards of extended coverage and such other hazards as are customary in the area where the Underlying Collateral is located. If required by the Flood Disaster Protection Act of 1973 ("FDPA"), the Collateral Loan is covered by a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration, in an amount not less than the amount required by the FDPA. Such flood policy was issued by a generally acceptable insurer. The Mortgage obligates the Collateral Loan Obligor thereunder to maintain all such insurance at the Collateral Loan Obligor's cost and expense, and upon the Collateral Loan Obligor's failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at the Collateral Loan Obligor's cost and expense and to seek reimbursement therefore from the related

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Collateral Loan Obligor. The hazard insurance policy is the valid and binding obligation of the insurer, is in full force and effect, and will be in full force and effect.

5.3.5 The Collateral Loan Note or Mortgage is not subject to any right of rescission, set-off, counterclaim or defense, including, without limitation, the defense of usury, nor will the operation of any of the terms of the Collateral Loan Note or the Mortgage, or the exercise of any right thereunder, render either the Collateral Loan Note or the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, and no Collateral Loan Obligor in respect of the Collateral Loan was a debtor in any state or federal bankruptcy or insolvency proceeding at the time the Collateral Loan was originated.

5.3.6 The Collateral Loans were, and will have been, at all times serviced in accordance with the terms of the related Collateral Loan Note and in accordance with applicable Law. With respect to escrow deposits and escrow payments, all such payments are in the possession of, or under the control of, the Borrower or the Servicer and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. All escrow payments have been collected in full compliance with applicable Law and the provisions of the related Collateral Loan Note and Mortgage. An escrow of funds is not prohibited by applicable Law and has been established in an amount sufficient to pay for every escrow item that remains unpaid and has been assessed but is not yet due and payable. No escrow deposits or escrow payments or other charges or payments due the Borrower have been capitalized under the Mortgage or the Collateral Loan Note.

5.3.7 There is no action, suit, proceeding or investigation pending, or, to the best of Borrower’s knowledge, threatened, that is related to the Collateral Loan and likely to affect materially and adversely such Collateral Loan.

5.3.8 The documents required to be delivered on or before the related Closing Date with respect to such Collateral Loan have been delivered to Lender. The Collateral Loan Document Package contains each of the documents and instruments specified to be included therein duly executed and in due and proper form, and each such document or instrument complies with federal and state regulatory requirements (if any) applicable to Borrower or the origination of the Collateral Loan by Borrower or an Affiliate.

5.3.9 The Collateral Loan Note, the related Mortgage and any intervening assignments of the Mortgage are genuine, and each is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization or other similar laws relating to or affecting the enforcement of creditors' rights and (ii) by general principles of equity. All parties to the Collateral Loan Note, the Mortgage and any intervening assignments had legal capacity to execute the Collateral Loan Note, the Mortgage and such assignments, and the Collateral Loan Note, Mortgage and such assignments have been duly and properly executed by such parties.

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5.3.10 The related Mortgage is a valid, subsisting, enforceable and perfected first lien on the Underlying Collateral, including all buildings on the Underlying Collateral, and all installations and mechanical, electrical, plumbing, heating and air conditioning systems affixed to such buildings, and all additions, alterations and replacements made at any time with respect to the foregoing securing the Collateral Loan Note's original principal balance. The Mortgage and the Collateral Loan Note do not contain any evidence of any security interest or other conflicting interest or right thereto. Such lien is free and clear of all adverse claims, liens and encumbrances having priority over the first lien of the Mortgage subject only to (1) the lien of non-delinquent current real property taxes and assessments not yet due and payable, (2) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording which are acceptable to mortgage lending institutions generally and specifically referred to in the lender's title insurance policy and either (A) which are referred to or otherwise considered in the appraisal made in connection with the origination of the Collateral Loan, or (B) which do not adversely affect the appraised value of the Underlying Collateral as set forth in such appraisal and (3) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Underlying Collateral. Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Collateral Loan establishes and creates a valid, subsisting, enforceable and perfected first lien and first priority security interest on the property described therein.

5.3.11 The Mortgage and the related Collateral Loan Note contain customary and enforceable provisions which render the rights and remedies of the holder thereof adequate for the realization against the Underlying Collateral of the benefits of the security provided thereby, including, (i) in the case of a Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure, subject only to rights of redemption, seizure and other Laws that would not materially interfere with the ultimate realization of the benefits of the security.

5.3.12 The Mortgage contains the usual and enforceable provisions, to the extent not prohibited by applicable Law as of the date of such Mortgage, for the acceleration of the payment of the unpaid principal amount of the Collateral Loan in the event that the related Underlying Collateral is sold or transferred without the prior consent of the beneficiary of the Mortgage thereunder.

5.3.13 The terms of the Collateral Loan Note and the Mortgage have not been impaired, waived, altered or modified in any respect from the date of origination; except by a written instrument which has been recorded, if necessary to protect the interests of Lender, and which has been delivered to Lender. The substance of any such waiver, alteration or modification has been approved by the title insurer, to the extent required. No Collateral Loan Obligor in respect of the Collateral Loan has been released, in whole or in part, except in connection with an assumption agreement approved by the title insurer, to the extent required by such policy, and which assumption agreement is part of the Collateral Loan Document Package delivered to Lender.

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5.3.14 There are no mechanics' or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under law could give rise to such lien) materially and adversely affecting the Underlying Collateral which are, or may be, liens prior or equal to, or coordinate with, the lien of the related Mortgage, unless within 60 days after such liens are first noticed to Borrower (i) such liens or claims have been bonded over to the reasonable satisfaction of Lender, or (ii) in the event the State which the Underlying Collateral is located does not provide for the bonding of such liens or claims, a cash escrow or other deposit or arrangement in respect of such liens has been established to Lender’s reasonable satisfaction.

5.3.15 There is no default, breach, violation or event of acceleration existing under the Mortgage or the related Collateral Loan Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration; and neither the Borrower nor any prior owner of such Collateral Loan has waived any default, breach, violation or event permitting acceleration. Neither the Borrower nor any such prior owner has waived the performance by any Collateral Loan Obligor of any action, if such party's failure to perform such action would cause the Collateral Loan to be in default. No foreclosure action is currently threatened or has been commenced with respect to any Underlying Collateral.

5.3.16 Each original Mortgage was recorded, and all subsequent assignments of the original Mortgage have been recorded in the appropriate jurisdictions in which such recordation is necessary to perfect the liens against each related Collateral Loan Obligor or are in the process of being recorded (except with respect to each MERS Collateral Loan, for which the related Assignment of Deed of Trust to MERS has been duly and properly recorded).

5.3.17 The Collateral Loan has been closed and the proceeds of the Collateral Loan have been fully disbursed (other than the portion of such Collateral Loan to be disbursed on a later date as part of a construction loan), there is no requirement for future advances thereunder, and any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in making or closing Collateral Loans and the recording of the Mortgage were paid, and each Collateral Loan Obligor is not entitled to any refund of any amounts paid or due under the Collateral Loan Note or Mortgage. All points and fees related to the Collateral Loan were disclosed in writing to each Collateral Loan Obligor in accordance with all applicable Laws.

5.3.18 No loan payment has been escrowed as part of the loan proceeds on behalf of the Collateral Loan Obligor, except for reserves funded by Borrower pursuant to the Collateral Loan Documents. No payments due and payable under the terms of the Collateral Loan Note and Mortgage, except for seller or builder concessions, have been paid by any person who was involved in, or benefited from, the sale or purchase of the Underlying Collateral or the origination, refinancing, sale, purchase or servicing of the Collateral Loan other than the Collateral Loan Obligor.

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5.3.19 All taxes, governmental assessments, insurance premiums and water, sewer and municipal charges which previously became due and owing have been paid by each Collateral Loan Obligor, or an escrow of funds from such Collateral Loan Obligor has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable.

5.3.20 All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Underlying Collateral and, with respect to the use and occupancy of the same, have been made or obtained from the appropriate authorities and the Underlying Collateral is lawfully occupied under applicable Law in all material respects.

5.3.21 In the event the Mortgage is a deed of trust, a trustee, authorized and duly qualified under applicable law to serve as such, has been properly designated, is named in the Mortgage and currently so serves, and no fees or expenses are or will become payable by the holder thereof to the trustee under the deed of trust, except for customary trustee service fees in accordance with customary market practice.

5.3.22 No Collateral Loan is secured by a leasehold interest with a term of less than 30 years.

5.3.23 The Borrower or its trustee is the sole legal, beneficial and equitable owner and holder of the Collateral Loan and the indebtedness evidenced by the Collateral Loan Note. Each sale of the Collateral Loan from any prior owner thereof was in exchange for fair equivalent value, and the prior owner was solvent on the sale date of the Collateral Loan and had sufficient capital to pay and was able to pay its debts as they would generally mature. The applicable Borrower or its related trustee has good, and marketable title to and is the sole owner thereof has full right and authority to pledge and assign the Collateral Loan to the Lender free and clear of any encumbrance, equity, lien, pledge, charge, claim (including, but not limited to, any preference or fraudulent transfer claim) or security interest.

5.3.24 All parties which have had any interest in the Collateral Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) in compliance with any and all applicable licensing requirements of the laws of the state wherein the Underlying Collateral is located, except to the extent that failure to be so licensed would not give rise to any material claim against the holder.

5.4. MAINTENANCE OF INSURANCE; SETTLEMENT. Borrower shall (a) cause the Collateral Loan Obligors to at all times insure the Underlying Collateral against loss or damage by fire and other risks as shall be required pursuant to the Collateral Loan Documents, with Borrower to be the loss payable beneficiary and/or additional insured or (b) force place such insurance if any Collateral Loan Obligor fails to so comply with the Collateral Loan Documents (except that earthquake and/or terrorism insurance, if required pursuant to the provisions of the Collateral Loan Documents, will only be required hereunder to the extent commercially reasonable and customarily obtained by other lenders in respect of similarly-situated properties). In the event of any damage or destruction of the Underlying Collateral, or any taking of all or a portion of the Underlying Collateral by power of eminent domain, Borrower shall take any and

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all action as may be necessary or appropriate to make a timely claim for proceeds or an award to which the holder of the Collateral Loan Documents is or may then be entitled; provided, however, that Borrower shall not settle or compromise the amount of any claim, settlement, payment, or award in an amount greater than ten percent (10%) of the outstanding principal balance of the Collateral Loan, but not to exceed $1,000,000.00, without the prior written approval of Lender, which approval by Lender shall not be unreasonably withheld or delayed, and the amount of such settlement or award shall be released to pay for restoration of the Underlying Collateral if so required pursuant to the provisions of the Collateral Loan Documents and otherwise paid first to Lender to be applied to repay the Advances made by Lender with respect to the Underlying Collateral which is the subject of such claim.

5.5. MANAGEMENT OF PROPERTY. If Borrower acquires title to the Underlying Collateral, Borrower (i) shall take all commercially reasonable steps necessary to cause the Underlying Collateral to be properly managed, maintained, repaired, and adequately insured, (ii) to the extent provided by Law, shall cause all rents and other income and proceeds and other rights generated from the Underlying Collateral and any insurance proceeds to be properly collected and applied for the account and benefit of Borrower and/or Lender according to their respective interests in the Underlying Collateral, and (iii) maintain insurance on the Underlying Collateral consistent with Section 5.4. Additionally in such circumstance, Lender shall obtain, at Borrower’s expense, an updated Appraisal for such Underlying Collateral and Borrower shall have paid to Lender, in addition to any other fees required under this Agreement or any of the other Loan Documents, an appraisal review fee of approximately $1,000.00, which actual amount is to be determined by Lender in its reasonable discretion, for review of such updated Appraisal.

5.6. REPORTING. Should Borrower at any time become aware of the occurrence of any loss, damage, destruction, waste, presence or release of any hazardous substance, or nuisance upon or from the Underlying Collateral, Borrower shall promptly report in writing to Lender Borrower’s findings and such other information related to such occurrence as Lender may reasonably request.

5.7. MAINTENANCE OF SECURITY INTEREST. Borrower shall perfect, and maintain the perfected status and priority, of all security for the Collateral Loans, including, but not limited to, all security interests in personal property and real property security. Without limiting the generality of the foregoing, Borrower shall cause to be filed at all appropriate locations all such financing statements as shall be required or permitted pursuant to the Collateral Loan Documents, and all continuation statements extending the financing statements.

5.8. REPORTING AND REMITTANCE. Within thirty (30) days following the end of each calendar month, Borrower shall prepare and deliver to Lender a written report of the status of each Collateral Loan as of the end of such calendar month, which report shall include the following and all other information regarding each Collateral Loan as Lender may request from time to time: (a) the name and address of the Collateral Loan Obligors, and the loan number; (b) the principal amount of all advances, and all accrued and unpaid interest, on each Collateral Loan, and the date last paid and next due date; and (c) the existence of any breach or

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default by Collateral Loan Obligors under the Collateral Loan Documents and, if so, any actions taken by Borrower to enforce the Collateral Loan Documents.

5.9. DEFAULT BY COLLATERAL LOAN OBLIGORS; THIRD PARTY CLAIMS

5.9.1 In the event of any breach or default by any Collateral Loan Obligor in the payment or performance of any obligations under the Collateral Loan Documents, then, so long as no Event of Default shall have then occurred and be continuing, Borrower shall, in accordance with the Servicing Standard, exercise and enforce any and all rights and remedies available to Borrower under the Collateral Loan Documents and by operation of law in order to collect all indebtedness thereunder and, if consistent with the Servicing Standard, to realize upon and liquidate all Underlying Collateral in payment thereof, including, without limitation, by commencing and pursuing to completion foreclosure, whether judicial or nonjudicial, of all liens and security interests encumbering the Underlying Collateral (subject to Borrower’s actions, if consistent with the Servicing Standard, including without limitation, the making of Minor Modifications). Borrower shall also timely file and pursue any and all claims which the holder of the Collateral Loan Documents shall be entitled to assert against third parties as may be necessary or appropriate in order to prevent losses to the Underlying Collateral or to the Loan Collateral, including, without limitation, all claims against any title insurance company with respect to any policy of title insurance issued in connection with a Collateral Loan. All actions taken by Borrower in the exercise and enforcement of the Collateral Loan Documents shall be undertaken and carried out by Borrower at its sole expense and risk (subject to required reimbursement by the underlying Collateral Loan Obligor), and in full compliance with applicable Law and in a commercially reasonable manner. Notwithstanding the foregoing, Borrower may make Minor Modifications consistent with the Servicing Standard without Lender’s consent, and such will not violate the provisions of this Section. Borrower hereby indemnifies and shall defend and hold harmless Lender from and against any and all claims, liabilities, losses, actions, suits, proceedings, damages, and expense of whatever kind or description in connection with any and all actions taken by Borrower and its agents and attorneys in the exercise and enforcement of Borrower’s rights, remedies, and obligations under this Agreement or as a result of any failure by Borrower to perform its obligations hereunder, including, without limitation, all related expenses and reasonable attorneys’ fees incurred by Lender as a result thereof. Any and all payments, proceeds, and recoveries received and/or recovered by Borrower with respect to any and all such claims, actions and proceedings shall be paid first to Lender to the extent of the unpaid principal balance of any Collateral Loan Note which is the subject of any such matter; provided, however, Borrower shall not settle or compromise the amount of any claim, settlement, payment, or award without the prior written approval of Lender, which approval Lender will not unreasonably withhold.

5.9.2 Notwithstanding anything herein to the contrary, in the event that any Collateral Loan that is an Eligible Receivable becomes an Ineligible Receivable, then (i) Lender’s approval of such Collateral Loan as an Eligible Receivable shall automatically terminate, (ii) such Collateral Loan shall automatically cease to be an Eligible Receivable and

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shall be removed from the Borrowing Base, and (iii) Borrower shall make such repayment of the Loan as may be required pursuant to Sections 4.1.1.(a) or 4.6.3.

5.9.3 Nothing herein contained shall be construed as a waiver by Lender of any obligation or duty of Borrower hereunder or under any other Loan Documents, including, without limitation, Borrower’s duty to enforce all Collateral Loan Documents in accordance with the Servicing Standard.

5.10. CONTINUOUS AND REPLACEMENT SECURITY. In the event Borrower commences a judicial or nonjudicial foreclosure action or proceeding against a Collateral Loan Obligor pursuant to the provisions of Section 5.8 above, and intends to proceed to sell or otherwise dispose, or to cause a sale or other disposition to be made, of any Underlying Collateral pursuant to any such action or proceedings in liquidation of the indebtedness under a Collateral Loan, then Borrower shall sell or cause a sale of the Underlying Collateral in accordance with applicable Law and standards of commercial reasonableness. If Borrower acquires title to the Underlying Collateral in such a sale or through the acceptance of a deed in lieu (“DIL Transaction”), then Lender’s security interest under the Loan Documents shall attach to, and continue in, all such property purchased by Borrower, and all such Underlying Collateral purchased by Borrower shall automatically become and be deemed to constitute Collateral for any and all unpaid indebtedness and other obligations owing by Borrower to Lender hereunder or under the other Loan Documents, having a first lien priority and subject to the provisions of this Agreement. Notwithstanding any provision to the contrary herein contained, and without limiting the validity and effectiveness of the foregoing provisions, Borrower shall notify Lender of each such proposed sale or DIL Transaction concerning Underlying Collateral in writing at least ten (10) Business Days prior to the scheduled date of sale or DIL Transaction, and shall execute and deliver to Lender prior to such sale all such security instruments, in recordable form, as Lender shall reasonably require in order to create, continue, and perfect Lender’s lien upon and security interest in such Underlying Collateral, to be effective and perfected as of the time Borrower acquires title thereto as herein provided, including, without limitation, a deed of trust and assignment of rents (or mortgage, as applicable) in form and content reasonably required by Lender, encumbering any and all interests in real property which may then be the subject of such sale or DIL Transaction (“Lender Deed of Trust”). Lender may, in its sole discretion, cause such security agreements, financing statements or Lender Deeds of Trust to be duly filed or recorded prior to, concurrently with, or subsequent to, the completion of such sale or DIL Transaction and, in the case of any sale or DIL Transaction concerning Underlying Collateral constituting interests in real property, may condition such sale or DIL Transaction and acquisition by Borrower upon the issuance of a title insurance policy to Lender, as the sole insured with respect to each Lender Deed of Trust, following Borrower’s acquisition of title to said property and at Borrower’s sole expense, in the amount of the then unpaid principal balance of the Note secured thereby and in form and content otherwise substantially identical to the title insurance policy issued to Borrower in connection with the original Collateral Loan, as updated.

5.11. INSURANCE. Borrower shall obtain and at all times maintain hazard and liability insurance with respect to any and all tangible Loan Collateral which may have been repossessed or otherwise acquired by Borrower in the exercise and enforcement of its rights

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under the Collateral Loan Documents, in amounts reasonably necessary to protect the interests of Borrower and Lender, as their interests may appear, and issued by companies acceptable to Lender in its sole discretion. Upon Lender’s request, a certificate of insurance acceptable to Lender shall be delivered to Lender together with evidence of payment of premium thereon and an agreement to give Lender at least thirty (30) Business Days’ prior notice of any material changes, termination, or expiration of the policies.

5.12. RIGHT OF ENTRY. Lender and Lender’s employees or agents shall have the right at all times to enter upon any and all real property collateral repossessed or acquired by foreclosure or deed in lieu of foreclosure for whatever purpose Lender deems appropriate, including, without limitation, inspection of the premises and the posting of such notices and other written or printed material thereon as Lender may deem appropriate or desirable.

5.13. ENFORCEMENT UPON EVENT OF DEFAULT. Unless and until all obligations to Lender have been fully and finally satisfied and discharged (other than contingent indemnification obligations for which no claims have been asserted at the time the Loan is paid in full and the commitment of Lender to make any further Advances has been terminated (herein referred to as “Surviving Indemnity Requirements”)), upon the occurrence of an Event of Default and only during the continuance thereof, Lender shall have the sole right to receive any and all payments, proceeds and recoveries under or in connection with the Collateral Loan, and Lender shall have the right to notify Collateral Loan Obligor to make all payments under the Loan to Lender. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, so long as there exists no uncured Event of Default, Borrower shall have the sole and exclusive right to bill and collect all payments due under and pursuant to all Collateral Loans and otherwise to communicate in any manner or for any purpose with any Collateral Loan Obligor or guarantors under the Collateral Loans. Borrower shall observe reasonable loan servicing practices with respect to collection of such obligations in the ordinary course of its business. Borrower shall at all times diligently monitor and verify compliance by the Collateral Loan Obligor with all obligations under the Collateral Loan in accordance with reasonable loan servicing policies, practices, and procedures.

5.13.1 Lender shall have the right to take any and all other actions as Lender reasonably determines to be necessary or appropriate in order to establish and perfect its rights and interests in and to the Collateral Loan Documents and in all payments, proceeds, and recoveries thereon; provided, however, notwithstanding the foregoing or any other provision of this Agreement or applicable law to the contrary, no assignments of Collateral Deeds of Trust delivered by Borrower hereunder shall be recorded in the Official Records of any county unless and until there occurs an Event of Default that has not already been cured prior to such recordation.

5.13.2 In addition to any other power of attorney provided in the Loan Documents, Borrower hereby appoints Lender as Borrower’s attorney in fact, with full power of substitution, to endorse and otherwise negotiate payment in any form made by Collateral Loan Obligor under the Collateral Loan to or for the account of Lender, subject to the provisions of

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this Agreement; provided, however, Lender shall only be entitled to exercise the appointment from and after an Event of Default and during the continuance thereof. Collateral Loan Obligor may conclusively rely upon all instructions, notices, requests for payment, and receipts given by Lender in connection with collection of the Collateral Loan.

In addition to any other indemnity herein provided, Borrower hereby indemnifies and holds harmless Lender from and against any and all losses, damages, claims, costs, and expenses, including reasonable attorneys’ fees and related costs, suffered or incurred by Lender (except if such arises as a result of Lender’s gross negligence or willful misconduct) as a result of any action or proceeding taken by Lender in the collection and enforcement of the provisions of the Collateral Loan Documents as provided in the Loan Documents.

SECTION 6.

BORROWER’S COVENANTS

In addition to anything else herein stated:

6.1. LENDER MAY EXAMINE BOOKS AND RECORDS. Lender shall have the right, at any time, acting by and through its employees or agents, reasonably to examine the books, records, and accounting data of Borrower, and to make extracts therefrom or copies thereof; provided, however (except to the extent specified in Section 5.2), unless an Event of Default has occurred and is continuing, any such examinations conducted by Lender shall be at Lender’s expense. Borrower shall promptly (but in no event later than two (2) Business Days after the request) make such books, records, and accounting data available to Lender, as stated above, upon written request, and upon like request shall promptly advise Lender, in writing, of the location of such books, records, and accounting data. Borrower shall at all times permit Lender to review, audit and examine all such books and records, either directly or through one or more auditors designated by Lender, including independent contractors, , provided that such audit shall be at Lender’s expense except to the extent specified in Section 5.2.

6.2. PAYMENT OF TAXES AND OTHER DEBT. Borrower shall pay, or cause to be paid, and discharge, or cause to be discharged, (a) before delinquency all taxes, assessments, and governmental charges or levies imposed upon it, upon its income or profits, or upon any property belonging to it (including, without limitation, the Collateral); (b) when due all lawful claims (including, without limitation, claims for labor, materials, and supplies), which, if unpaid, might become a lien, charge or encumbrance upon any of its assets or property (including, without limitation, the Collateral); and (c) all its other obligations and indebtedness when due; provided, however, that Borrower may contest any of the foregoing in good faith and by appropriate proceedings diligently prosecuted by Borrower as long as Borrower has adequate reserves to pay any adverse determination or has otherwise provided Lender evidence of a surety or bond to pay any adverse determination.

6.3. COMPLY WITH APPLICABLE LAWS. Borrower shall comply with all applicable Laws, including without limitation, all health and environmental Laws, and all other directions, orders and notices of violations issued by any Governmental Agency relating to or affecting Borrower or the Collateral. Further, Borrower shall indemnify and hold Lender

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harmless from the failure by Borrower to comply with such Laws to the full extent provided for herein.

6.4. PRESERVE EXISTENCE. Borrower shall do all things necessary to preserve and keep in full force and effect Borrower’s organizational status, will not change its name, and will comply with all Laws, orders and decrees of any Governmental Agency or court applicable to Borrower or to the Loan Collateral and/or the Underlying Collateral.

6.5. REPORTING REQUIREMENTS. So long as Borrower shall have any obligation to Lender under this Agreement and/or the Loan Documents, Borrower shall prepare, or cause to be prepared, and deliver, or cause to be delivered, Financial Statements and reports set forth on Schedule 6.5.

6.6. DISTRIBUTIONS. Borrower shall not make, declare or permit any distribution to any officer, member, manager, partner or other direct or indirect beneficial owner of Borrower at any time that an Event of Default (or an event that with the giving of notice or passage of time, or both, would constitute an Event of Default) has occurred and is continuing or if any such distribution would cause or contribute to an Event of Default (or an event that with the giving of notice or passage of time, or both, would constitute an Event of Default), except to the extent required to permit Guarantor to comply with the legal requirements applicable to its status as a REIT.

6.67. TERRORISM AND ANTI-MONEY LAUNDERING. Borrower warrants and agrees as follows:

6.7.1 As of the date hereof and throughout the term of the Loan: (i) Borrower; (ii) any Person controlled by Borrower; (iii) any Person for whom Borrower is acting as agent or nominee in connection with this transaction, is not an OFAC Prohibited Person.

6.7.2 To comply with applicable U.S. Anti-Money Laundering Laws and regulations, all payments by Borrower to Lender or from Lender to Borrower will only be made in Borrower’s name and to and from a bank account of a bank based or incorporated in or formed under the laws of the United States or a bank that is not a “foreign shell bank “ within the meaning of the U.S. Bank Secrecy Act (31 U.S.C. § 5311 et seq.), as amended, and the regulations promulgated thereunder by the U.S. Department of the Treasury, as such regulations may be amended from time to time.

6.7.3 To provide Lender at any time and from time to time during the term of the Loan with such information as Lender determines to be necessary or appropriate to comply with the Anti-Money Laundering Laws and regulations of any applicable jurisdiction, or to respond to requests for information concerning the identity of Borrower, or any Person controlled by Borrower, from any governmental authority, self-regulatory organization or financial institution in connection with its anti-money laundering compliance procedures, or to update such information.

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6.7.4 The representations and warranties set forth in this Section 6.7 shall be deemed repeated and reaffirmed by Borrower as of each date that Lender makes an Advance to Borrower and each date that Borrower makes a payment to Lender under the Note, this Agreement and the other Loan Documents or receives any payment from Lender. Borrower agrees promptly to notify Lender in writing should Borrower become aware of any change in the information set forth in these representations.

6.8. CHANGE OF MANAGEMENT; CHANGE OF OWNERSHIP OF GENERAL PARTNER.

6.8.1 There shall be no change in the management of Borrower; provided, however, if Borrower continues to be managed by Terra Capital Partner, LLC, a Delaware limited liability company, or any other Affiliate of Guarantor, no change of management will be deemed to have occurred.

6.8.2 Borrower shall continue to be wholly owned, directly or indirectly, by Guarantor.

6.9. COOPERATION. Borrower shall take any and all action reasonably requested by Lender to carry out the intent of this Agreement.

6.10. SITE VISITS, OBSERVATIONS AND TESTING. Subject to the terms of the Collateral Loan Documents, Lender and its agents and representatives will have the right at any reasonable time, after giving reasonable notice to Borrower, to enter and visit any locations where the Collateral or Underlying Collateral is located for the purposes of observing the Collateral or Underlying Collateral, provided, however, unless an Event of Default has occurred and is continuing, any such visitations conducted by Lender shall be at Lender’s expense except to the extent otherwise specified in Section 5.2. Lender will make reasonable efforts during any site visit, observation or testing conducted pursuant to this Section to avoid interfering with Borrower’s use of the Collateral. Lender is under no duty to observe the Collateral or Underlying Collateral or to conduct tests, and any such acts by Lender will be solely for the purposes of protecting Lender’s security and preserving Lender’s rights under this Agreement. No site visit, observation or testing, or any report or findings made as a result thereof, will (a) result in a waiver of any default of Borrower; (b) impose any liability on Lender; or (c) be a representation or warranty of any kind regarding the Collateral or Underlying Collateral (including its condition or value or compliance with any Laws) or any environmental report (including its accuracy or completeness).

6.11. NO TRANSFER OR FURTHER ENCUMBRANCE. Borrower shall not, without the prior written consent of Lender:

6.11.1 Create, incur, assume, permit or suffer to exist, any mortgage, deed of trust, pledge, lien, hypothecation, charge (fixed or floating), security interest or other encumbrance whatsoever on any Assets of Borrower, including, without limitation, the Collateral Loans or any interest therein, except as permitted pursuant to this Agreement; provided, however, the foregoing shall not apply to taxes, assessments or governmental charges or levies

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on property of Borrower, or in respect of a judgment or award against Borrower, if (i) such taxes, assessments or governmental charges are not delinquent at the time or thereafter can be paid without penalty, (ii) if Borrower shall have set aside adequate reserves therefor as determined or approved by its certified independent accounting firm, or (iii) if in the case of a judgments or award, execution on the same shall have been effectively stayed pending appeal or review or insured or bonded to the extent of Borrower’s liability in respect thereof, and in the case of all of the foregoing, the same are being contested in good faith and by appropriate proceedings.

6.11.2 Transfer the Collateral, or any interest therein, except as expressly permitted under the Agreement; or

6.11.3 Change the use of the Collateral.

6.12. NAME, FISCAL YEAR AND ACCOUNTING METHOD. Borrower will not change its name, fiscal year, or method of accounting. Borrower will not directly or indirectly engage in any business other than the business in which Borrower is engaged on the date of this Agreement, discontinue any existing lines of business that are material to the business or operations of Borrower, or substantially alter its method of doing business.

6.13. LOANS. Borrower will not directly or indirectly (a) make any loan or advance to any other Person other than advances made in the ordinary course of Borrower’s business; (b) purchase or otherwise acquire any capital stock or any securities of any other Person, any limited liability company interest or partnership interest in any other Person, or any warrants or other options or rights to acquire any capital stock or securities of any other Person or any limited liability company interest or partnership interest in any other Person; (c) make any capital contribution to any other Person; (d) otherwise invest in or acquire any interest in any other Person or establish any subsidiaries, (e) guarantee or otherwise become obligated in respect of any indebtedness of any other Person, or (f) subordinate any claim against or obligation of any other Person to Borrower to any other indebtedness of such Person.

6.14. INDEBTEDNESS. Except as approved, in writing, by Lender, Borrower shall not assume, create, incur, or permit to exist any obligations or indebtedness in favor of any Person except trade obligations and normal accruals in the ordinary course of business not yet due and payable and intercompany debt subordinated to the Loan (and upon request of Lender, such intercompany debt shall be subordinated to the Loan pursuant to a written subordination agreement in form and content reasonably satisfactory to Lender). Except under the Collateral Loan Documents or the Loan Documents, or as otherwise approved, in writing, by Lender, Borrower shall not assume, create, incur, or permit to exist any contingent liabilities, including, without limitation, contingent reimbursement obligations under letters of credit.

6.15. TRANSACTIONS WITH AFFILIATES. Borrower will not enter into, or cause, suffer or permit to exist, any arrangement or contract with any of its Affiliates, including, without limitation, any management contract, unless such transaction is on terms that are no less favorable to Borrower than those that could have been obtained in a comparable transaction on an arms’ length basis from a Person that is not an Affiliate.

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6.16. OPERATING ACCOUNT.

6.16.1 At all times during the term of the Loan, (i) the Operating Account shall be maintained by Borrower with Lender, (ii) Borrower shall use the Operating Account as the only operating account(s) of Borrower, and (iii) no operating accounts of Borrower shall be maintained with any Person other than Lender.

6.16.2 At all times during the term of the Loan, Borrower shall (i) deposit into the Operating Account, on a monthly or more frequent basis, any and all Net Operating Income of Borrower, and (ii) pay from the Operating Account any and all Operating Expenses of Borrower

6.16.3 In addition to being Borrower’s depository account(s) for any and all Net Operating Income of Borrower, the funds on deposit in the Operating Account shall be utilized, on a monthly basis, to pay any and all principal and/or interest payments due under the Note. Accordingly, Borrower hereby authorizes Lender on a monthly basis to disburse from the Operating Account the amount of principal and/or interest due under the Note, without further authorization on the part of Borrower. Such disbursements by Lender may be made by such means (including, without limitation, by automatic debit) as shall be satisfactory to Lender, in its sole and absolute discretion. Notwithstanding the existence of the Operating Account, Borrower shall be responsible to pay interest and principal due under the terms of the Note from sources other than the Operating Account if necessary to comply with Section 6.16.4, regardless of whether the Operating Account has been disbursed in its entirety or an Event of Default has occurred.

6.16.4 Unless and until there occurs an Event of Default, the funds in the Operating Account shall be accessible to Borrower, and Borrower shall have the right to withdraw any and all sums on deposit in the Operating Account; provided, however, that there must remain on deposit in the Operating Account a sum sufficient to pay the installments of principal and/or interest due under the Note on the Payment Date immediately following the date of Borrower’s intended withdraw or utilization of funds in the Operating Account. Notwithstanding the foregoing or anything to the contrary stated in this Agreement or in any of the other Loan Documents, upon the occurrence and during the continuance of any Event of Default, any and all rights of Borrower to withdraw or otherwise utilize any or all of the funds in the Operating Account shall terminate without notice to Borrower, and, thereafter (for so long as such Event of Default continues), Borrower shall have no right to withdraw or otherwise utilize funds from the Operating Account or to reduce the balance in the Operating Account in any manner or for any purpose.

6.16.5 Upon the occurrence and during the continuance of any Event of Default, Lender may continue to withdraw funds from the Operating Account to pay any amounts of principal and/or interest due and unpaid under the Note, in Lender’s sole and absolute opinion and judgment, without further authorization on the part of Borrower.

6.16.6 If, with respect to the Operating Account, an automatic debit is entered to pay amounts of principal and/or interest due under the terms of the Note, but there are

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insufficient funds in the Operating Account to pay such amounts of principal and/or interest in full on the date such debit is entered, then Lender may, in its sole and absolute discretion, reverse such debit.

6.16.7 Borrower acknowledges that Lender has made no representation or warranty concerning the adequacy or sufficiency of the funds that may, at any time, be maintained in the Operating Account for payment of interest and/or principal on the Loan or any portion thereof.

6.17. ENVIRONMENTAL INDEMNITY. Borrower does and shall at all times indemnify and hold harmless Lender against and from any and all claims, liability, suits, actions, debts, damages, costs, losses, obligations, judgments, charges, and expenses, of every and any nature whatsoever suffered or incurred by Lender in connection with the discharge of hazardous materials or hazardous waste, the presence of any hazardous materials or hazardous waste, or any violation of applicable Laws concerning hazardous materials or hazardous waste regarding or concerning any underlying real property serving as security for any Collateral Loan.

6.18. FINANCIAL COVENANTS. Borrower shall at all times remain in compliance with the financial and performance-related covenants set forth on Schedule 6.18, as calculated based on information and documentation actually provided to Lender by Borrower. Although Lender will formally measure compliance with each covenant at the intervals stated on Schedule 6.18, Borrower must remain in compliance with such covenants at all times they are applicable, and Lender reserves the right to declare a default under any such covenant at any time based on information otherwise available to Lender.

6.19. NO OTHER BUSINESS. Borrower shall not, directly or indirectly, engage in any business other than as permitted to be performed under this Agreement.

6.20. NO OTHER ASSETS. Borrower shall not own any property other than Borrower Loans.

SECTION 7.

EVENTS OF DEFAULT

There shall be an “Event of Default” under this Agreement if:

7.1. DEFAULT UNDER LOAN DOCUMENTS. Borrower shall fail to pay any principal or interest, as applicable, when due under the terms of the Note (provided, however, in the case of interest, prior to the due date, Lender shall have either provided Borrower access to the information necessary for it to determine the amount of interest required to be paid on the due date or the actual amount of interest required to be paid on the due date); or Borrower shall fail to pay any other amount owing under this Agreement or any of the other Loan Documents within ten (10) Business Days after notice from Lender as to such default; or Borrower shall fail to perform or observe any other term, covenant, or agreement contained in this Agreement or in any of the other Loan Documents, which failure shall continue for a period of thirty (30) days from the date Lender provides written notice of such failure to Borrower (provided, that if the nature

39

of the failure is such that an additional period is reasonably needed to effect such cure, such longer cure period shall be permitted, not to exceed sixty (60) days from the date of Lender’s notice to Borrower).

7.2. BREACH OF WARRANTY. Any warranties or representations made or agreed to be made in this Agreement or in any of the other Loan Documents are breached in any material respect or shall prove to be false or misleading in any material respect when made, unless, as to any such breach that is not intentionally false or misleading, Borrower cures such breach within thirty (30) days after notice from Lender.

7.3. LITIGATION AGAINST BORROWER. Any suit is filed against Borrower, which has a reasonable likelihood of an adverse determination and which, if adversely determined, is reasonably likely to substantially impair the ability of Borrower to perform any or all of its material obligations under and by virtue of this Agreement or any of the other Loan Documents.

7.4. ACCELERATION OR MATURITY OF OTHER DEBTS. Borrower does, or omits to do, any act, or any event occurs, as a result of which any material payment obligation of Borrower, including, but not limited to, the occurrence of any breach or default by Borrower under the terms of any other agreement between Lender and Borrower, whether or not arising hereunder and/or relating to Borrower’s ability to perform hereunder, may be declared immediately due and payable by the holder thereof prior to its stated maturity or has otherwise been declared due and payable at its stated maturity date; provided, that this Section will not apply unless (i) the beneficiary of such payment obligation accelerates such obligation prior to its stated maturity as a consequence thereof, and (ii) the principal amount of such obligation exceeds $500,000.00.

7.5. BANKRUPTCY. Borrower fails to pay its debts as they become due, or makes an assignment for the benefit of its creditors, or admits, in writing, its inability to pay its debts as they become due, or files a petition under any chapter of the Federal Bankruptcy Code or any similar law, now or hereafter existing, or becomes “insolvent” as that term is generally defined under the Federal Bankruptcy Code, or shall in any involuntary bankruptcy case commenced against it file an answer admitting insolvency or inability to pay its debts as they become due, or fails to obtain a dismissal of such case within sixty (60) calendar days after its commencement or convert the case from one chapter of the Federal Bankruptcy Code to another chapter, or be the subject of an order for relief in such bankruptcy case, or be adjudged a bankrupt or insolvent, or has a custodian, trustee, or receiver appointed for, or has any court take jurisdiction of, its properties, or any part thereof, in any voluntary or involuntary proceeding, including those for the purpose of reorganization, arrangement, dissolution, or liquidation, and such custodian, trustee, or receiver shall not be discharged, or such jurisdiction shall not be relinquished, vacated, or stayed within sixty (60) days after the appointment.

7.6. BORROWER STATUS. Borrower is liquidated, dissolved, or fails to maintain its status as a going concern.

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7.7. EXECUTION LEVY. Execution by a creditor of Borrower or Guarantor is levied against any of the Loan Collateral or any lien creditor of Borrower or Guarantor shall commence suit to enforce a judgment lien against the Loan Collateral, and such action or suit shall not have been bonded or shall continue unstayed for a period of sixty (60) days or more.

7.8. ATTACHMENT. Any proceeding is brought to make any part of the Lender’s commitment to make the Advances subject or liable to attachment or levy by any creditor of Borrower and such proceeding shall not have been bonded or shall continue unstayed for a period of sixty (60) days or more.

7.9. [Reserved.]

7.10. JUDGMENTS. A judgment or judgments for the payment of money in excess of $500,000.00, in the aggregate shall be rendered against Borrower or Guarantor by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within sixty (60) days from the date of entry thereof, and Borrower shall not, within said period of sixty (60) days, or such longer period during which execution of the same shall have been stayed or bonded, appeal therefrom and cause the execution thereof to be stayed during such appeal, unless Borrower provides Lender with evidence reasonably satisfactory to Lender that adequate funds have been reserved or set aside for the payment thereof.

7.11. MISREPRESENTATION AND/OR NON-DISCLOSURE. Borrower has made certain statements and disclosures in order to induce Lender to make the Loan and enter into this Agreement, and, if Borrower has made material misrepresentations or failed to disclose any material fact, Lender may treat such misrepresentation or omission as a breach of this Agreement, provided that Borrower will have thirty (30) days to cure such breach after notice from Lender, unless such misrepresentation or omission was intentionally false or misleading.

7.12. [Reserved.]

7.13. LOANS. Other than Borrower Loans, Borrower directly or indirectly makes a loan or advance to any other Person, including, without limitation, officers, shareholders, employees, Affiliates and subsidiaries of Borrower.

7.14. CROSS DEFAULT; OTHER OBLIGATIONS. Borrower or Guarantor commits a breach or default in the payment or performance of any other obligation of Borrower or Guarantor, or breaches any warranty or representation of Borrower or Guarantor, in each case under the provisions of any other instrument, agreement, guaranty, or document evidencing, supporting, or securing any other loan or credit extended by Lender, or by any Affiliate of Lender, to Borrower, Guarantor, or to any Affiliate of Borrower or Guarantor, including, but not limited to, any and all term loans, revolving credits, or lines of credit extended from time to time to Borrower or Guarantor (or any Person signing this Agreement on behalf of Borrower), or any other Person with which Borrower or Guarantor is affiliated; provided, that this Section will not apply unless (i) Lender or such Affiliate of Lender accelerates such loan or credit prior to its

41

stated maturity as a consequence thereof, and (ii) the principal amount of such loan or credit exceeds $500,000.00.

7.15. GUARANTOR. Guarantor revokes or attempts to revoke the Guaranty, or an Event of Default occurs under (and as defined in) the Guaranty.

SECTION 8.

REMEDIES

Upon and during the continuance of an Event of Default Lender shall have the following remedies:

        8.1    CEASE PAYMENT AND/OR ACCELERATE. Upon, or at any time after, the occurrence of an Event of Default, Lender shall have no obligation to make any further Advances, all sums disbursed or advanced by Lender and all accrued and unpaid interest thereon shall, at the option of Lender, become immediately due and payable, and Lender shall be released from any and all obligations to advance funds to Borrower under the terms of this Agreement.

        8.2    COLLATERAL. Upon, or at any time after, the occurrence and during the continuance of an Event of Default, Lender may, at its option, without notice to Borrower or any Affiliate of Borrower or without regard to the adequacy of the Collateral for the payment of the Loan, appoint one or more receivers of the Collateral, and Borrower hereby irrevocably consents to such appointment, with such receivers having all the usual powers and duties of receivers in similar cases, including the full power to maintain, sell, dispose and otherwise operate the Collateral upon such terms that may be approved by a court of competent jurisdiction.

        8.3     ENFORCEMENT OF RIGHTS. Upon, or at any time after, the occurrence and during the continuance of an Event of Default, Lender may enforce any and all rights and remedies under the Loan Documents, and all other documents delivered in connection therewith and against any or all Collateral and may pursue all rights and remedies available at Law or in equity. In addition to all the rights and remedies of a secured party under the UCC, Lender shall have the right, at any time and without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Borrower or any other person (all and each of which demand, advertisements and/or notices are hereby expressly waived to the extent permitted by law), to proceed immediately to collect, redeem, receive, appropriate, sell, or otherwise dispose of and deliver the Collateral or any part thereof in one or more lots at public or private sale or sales at Lender’s offices or elsewhere at such prices and on such terms as Lender may reasonably determine. The foregoing disposition(s) must be for cash or on credit or for future delivery without assumption of any credit risk by Lender, with Lender having the right to purchase all or any part of said Collateral so sold at any such sale or sales, public or private, free of any right or equity of redemption in Borrower, which right or equity is hereby expressly waived or released by Borrower. The proceeds of any such collection, redemption, recovery, receipt, appropriation, realization, sale or other disposition, after deducting all costs and expenses of every kind

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incurred relative thereto or incidental to the care, safekeeping or otherwise of any and all Collateral or in any way relating to the rights of Lender hereunder (including, without limitation, reasonable attorneys’ fees and legal expenses, including, without limitation, a reasonable estimate of the allocated cost of Lender’s in house counsel and legal staff) shall be applied first to the satisfaction of the Obligations (in such order as Lender may elect and whether or not due) and then to the payment of any amounts required by applicable law, including Section 9610 of the UCC. Borrower shall be liable to Lender for the payment on demand of all such costs and expenses, together with interest at the default rate set forth in the Note, together with any reasonable attorneys’ fees if placed with an attorney for collection or enforcement. Borrower agrees that thirty (30) days’ prior notice by Lender of the date after which a private sale may take place or a public auction may be held is reasonable notification of such matters and shall be deemed commercially reasonable under the UCC.

8.4    RIGHTS AND REMEDIES NON-EXCLUSIVE. In addition to the specific rights and remedies hereinabove mentioned, Lender shall have the right to avail itself of any other rights or remedies to which it may be entitled, at Law or in equity, including, but not limited to, the right to have a receiver appointed over Borrower and/or its assets, the right to realize upon any or all of its security, and to do so in any order. Furthermore, the rights and remedies set forth above are not exclusive, and Lender may avail itself of any individual right or remedy set forth in this Agreement, or available at Law or in equity, without utilizing any other right or remedy.

SECTION 9.

GENERAL CONDITIONS AND MISCELLANEOUS

9.1. NONLIABILITY OF LENDER. Borrower acknowledges and agrees that by accepting or approving anything required to be observed, performed, fulfilled, or given to Lender pursuant to this Agreement or the other Loan Documents, including any certificate, Financial Statement, appraisal or insurance policy, Lender shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision, or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or representation to anyone with respect thereto by Lender.

9.2. NO THIRD PARTIES BENEFITTED. This Agreement is made for the purpose of defining and setting forth certain obligations, rights, and duties of Borrower and Lender in connection with the Loan. It shall be deemed a supplement to each Note and the other Loan Documents, and shall not be construed as a modification of any Note or other Loan Documents, except as provided herein. It is made for the sole protection of Borrower and Lender, and Lender’s successors and assigns. No other person shall have any rights of any nature hereunder or by reason hereof or the right to rely hereon.

9.3. TIME IS OF THE ESSENCE. Time is of the essence of this Agreement and of each and every provision hereof. The waiver by Lender of any breach hereof shall not be deemed, nor shall the same constitute, a waiver of any subsequent breach or breaches.

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9.4. NOTICES. All notices, requests, demands, directions, and other communications provided for hereunder and under any other Loan Document (a “Notice”), must be in writing and must be mailed, personally delivered (including by overnight service such as FedEx), or sent by electronic mail (provided that any notice of either (i) an event or circumstance which, with notice and the passage of time would become an Event of Default if not cured, or (ii) an Event of Default or the exercise of remedies in respect thereof, shall not be given via electronic mail) to the appropriate party at its respective address set forth below or, as to any party, at any other address as may be designated by it in a written notice sent to the other parties in accordance with this Section.

Any notice given by mail shall be given by certified mail, and shall be deemed given only upon confirmation of actual delivery (or upon failure by the addressee to accept such delivery). Any notice by personal delivery shall be deemed to have occurred upon confirmation of delivery to the applicable address specified below. Any notice by electronic mail shall be deemed to have occurred upon confirmation of delivery

Such notices will be given to the following:

To Lender:        WESTERN ALLIANCE BANK

                2701 East Camelback Road, Suite 110

                Phoenix, Arizona 85016

                Attention: Seth Davis, Senior Director

                Email: sdavis@westernalliancebank.com

            WESTERN ALLIANCE BANK

                2701 East Camelback Road, Suite 110

                Phoenix, Arizona 85016

                Attention: docs@westernalliancebank.com

                and notefinance@westernalliancebank.com

    To Borrower:        TERRA MORTGAGE PORTFOLIO II, LLC

    c/o Terra Capital Partners, LLC

    550 Fifth Avenue, Sixth Floor

    New York, NY 10036

    Attention: Vik Uppal and Greg Pinkus

    Email: vuppal@tcp-us.com and gpinkus@tcp-us.com

    With a copy to:    TERRA CAPITAL PARTNERS, LLC

    550 Fifth Avenue, Sixth Floor

    New York, NY 10036

    Attention: Chief Legal Officer

    Email: dstern@tcp-us.com

9.5. USA Patriot Act Notice. Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account or obtains

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a loan.  Lender will ask for Borrower’s legal name, address, tax ID number or social security number and other identifying information.  Lender may also ask for additional information or documentation or take other actions reasonably necessary to verify the identity of Borrower, Guarantor or other related persons.

9.6. INDEMNITY BY BORROWER. Borrower hereby indemnifies and agrees to hold Lender and its directors, officers, agents, attorneys, and employees (individually and collectively, the “Indemnitee(s)”) harmless from and against:

9.6.1 Any and all claims, demands, actions, or causes of action that are asserted against any Indemnitee by any Collateral Loan Obligor if the claim, demand, action, or cause of action, directly or indirectly, relates to a claim, demand, action, or cause of action that the Person has or asserts against Borrower;

9.6.2 Any and all claims, demands, actions or causes of action that are incurred by an Indemnitee as a result of a breach of Section 3.9 of this Agreement; and

9.6.3 Any and all claims, liabilities, losses, costs, or expenses (including court costs and reasonable attorneys’ fees) that any Indemnitee suffers or incurs as a result of the assertion of any claim, demand, action, or cause of action specified in this Section 9.6.

9.7. CHANGE IN LAWS. In the event of the enactment, after the date of this Agreement, of any Laws: (a) deducting from the value of property for the purpose of taxation any lien or security interest thereon; (b) imposing upon Lender the payment of the whole or any part of the taxes or assessments or charges or liens herein required to be paid by Borrower; (c) changing in any way the Laws relating to the taxation of deeds of trust or mortgages or security agreements, or debts secured by deeds of trust or mortgages or security agreements, or the interest of the mortgagee or secured party in the property covered thereby (not including income taxes); or (d) changing the manner of collection of such taxes; then, to the extent any of the foregoing may affect the Collateral or the indebtedness secured thereby or Lender, then, and in any such event, Borrower, upon demand by Lender, shall pay such taxes, assessments, charges, or liens, or reimburse Lender therefor. If Borrower shall be prohibited from paying such tax or from reimbursing Lender for the amount thereof, Borrower shall execute a modification to the Loan Documents and the Note, which modification shall increase the interest rate payable pursuant to the Note so as to permit Lender to maintain its yield as if such tax had not been imposed. If Borrower shall be prohibited from executing the above-referenced modifications, Lender may, in Lender’s sole discretion, declare the principal of all amounts disbursed and owing under the Note, this Agreement, and the other Loan Documents (including all obligations secured by the Loan Documents) and all other indebtedness of Borrower to Lender, together with interest thereon, to be immediately due and payable, regardless of any other specified maturity or due date.

9.8. NONRESPONSIBILITY. Lender shall in no way be liable for any acts or omissions of Borrower or Borrower’s agents or employees.

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9.9. BINDING EFFECTS; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower may not assign its rights hereunder or any interest herein without the prior written consent of Lender. Lender shall have the right, without the written consent of Borrower, to assign its rights under this Agreement and to grant participations in the Loan to others, but all waivers or abridgements of Borrower’s obligations that may be granted from time to time by Lender shall be binding upon such assignees or participants, but any such waivers or agreements, to be effective, must be in writing and signed by Lender; provided, however, that Lender shall not assign any rights under this agreement or grant any participations in the Loan to any other lender without the consent of Borrower, which consent shall not be unreasonably withheld or delayed; provided that (a) Borrower will not have a right of consent to any lender receiving an assignment or participation (except as to a Specified Lender) if an Event of Default is existing at the time Lender enters into an agreement to assign or participate an interest in the Loan, and (b) Borrower will be deemed to be reasonable for purposes hereof if Borrower withholds consent to any Specified Lender. In that regard, Borrower agrees that Lender may disclose to each prospective and actual transferee or participant any and all documents relating to the Loan and Borrower. Borrower shall, promptly upon demand, provide Lender or any such purchaser or participant (other than a Specified Lender), on a confidential basis, one or more written statements confirming Borrower’s indebtedness to Lender and all obligations in connection with the Loan, including the existence of any default thereunder.

9.10. EXECUTION IN COUNTERPARTS. This Agreement and any other Loan Documents, except the Note, may be executed in any number of counterparts, and any party hereto or thereto may execute any counterpart, each of which, when executed and delivered, will be deemed to be an original, and all of which counterparts of this Agreement or any other Loan Document, as the case may be, taken together will be deemed to be but one and the same instrument. The execution of this Agreement or any other Loan Document by any party or parties hereto or thereto will not become effective until counterparts hereof or thereof, as the case may be, have been executed by all the parties hereto or thereto. Delivery of an executed counterpart of a signature page of this Agreement in a Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Agreement. The parties agree that this Agreement, any addendum or amendment hereto or any other document necessary for the consummation of the transactions contemplated by this Agreement may be accepted, executed or agreed to through the use of an electronic signature in accordance with the E-Sign, UETA and any applicable state law, but only, if “wet” signatures are provided within ten (10) Business Days thereof. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service providers with appropriate document access tracking, electronic signature tracking and document retention as may be approved by Lender in its sole discretion.

9.11. INTEGRATION; AMENDMENTS; CONSENTS. This Agreement, together with the documents referred to herein constitutes the entire agreement of the parties touching upon the subject matter hereof, and supersedes any prior negotiations or agreements on such subject matter. No amendment, modification, or supplement of any provision of this

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Agreement or any of the other Loan Documents shall be effective unless in writing, signed by Lender and Borrower; and no waiver of any of Borrower’s obligations under this Agreement or any of the other Loan Documents or consent to any departure by Borrower therefrom shall be effective unless in writing, signed by Lender, and then only in the specific instance and for the specific purpose given.

9.12. NEUTRAL INTERPRETATION. This Agreement is the product of the negotiations between the parties, and in the interpretation and/or enforcement hereof is not to be interpreted more strongly in favor of one party or the other.

9.13. COSTS, EXPENSES, AND TAXES. In addition to other amounts expressly for Borrower’s account pursuant to the other provisions of this Agreement (but without duplication), Borrower shall pay to Lender, on demand:

9.13.11 All reasonable attorneys’ fees and outofpocket expenses incurred by Lender in connection with the negotiation, preparation, execution and delivery of this Agreement and any other Loan Document;

9.13.12 All out-of-pocket costs and expenses of Lender in connection with the enforcement of this Agreement and any other Loan Document and any matter related thereto, including the outofpocket expenses and reasonable attorney’s fees of any legal counsel, independent public accountants, and other outside experts reasonably retained by Lender and including all costs and expenses of enforcing any judgment or prosecuting any appeal of any judgment, order or award arising out of or in any way related to the Loan, this Agreement, or the Loan Documents (except to the extent due to the willful misconduct, whether by act or omission, of Lender or its Affiliates); and

9.13.13 All out-of-pocket costs, expenses, fees, premiums, and other charges required to perfect Lender’s Collateral pursuant to the Loan Documents or reconvey such Collateral to Borrower, including, but not limited to, recording fees, filing fees, release or reconveyance fees.

All sums paid or expended by Lender under the terms of this Agreement shall be considered to be, and shall be, a part of the Loan. All such sums, together with all amounts to be paid by Borrower pursuant to this Agreement, shall bear interest from the date of expenditure at the rate provided in the Note, shall be secured by the Loan Documents, and shall be immediately due and payable by Borrower upon demand.

9.14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties of Borrower contained herein or in any and all other Loan Documents shall survive the making of the Loan and the execution and delivery of the Note, and are material and have been or will be relied upon by Lender, notwithstanding any investigation made by Lender or on behalf of Lender. For the purpose of this Agreement, all statements contained in any certificate, agreement, financial statement, appraisal or other writing delivered by or on behalf of Borrower pursuant hereto or to any other Loan Document or in connection with the transactions contemplated hereby or thereby shall be deemed to be

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representations and warranties of Borrower contained herein or in the other Loan Documents, as the case may be.

9.15. FURTHER ASSURANCES. Borrower shall, at its sole expense and without expense to Lender, do, execute, and deliver such further acts and documents as Lender from time to time may reasonably require for the purpose of assuring and confirming unto Lender the rights hereby created or intended, now or hereafter so to be, or for carrying out the intention or facilitating the performance of the terms of any Loan Document, or for assuring the validity of any security interest.

9.16. GOVERNING LAW; JURISDICTION.

9.16.1 The Loan shall be deemed to have been made in Arizona, and the Loan Documents shall be governed by and construed and enforced in accordance with the Laws of the State of Arizona. Notwithstanding the foregoing, the laws of the jurisdiction in which the Collateral for the Loan is located shall apply to the creation and perfection of security interests therein and to the exercise of remedies by Lender that pertain or concern such Collateral, including, without limitation, the foreclosure of the security interests and liens granted in such Collateral.

9.16.2 Borrower irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Lender or any affiliate of the Lender in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of Arizona sitting in Maricopa County, and of the United States District Court of the District of Arizona, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such Arizona State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction.

9.17. SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid shall be inoperative, unenforceable, or invalid without affecting the remaining provisions, and to this end the provisions of all Loan Documents are declared to be severable.

9.18. JOINT AND SEVERAL OBLIGATIONS. If this Agreement is executed by more than one Person as Borrower, the obligations of each of such Persons hereunder shall be joint and several obligations.

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9.19. JURY WAIVER. BORROWER WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND LENDER MAY BE PARTIES, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO, THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTION OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER, AND BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.

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Borrower has initialed this Section 9.19 to further indicate its awareness and acceptance of each and every provision hereof.

_______GP________

Borrower’s Initials

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to be executed on the date first above written.

BORROWER:

TERRA MORTGAGE PORTFOLIO II, LLC,

a Delaware limited liability company

By:    /s/ Greg Pinkus______________

Name:    Greg Pinkus

Its:    Authorized Signatory

LENDER:

WESTERN ALLIANCE BANK,

an Arizona corporation

By:     /s/ Seth Davis_______________

Name:    Seth Davis

Title:     Senior Director

4085694.5 | 100775-0196

[Signature Page to Business Loan And Security Agreement]

Schedule 1

Collateral Loan Document Package - Real Property

The following instruments and documents, in form and content required by Lender in its sole opinion and judgment, shall be included in and collectively constitute a Collateral Loan Document Package as provided and defined in the Agreement:

1.    The original Collateral Loan Note in favor of Borrower executed by Collateral Loan Obligor;

2.    An original Allonge To Promissory Note, executed by Borrower, to be attached to the Collateral Loan Note at Lender’s option;

3.    An original Assignment of Mortgage executed and acknowledged by Borrower, if required by Lender;

4.    True and complete copy of all other Collateral Loan Documents executed by a Collateral Loan Obligor to and in favor of Borrower, including, without limitation:

a.    Loan Agreement;

b.    Mortgage (which must include an environmental indemnity);

c.    Security Agreement (if any separate from the Deed of Trust);

d.     Environmental Agreement, if any;

e.    Agreement Regarding Insurance Requirements and Certificate of Insurance;

f.    Fixture Filing;

g.    Financing statement(s), if any; and

h.    Certified organization authorization to borrow (corporate resolution, partnership authorization, and authorization of members of limited liability company).

5.    True and complete copies of all relevant underwriting documentation required or otherwise obtained by Borrower, including, without limitation:

a.    Collateral Loan Obligor’s application for the Collateral Loan and evidence of Borrower’s approval of the Collateral Loan, signed by the requisite officers or representatives of Borrower authorized to approve the same;

b.    Appraisal;

4085694.5 | 100775-0196     Schedule 1-1

c.    Copies of the certificates or other acceptable evidence of fire, casualty and flood (if applicable) insurance;

d.    Title policy and endorsements, including mechanic’s lien coverage, to the real property;

e.    Updated preliminary title report and copies of all documents described in all reported exceptions;

f.    UCC search of existing financing statements and liens;

g.    Certified copies of loan escrow instructions and recording instructions to title company;

h.    Organizational documents (articles of incorporation, articles of organization, bylaws, operating agreement, current certificate of good standing unless Collateral Loan Obligor formed within 30 days of closing the Collateral Loan);

i.    Financial statements and credit reports presenting the financial condition and credit history of the Collateral Loan Obligor;

j.    Flood search and flood insurance, if applicable for the real property; and

k.    OFAC searches for each Collateral Loan Obligor.

4085694.5 | 100775-0196     Schedule 1-2

Schedule 2

Ineligible Receivables

The following shall be deemed Ineligible Receivables, subject to Section 4.6.3:

(a) Any Collateral Loan that is not secured by a Collateral Mortgage with a first (1st) lien priority on underlying real property collateral that, at the time of closing of such Collateral Loan, is located within one of the top 100 metropolitan statistical areas in the United States of America (this paragraph will cease to apply to a Collateral Loan accepted as an Eligible Receivable by Lender);.

(b) Any Collateral Loan which has incomplete loan documentation, or for which any loan documentation is not fully executed, in any material respect, unless such deficiency is corrected within five (5) Business Days after notice from Lender;

(c) Any Collateral Loan for which the Collateral Loan Documents do not provide for the creation of a perfected first priority lien upon and/or security interest in all Underlying Collateral (subject to the exception to the representations and warranty contained in Section 5.3.10); provided that any lien or encumbrance first noticed to Borrower after a Collateral Loan is accepted as an Eligible Receivable by Lender shall not render such Collateral Loan an Ineligible Receivable under this paragraph if, within 60 days after such lien or encumbrance is so noticed to Borrower (i) such lien or claim has been bonded over to the reasonable satisfaction of Lender, or (ii) in the event the State which the Underlying Collateral is located does not provide for the bonding of such lien or claim, a cash escrow or other deposit or arrangement in respect of such liens or encumbrances has been established to Lender’s reasonable satisfaction;

(d) All conditions to the funding of the portion of any Collateral Loan required to be funded at the closing of such Collateral Loan shall have been satisfied in accordance with the provisions of the Collateral Loan Documents and either (i) the Collateral Loan shall be fully funded at such closing, or (ii) the Loan Proceeds shall be used to fund the Collateral Loan, to the extent required at such Collateral Loan’s closing (for avoidance of doubt, this paragraph shall not apply to advances under Collateral Loans pursuant to which Borrower is obligated to make advances after such closing).

(e) Any Collateral Loan for which any levy has been made by a creditor of Borrower or Guarantor on any Underlying Collateral therefor if such levy has not been released or bonded or (if bonding is not available in the applicable State) otherwise addressed to the reasonable satisfaction of Lender within sixty (60) days of its creation;

(f) Any Collateral Loan accepted by Lender as an Eligible Receivable which has been included in the Borrowing Base for longer than the Dwell Time for such Collateral Loan after the date such Eligible Receivable was first included in the Borrowing Base, unless an extension of such time is authorized in writing by Lender;

4085694.5 | 100775-0196     Schedule 2-1

(g) Any Collateral Loan as to which any payment of principal or interest at the non-default rate or any other material monetary payment is more than sixty (60) days past due; provided, that if Borrower or any Collateral Loan Obligor applies amounts in any reserve or escrow account to pay any such principal or interest within such 60-day period, then such Collateral Loan shall not be an Ineligible Receivable (unless some other payment of principal or interest at the non-default rate is more than sixty (60) days past due and is not similarly paid from a reserve or escrow account)(for avoidance of doubt, for purposes of this paragraph there shall be disregarded obligations that, pursuant to the definition of Minor Modifications, are deemed to constitute nonmaterial monetary obligations) ;

(h) Any Collateral Loan that is in default, subject to a forbearance, or is otherwise non-performing (unless the default, forbearance or non-performance is a required payment default of less than sixty (60) days) for any reason); provided that this paragraph will cease to apply to a Collateral Loan once such Collateral Loan is accepted by Lender as an Eligible Receivable (it being the intent of the parties that in such case paragraph (g) of this Schedule 2 will apply);

(i) Any Collateral Loan with a maturity date greater than five (5) years from the date of its origination;

(j) Any Collateral Loan, or with respect to the Collateral Mortgage securing such Collateral Loan, where judicial or non-judicial foreclosure proceedings have been commenced; or

(k) Any Collateral Loan which is deemed ineligible by Lender in its sole and absolute discretion; provided, however, that this paragraph will cease to apply to a Collateral Loan once such Collateral Loan is accepted by Lender as an Eligible Receivable (for avoidance of doubt, it is the intent of the parties that Section 4.6.3 will apply to Collateral Loans once accepted by Lender as Eligible Receivables).

4085694.5 | 100775-0196     Schedule 2-2

Schedule 6.5

Financial Statements and Reports

6.5.1    Within thirty (30) days after any litigation is instituted against Borrower, a copy of the applicable complaint and such other information as Lender may reasonably request.;

6.5.2    Within five (5) Business Days after the occurrence of any Event of Default or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, a report regarding such Event of Default or event setting forth details and describing any action which Borrower proposes to take with respect thereto, signed by the general partner of Borrower;

6.5.3    Any change in name of Borrower or use of any trade names or trade styles;

6.5.4    Borrower shall provide to Lender, no later than sixty (60) days following the end of each calendar quarter ending March 31, June 30, and September 30, commencing with the calendar quarter ending on March 31, 2021, complete and accurate interim Financial Statements representing the financial condition of Borrower as of the end of the immediately preceding calendar quarter, including balance sheets, income statements, sources and uses of funds, and such other supplemental reports and schedules as Lender shall require, in its reasonable discretion. All such interim Financial Statements may be prepared by Borrower and shall contain a certification signed by any individual providing a Financial Statement or by one or more authorized representatives of any corporation, partnership, limited liability company or other entity providing a Financial Statement, certifying to the completeness and accuracy of all information, without exception. All such interim Financial Statements shall be prepared and presented in accordance with GAAP, consistently applied, or in such other form and content as Lender may permit, in its sole and absolute discretion;

6.5.5    Borrower shall provide to Lender, by no later than one hundred twenty (120) days following the end of each calendar year, commencing with the calendar year ending on December 31, 2021, complete and accurate annual Financial Statements representing the financial condition of Borrower and Guarantor as of the end of the immediately preceding calendar year, including balance sheets, income statements, sources and uses of funds, and such other supplemental reports and schedules as Lender shall require, in its reasonable discretion. All such Financial Statements shall be prepared by an independent certified public accountant reasonably acceptable to Lender (except in the case of Borrower such financial statements may be prepared by Borrower), and in the case of Guarantor, such Financial Statements shall be audited. Such Financial Statements shall contain a certification signed by any individual providing a Financial Statement or by one or more authorized representatives of any corporation, partnership, limited liability company or other entity providing a Financial Statement, certifying to the best of her or his knowledge to the completeness and accuracy of all information in accordance with GAAP, without exception. All such Financial Statements shall be prepared and presented in accordance with GAAP, consistently applied (subject to modifications thereto that

4085694.5 | 100775-0196     Schedule 6.5-1

are mandated by SEC requirements applicable to Guarantor), or in such other form and content as Lender may permit, in its sole and absolute discretion;

6.5.6    Concurrently with the delivery of the Financial Statements set forth in Section 6.5.4 and Sections 6.5.4 above, Borrower shall provide to Lender a compliance certificate in form as set for in Exhibit “G” certifying compliance with the financial covenants set forth in Schedule 6.18 of this Agreement;

6.5.7    As soon as available, and in any event no later than thirty (30) days following the end of each calendar month, Borrower shall deliver to Lender a monthly Borrowing Base Certificate, which Borrowing Base Certificate shall be duly certified by the authorized representative of Borrower as to the completeness and accuracy of all information contained therein, without exception, and which Borrowing Base Certificate shall be accompanied by any and all other supporting documentation reasonably requested by Lender;

6.5.8    As soon as available, and in any event no later than thirty (30) days following the end of each calendar quarter, Borrower shall deliver to Lender a quarterly portfolio loan tape covering all Borrower Loans, and which shall be accompanied by any and all other supporting documentation reasonably requested by Lender;

6.5.9    Promptly upon receipt thereof, one (1) copy of any report submitted to Borrower by independent accountants engaged in connection with any annual, interim or special audit made by them of the books of Borrower;

6.5.10    Within five (5) Business Days after (i) any contact from any Governmental Agency concerning any environmental protection Laws, including any notice of any proceeding or inquiry with respect to the presence of any hazardous materials on the Underlying Collateral or any Loan Collateral or the migration thereof from or to other property, (ii) any and all claims made by any third party against or relating to said property concerning any loss or injury resulting from hazardous materials, or (iii) Borrower’s discovery of any occurrence or condition on any property adjoining or in the vicinity of said property that could cause said property, or any part thereof, to be subject to any restrictions on the ownership, occupancy, transferability, or loss of the property under any Law, Borrower shall deliver to Lender a report regarding such contact and setting forth in detail and describing any action which Borrower proposes to take with respect thereto, signed by an officer of Borrower;

6.5.11    Within ten (10) Business Days following Lender’s written request, Borrower and/or Guarantor will also deliver to Lender such additional financial statements and information (financial or otherwise) regarding Borrower and/or Guarantor as Lender may reasonably request from time to time. Such information must be dated no earlier than ninety (90) days prior to date provided.

4085694.5 | 100775-0196     Schedule 6.5-2

Schedule 6.18

Financial Covenants

Guarantor shall at all times remain in compliance with the financial and performance-related covenants set forth below, and Borrower shall, in connection therewith, provide Lender a Compliance Certificate in the form of Exhibit “G” attached hereto concurrently with the delivery of the Financial Statements set forth in Sections 6.5.4 and 6.5.5 of Schedule 6.5 herein:

6.18.1    TOTAL NET WORTH. At all times during the term of the Loan, Borrower shall at all times cause Guarantor to maintain minimum Total Net Worth of $250,000,000.00, measured on a quarterly basis as of March 31, June 30, September 30 and December 31 of each calendar year during the term of the Loan, commencing on March 31, 2021, based upon the Financial Statements delivered by Borrower to Lender in accordance with Sections 6.5.4 and 6.5.5 on Schedule 6.5. Borrower shall deliver to Lender any other documentation and evidence as shall be satisfactory to Lender, in Lender’s reasonable opinion and judgment, evidencing Guarantor’s compliance with the minimum requirement set forth in this Section 6.18.1.

6.18.2    MINIMUM PROFITABILITY. At all times during the term of the Loan, Borrower shall cause Guarantor to maintain an Operating Profit of not less than $2,000,000.00 for each calendar quarter during the term of the Loan, measured on a trailing quarterly basis as of March 31, June 30, September 30 and December 31 of each calendar year, commencing on March 31, 2021, for the immediately preceding three (3) consecutive calendar month period of time, based upon the Financial Statements delivered by Borrower to Lender in accordance with Sections 6.5.4 and 6.5.5 on Schedule 6.5. Borrower shall deliver to Lender any other documentation and evidence as shall be satisfactory to Lender, in Lender’s reasonable judgment, evidencing Guarantor’s compliance with the minimum requirement set forth in this Section 6.18.2.

6.18.3    MAXIMUM GLOBAL LEVERAGE. At all times during the term of the Loan, Borrower shall maintain a ratio of Global Debt to Total Net Worth of not more than 2.50 to 1.00, measured on a quarterly basis as of March 31, June 30, September 30 and December 31 of each calendar year during the term of the Loan, commencing on March 31, 2021.

    The following defined terms shall apply to this Schedule 6.18, all as determined in accordance with GAAP:

    “Global Debt” means the sum of short term debt plus long term debt plus fixed payment obligations of Borrower and Guarantor.

    “Gross Income” means, for any given time, but only to the extent in accordance with GAAP, any and all revenues, income, receipts and money received by or on behalf of, and moneys due to, the Person whose Gross Income is being measured, solely from such Person’s use, operation, management and/or conduct of its businesses, including, without limitation, (a) gross revenues derived from such Person’s operation and possession of any real property, and (b) proceeds derived from (1) accounts receivable, (2) inventory and other tangible and intangible

4085694.5 | 100775-0196     Schedule 6.5-1

property and (3) contract rights and other rights and assets now or hereafter owned by such Person in connection with its business.

    “Operating Profit” means, at any given time, the amount by which Gross Income exceeds Operating Expenses.

    “Operating Expenses” means, at any given time, but only to the extent in accordance with GAAP, the sum of the current expenses of operation, maintenance and conducting of the businesses of the Person whose Operating Expenses are being measured, including, without limitation, wages, salaries, benefits and bonuses to personnel, the cost of goods, materials and supplies used for current business operations and maintenance, security costs, utility expenses, all taxes and assessments, including, without limitation, bond assessments, insurance premiums, trash removal, advertising, insurance premiums, rental payments for real or personal property (other than capital lease payments), and charges for the accumulation of appropriate reserves for current expenses that are not recurrent monthly but may reasonably be expected to be incurred in accordance with GAAP; provided, however, that the following shall be excluded from Operating Expenses: (i) depreciation and other non-cash charges, and (ii) fees payable to Affiliates pursuant to the Amended and Restated Management Agreement, dated February 8, 2018, between Guarantor and Terra REIT Advisors LLC, which has been disclosed to Lender and has been publicly filed with the Securities and Exchange Commission.

    “Total Net Worth” means, with respect to Guarantor on any date of determination, but only to the extent consistent with GAAP: (A) the sum of all amounts that would be included under capital or shareholder’s equity (or any like caption) on a balance sheet of Guarantor and its consolidated subsidiaries, if any, at such date, minus (B) the sum of (i) amounts owing to Guarantor from any Affiliate thereof not already eliminated in consolidation, or from officers, employees, partners, members, directors, shareholders or other Persons similarly affiliated with Guarantor or any Affiliate thereof that were not already eliminated in consolidation, (ii) intangible assets of Guarantor and its consolidated subsidiaries, if any, and (iii) prepaid taxes and/or expenses, all on or as of such date and all without duplication as determined in accordance with GAAP.

4085694.5 | 100775-0196     Schedule 6.5-2

Schedule 9.9

1.Fortress

2.Stabilis

3.Lone Star

4.Mack

5.Blackstone

6.Oaktree

7.Rialto

8.KKR

9.Starwood

10.Apollo

11.iStar

12.Square Mile

13.Vornado

14.Cerberus

15.Colony

16.Angelo Gordon

17.Brookfield

18.SL Green

19.LNR

4085694.5 | 100775-0196     Schedule 6.5-1

EXHIBIT A

ALLONGE AND ENDORSEMENT

This Allonge and Endorsement is attached to and made a physical part of that certain Promissory Note dated ___________, ____, in the principal amount of ______________________________ ($___________), made by ______________, __________________ (“Maker”) in favor of _______________________________________ (the “Note”). The undersigned is the holder and owner of the Note.

The Note is hereby endorsed as follows:

“Pay to the order of WESTERN ALLIANCE BANK, an Arizona corporation, pursuant to the Business Loan and Security Agreement (Revolving Line of Credit), dated as of March 12, 2021 as the same may be modified, amended or supplemented from time to time.”

Dated: ___________

TERRA MORTGAGE PORTFOLIO II, LLC,

a Delaware limited liability company

By:    ______________________________

Name:    Greg Pinkus

Its:    Authorized Signatory

4085694.5 | 100775-0196     Exhibit A-1

EXHIBIT B

ASSIGNMENT OF MORTGAGE [DEED OF TRUST]

[See attached]

RECORDING REQUESTED BY

AND WHEN RECORDED, MAIL TO:

WESTERN ALLIANCE BANK

2701 East Camelback Road, Suite 110

Phoenix, Arizona 85016

Attention: Seth Davis, Senior Director

Assessor’s Parcel No(s).: _____________

COLLATERAL ASSIGNMENT OF MORTGAGE [DEED OF TRUST] AND

RELATED LOAN DOCUMENTS

THIS COLLATERAL ASSIGNMENT OF MORTGAGE [DEED OF TRUST1] AND RELATED LOAN DOCUMENTS (this “Assignment”) is made as of ___________, ____, by TERRA MORTGAGE PORTFOLIO II, LLC, a Delaware limited liability company (“Assignor” or “Borrower”), to WESTERN ALLIANCE BANK, an Arizona corporation (“Assignee”).

1.    Granting Clause. For value received, Assignor hereby grants, conveys, assigns and transfers to Assignee, for security purposes only, all of Assignor’s right, title and interest in and to all beneficial interest under that certain mortgage dated ___________, ____, by _______________________, as grantor (“Collateral Obligor”), [to _____________, as trustee,] for the benefit of Assignor, as beneficiary, which was recorded on ___________, ____, as Instrument No. ___________, in the Official Records of __________ County, ____________, and any and all amendments, modifications, renewals, supplements, extension or revisions thereof (the “Mortgage/Deed of Trust”), together with the promissory note and other agreements, instruments and documents relating thereto (collectively referred to hereinafter as the “Pledged Documents”).

2.    Secured Obligations. This Assignment is given for the purpose of securing payment and performance of the obligations of Assignor under that certain Promissory Note executed by Assignor, among others, and payable to the order of Assignee dated as of March 12, 2021 in the maximum stated principal sum of Seventy-Five Million and No/100 Dollars ($75,000,000.00) (the “Note”), that certain Business Loan and Security Agreement (Revolving Line of Credit) executed by Assignor and Assignee dated March 12, 2021 (“Loan Agreement”),

1 Revise if underlying security instrument is deed of trust.

4085694.5 | 100775-0196     Exhibit B-1

and all other agreements, instruments and documents relating thereto (collectively referred to hereinafter as the “Loan Documents”).

3.    Enforcement. Assignee may exercise its rights under the Loan Agreement, Security Agreement and this Assignment in accordance with their terms, including, without limitation, the right to succeed to all of Assignor’s right, title and interest in and to all beneficial interest under the Mortgage/Deed of Trust and the Pledged Documents.

4.    Property Encumbered. The real property encumbered by the Mortgage/Deed of Trust is described in Exhibit A attached hereto and incorporated herein by this reference.

5.    Amendments. This Assignment may not be amended, modified or waived except with the written consent of Assignor and Assignee.

6.    Termination. This Assignment shall terminate upon (A) (i) the indefeasible payment in full of the indebtedness owing to Assignee under the Note, the Loan Agreement and the Loan Documents, and (ii) the termination of any and all obligations of Assignee under the Note, the Loan Agreement or any Loan Documents to make any advances or disbursements of loan proceeds or other amounts to Assignor; or (B) the termination of the Security Agreement (or earlier to the extent of any partial or full release or reconveyance of this Assignment), unless prior to the termination of the Security Agreement, Assignee has succeeded to beneficiary’s interest under the Mortgage/Deed of Trust. Upon request by Borrower, Assignee agrees to promptly confirm termination of this Assignment and to take such steps (at Borrower’s expense and in a commercially reasonable period of time) as Borrower may reasonably request to terminate this Assignment of record.

7.    Attorneys’ Fees. In the event of any dispute or litigation concerning the enforcement or validity of this Assignment, the losing party shall pay all charges, costs and expenses (including reasonable attorneys’ fees) incurred by the prevailing party whether or not any action or proceeding is brought relative to such dispute and whether or not such litigation is prosecuted to judgment, and including post-judgment fees and costs.

8.    Successors and Assigns. The terms of this Assignment shall bind and inure to the benefit of the respective successors and assigns of the parties hereto.

[SIGNATURE PAGE FOLLOWS]

4085694.5 | 100775-0196     Exhibit B-2

IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

ASSIGNOR:

TERRA MORTGAGE PORTFOLIO II, LLC,

a Delaware limited liability company

By:    ______________________________

Name:    Greg Pinkus

Its:    Authorized Signatory

4085694.5 | 100775-0196     Exhibit B-3

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

State of	)
County of _______________________	)

On ____________________, before me, _________________________________, a Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of Arizona that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature

4085694.5 | 100775-0196     Exhibit B-4

EXHIBIT C

REQUEST FOR ADVANCE AND BORROWING BASE CERTIFICATE

[See attached]

4085694.5 | 100775-0196     Exhibit C-1

EXHIBIT D

SCHEDULE OF INITIAL LOAN COLLATERAL

[See attached]

4085694.5 | 100775-0196     Exhibit D-1

EXHIBIT E

ADVANCE RATE SCHEDULE

Notwithstanding the foregoing, Advances are subject to the following additional limitations:

1.Advances on any single Collateral Loan shall not exceed $25,000,000.00. On a case by case basis, Lender may approve advances greater than $25,000,000.00 at its sole and absolute discretion, and subject to additional recourse being available to Lender for proceeds in excess of $25,000,000.00;

2.The aggregate amount of all Advances on Collateral Loans secured by Underlying Collateral located in the New York City metropolitan areas shall not exceed 25% of the Credit Limit.

3.In the event any Collateral Loan Obligor, including any affiliate thereof, has two (2) or more Collateral Loans that otherwise qualify as Eligible Receivables, the aggregate Advances to Borrower for such Collateral Loans shall not exceed, in the aggregate, an amount equal to twenty-five percent (25%) of the Credit Limit;

4085694.5 | 100775-0196     Exhibit E-1

EXHIBIT F

FORM OF POWER OF ATTORNEY

SPECIAL POWER OF ATTORNEY

    TERRA MORTGAGE PORTFOLIO II, LLC, a Delaware limited liability company (the “Borrower”) have entered into that certain Business Loan and Security Agreement (Revolving Line of Credit) dated as of March 12, 2021 as the same may be amended or supplemented from time to time (the “Loan Agreement”), by and between Borrower and WESTERN ALLIANCE BANK, an Arizona corporation. All capitalized terms not defined herein shall have the meanings given them in the Loan Agreement.

    Borrower hereby irrevocably constitute and appoint Western Alliance Bank and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact (“Attorney in Fact”) with full irrevocable power and authority in the place and stead of Borrower and in the name of Borrower or in its own name, exercisable by the Attorney in Fact in each case, for the purpose of carrying out the terms of the Loan Agreement, but only following and during the continuance of an Event of Default under the Loan Agreement, including without limitation, to take any and all appropriate action and execute any and all documents and instruments which may be reasonably necessary or desirable to accomplish the purposes of the Loan Agreement, to file such financing statement or statements relating to the Collateral Loans as Attorney in Fact at its option may deem appropriate, and, without limiting the generality of the foregoing, Borrower hereby give Attorney in Fact the power and right, on behalf of Borrower, without assent by, but with notice to, Borrower, to do the following:

    in the name of Borrower, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any other Collateral Loans and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Attorney in Fact for the purpose of collecting any and all such moneys due with respect to any other Collateral Loans whenever payable;

    to pay or discharge taxes and Liens levied or placed on or against the Collateral Loans;

    to execute, in connection with any sale of Collateral Loans, any endorsements, assignments or other instruments of conveyance or transfer;

    (A) to direct any party liable for any payment under any Collateral Loans to make payment of any and all moneys due or to become due thereunder directly to Attorney in Fact or as Attorney in Fact shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral Loans; (C) to sign and endorse any invoices,

4085694.5 | 100775-0196     Exhibit F-1

assignments, verifications, notices and other documents in connection with any Collateral Loans; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral Loans or any proceeds thereof and to enforce any other right in respect of any Collateral Loans; (E) to defend any suit, action or proceeding brought against Borrower with respect to any Collateral Loans; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as Attorney in Fact may deem appropriate; (G) to send “goodbye” and “hello” letters on Borrower’s or subservicer’s behalf, and (H) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Collateral Loans as fully and completely as though Attorney in Fact were the absolute owner thereof for all purposes, and to do, at Attorney in Fact’s option and Borrower’s expense, at any time, and from time to time, all acts and things which Attorney in Fact deems necessary to protect, preserve or realize upon the Collateral Loans and Attorney in Fact’s interests therein and to effect the intent of the Loan Agreement, all as fully and effectively as Borrower might do.

    For value received, receipt of which is hereby acknowledged, Borrower has collaterally assigned and/or, and will in the future collaterally assign, to Western Alliance Bank certain Collateral Loans pursuant to the Loan Agreement and by such transactions that this Special Power of Attorney be coupled with an interest, and Borrower do hereby make and declare this Special Power of Attorney to be irrevocable by Borrower or otherwise, renouncing all right to revoke this Special Power of Attorney or to appoint any other person to perform any of the acts enumerated herein.

    Borrower does hereby ratify and confirm that, upon the occurrence and during the continuation of and Event of Default, the Attorney in Fact may exercise any power or authority granted hereunder, irrespective of whether or not a Default has occurred under the Loan Agreement. The rights and powers of Attorney in Fact hereunder are cumulative of all other rights, remedies, and recourse of Western Alliance Bank under the Loan Agreement.

4085694.5 | 100775-0196     Exhibit F-2

    The powers conferred on Attorney in Fact hereunder are solely to protect Attorney in Fact’s interests in the Collateral Loans and shall not impose any duty upon it to exercise any such powers. Attorney in Fact shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to Borrower for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct. Borrower hereby covenant and agree that it will indemnify, defend, and hold harmless the Attorney in Fact and its officers acting hereunder for, from and against any and all claims, demands, or causes of action, in any way associated with or related to the acts performed under this Special Power of Attorney, excluding any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses, and disbursements of any kind or nature whatsoever resulting, in whole or part, from the Attorney in Fact’s own gross negligence or willful misconduct. For purposes of A.R.S. § 14-5501.E, Borrower acknowledge that the power of attorney forms a part of a contract (being this Agreement) and is security for money or for the performance of a valuable act. Lender hereby discloses that it may exercise the power of attorney for Lender’s benefit, and such authority need not be exercised for Borrower’s best interest.

[Signature Page Follows]

4085694.5 | 100775-0196     Exhibit F-3

IN WITNESS WHEREOF, this instrument is executed by Borrower on this 12th day of March, 2021.

BORROWER:

TERRA MORTGAGE PORTFOLIO II, LLC,

a Delaware limited liability company

By:    ______________________________

Name:    Greg Pinkus

Its:    Authorized Signatory

[Borrower’s Signatures must be Notarized]

4085694.5 | 100775-0196     Exhibit F-4

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

State of	)
County of _______________________	)

On ____________________, before me, _________________________________, a Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of Arizona that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature    ___________________________

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

State of	)
County of _______________________	)

On ____________________, before me, _________________________________, a Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of Arizona that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature    ___________________________

4085694.5 | 100775-0196     Exhibit F-5

ACKNOWLEDGED BY

ATTORNEY-IN-FACT:

Western Alliance Bank, an Arizona corporation

By:
Name:	Glenn Smith
Title:	NF Operations Manager

By:
Name:	Cyndy Joseph
Title:	WHL Operations Manager

By:
Name:	Gabriel Sanchez
Title:	WHL Operations Assistant

4085694.5 | 100775-0196     Exhibit F-6

EXHIBIT G

FORM OF COMPLIANCE CERTIFICATE

COMPLIANCE CERTIFICATE

BORROWER:	Terra Mortgage Portfolio II, LLC
LENDER:	Western Alliance Bank, an Arizona corporation
TODAY’S date:	____/____/20__
Reporting PERIOD ENDED:	____/____/20__

This certificate is delivered to Lender under the Business Loan and Security Agreement dated effective as of March 12, 2021 with any and all subsequent Loan Modifications between Borrower and Western Alliance Bank, an Arizona corporation (the “Agreement”), all the defined terms of which have the same meanings when used herein.

I hereby certify that: (a) I am, and at all times mentioned herein have been, the duly elected, qualified, and acting officer of Borrower designated below; (b) to the best of my knowledge, the financial statements of Borrower from the period shown above (the “Reporting Period”) and which accompany this certificate were prepared in accordance with GAAP and present fairly the financial condition of Borrower as of the end of the Reporting Period and the results of its operations for the Reporting Period; (c) all of the representations and warranties made by Borrower in Section 3 of the Agreement are true and correct in all material respects on the date of this certificate as if made on this date; (d) a review of the Agreement and of the activities of Borrower during the Reporting Period has been made under my supervision with a view to determining Borrower’s compliance with the covenants, requirements, terms, and conditions of the Agreement, and such review has not disclosed the existence during or at the end of the Reporting Period (and I have no knowledge of the existence as of the date hereof) of any Default or Event of Default, except as disclosed herein (which specifies the nature and period of existence of each Default or Event of Default, if any, and what action Borrower has taken, is taking, and proposes to take with respect to each); and (e) the calculations described herein evidence that Borrower is in compliance with the requirements of the Agreement at the end of the Reporting Period (or if Borrower is not in compliance, showing the extent of non-compliance and specifying the period of non-compliance and what actions Borrower proposes to take with respect thereto).

Borrower

By:

Name:

Title:

Page 7 of 75

All financial calculations set forth herein are as of the end of the Reporting Period.

I.TOTAL NET WORTH (Schedule 6.18 of the Agreement)

The Total Net Worth for Terra Property Trust, Inc. is:
Total Assets	$
Minus: Intangible Assets & Loans to Stakeholders	$
Minus: Prepaid Taxes and/or Expenses	$
Minus: Total Liabilities	$
TOTAL NET WORTH	$
REQUIRED MINIMUM	$250,000,000.00
In compliance?	Yes No

II.PROFITABILITY (Schedule 6.18 of the Agreement)

Operating Profit for Terra Property Trust, Inc. is:
Gross Income for the previous 3 calendar months (T3M)	$
Minus: Operating Expenses (T3M)	$
NET OPERATING PROFIT	$
MINIMUM REQUIRED	$2,000,000.00
In compliance?	Yes No

III.GLOBAL LEVERAGE RATIO (Schedule 6.18 of the Agreement)

The Global Leverage Ratio for Terra Property Trust, Inc. is:
Total Global Debt:	$
Divided by: Total Net Worth (see above)	$
TOTAL LIABILITIES / ADJUSTED TANGIBLE NET WORTH :	__:1
MAXIMUM PERMITTED	2.50:1
In compliance?	Yes No

IV.INDEBTEDNESS (Section 6.14 of the Agreement)

Total Other Indebtedness except Trade Obligations:	$
MAXIMUM PERMITTED	$0.00
In compliance?	Yes No

4085694.5 | 100775-0196     Exhibit G-1

V.REPORTING REQUIREMENTS (Schedule 6.5 of the Agreement)

Financial Reporting Requirements Current? Yes No

DEFAULTS OR EVENTS OF DEFAULT

Disclose nature and period of existence and action being taken in connection therewith; if none, write “None”: ___________________________________________________________________

_______________________________________________________________________________

______________________________________________________________________________

4085694.5 | 100775-0196     Exhibit G-2

EX-10.9

Exhibit 10.9

LIMITED GUARANTY

THIS LIMITED GUARANTY (“Guaranty”) is made as of March 12, 2021, by TERRA PROPERTY TRUST, INC., a Maryland corporation (the “Guarantor”), whose address is set forth below, in favor of WESTERN ALLIANCE BANK, an Arizona corporation (“Lender”), whose address is set forth below.

RECITALS

A.Guarantor is executing this Guaranty to induce Lender to extend to TERRA MORTGAGE PORTFOLIO II, LLC, a Delaware limited liability company (“Borrower”), a credit facility (the “Loan”) in the maximum amount of $75,000,000.00, subject to the terms and conditions of which are more particularly described in the Business Loan and Security Agreement dated as of March 12, 2021 (as amended, supplemented, restated or otherwise modified from time to time, the “Loan Agreement”), and the Loan Documents (as herein defined).

B.The Loan is evidenced by that certain Promissory Note dated of even date herewith (as amended, supplemented, restated or otherwise modified from time to time, the “Note”) made payable to Lender in the principal amount of the Loan. (The term “Loan” is used throughout this Guaranty in its most comprehensive sense and means any and all loans, advances, debts, obligations, liabilities of any kind or nature owed by Borrower to Lender, made, incurred or created, arising from the Loan Documents, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, secured or unsecured, whether on original, renewed, extended or revised terms (including, without limitation, those evidenced by new or additional instruments or agreements or those changing the applicable rate of interest or which release any obligor with respect thereto), whether principal, interest, fees, or expenses, whether Borrower may be liable individually or jointly with others, whether recovery upon such indebtedness may be or hereafter becomes barred by any statute of limitations, and whether such indebtedness may be or hereafter becomes invalid or otherwise unenforceable. In the event a petition under the United States Bankruptcy Code is filed by or against Borrower, the term “Borrower” shall also mean and include Borrower in its status as a debtor, debtor-in-possession and/or reorganized debtor under the United States Bankruptcy Code.

C.This Guaranty, the Loan Agreement, the Note and all other documents and instruments that evidence, secure, or otherwise pertain to the Loan are collectively referred to as the “Loan Documents”.

GUARANTY

1.Borrower Obligations.

(a) Guarantor hereby unconditionally and irrevocably guarantees and promises to pay to Lender, or order, on demand, in immediately available funds, and to defend, indemnify and hold harmless Lender and Lender’s agents, employees, representatives, directors, officers,

4125961.4 | 100775-01961

successors and assigns for, from and against any and all claims, suits, actions, proceedings, obligations, damages, losses, liability, judgments, awards, amounts paid in settlement of whatever kind or nature, fines, charges, fees, costs and expenses suffered or incurred by Lender or Lender’s agents, employees, representatives, directors, officers, successors and assigns to the extent resulting from the occurrence of any of the following:

(i) fraud or intentional misrepresentation by Borrower, Guarantor or any other person or entity acting on behalf of such party in connection with (A) the Loan Documents, or (B) any financial information, including, but not limited to, financial statements, affidavits, certifications, representations or warranties given to Lender in connection with the Loan by Borrower, Guarantor or any other person or entity acting on behalf of such party;

(ii) misapplication or misappropriation in violation of the Loan Documents of (1) Loan proceeds, (2) proceeds from any collateral that secures all or any portion of the Loan, (3) other funds pledged or assigned to Lender or required to be pledged or assigned to Lender, (4) insurance proceeds or (5) any other amounts required to be paid or turned over to Lender pursuant to the Loan Documents;

(iii) willful misconduct, or criminal acts perpetrated by Borrower or Guarantor, resulting in forfeiture or seizure of any portion of any collateral that secures all or any portion of the Loan, or any other assets of Borrower or Guarantor;

(iv) wrongful removal or disposal of any portion of any collateral that secures the Loan;

(v) the making of any distribution, dividend or payment of any kind in violation of the Loan Documents;

(vi) the failure to pay insurance policy premiums to maintain insurance as required under the Loan Documents;

(vii) any consensual or intentional transfer, assignment, sale or encumbrance of any collateral that secures all or any portion of the Loan, except as otherwise permitted by the Loan Agreement;

(viii) any transfer or disposal of any portion of the collateral securing the Loan by Borrower or Guarantor after a default under or breach of any of the Loan Documents;

(ix) any encumbrances, liens, or security interests affecting any of the collateral securing the Loan (including, but not limited to judgment liens and tax liens) to the extent arising from the act or omission of Borrower or Guarantor, except as otherwise permitted by the Loan Agreement, and except that this clause will not apply to any encumbrance, lien or security interest arising because of the default of any Collateral Loan Obligor to pay any amount required under the Collateral Loan Documents due to the financial inability of such Collateral Loan Obligor (unless sufficient funds for such payment for that purpose or in a reserve or

4125961.4 | 100775-01962

escrow account controlled by Borrower and Borrower refuses to release such reserved or escrow amounts).

(b) Upon the occurrence of any of the events listed below in this Section 1(b) Guarantor absolutely, unconditionally and irrevocably guarantees to Lender, the full and prompt payment of the principal sum of the Note in accordance with its terms when due, by acceleration or otherwise, together with all interest accrued thereon, the full and prompt payment of all other sums, together with all interest accrued thereon, when due under the terms of the Loan Documents:

(i) Borrower or Guarantor filing a voluntary petition under Title 11 of the United States Code (as now or hereafter amended or recodified, the “Bankruptcy Code”) or any other federal or state bankruptcy or insolvency law;

(ii) Borrower, Guarantor or any of their respective affiliates, officers, directors, agents or representatives or any other person or entity that controls, is controlled by or is under common control with Borrower or Guarantor (in each case whether directly or indirectly) filing, filing an answer consenting to, or otherwise acquiescing in, or joining in the filing of, a voluntary or involuntary petition against Borrower or Guarantor under the Bankruptcy Code or any other federal or state bankruptcy or insolvency law, or soliciting or causing to be solicited petitioning creditors for any involuntary petition against Borrower or Guarantor from any person or entity;

(iii) Borrower or Guarantor making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due; and

(iv) Any transfer of ownership rights or interests in Borrower or change of control of Guarantor (so long as Guarantor is managed by Terra Capital Partners LLC or an Affiliate, no change of control of Guarantor will be deemed to have occurred).

The obligations guaranteed pursuant to Section 1(a) and 1(b) are hereinafter referred to as the “Recourse Obligations”. If there is more than a single entity or person included in the terms “Guarantor” or “Borrower,” respectively, each reference herein to such terms shall mean any and all, and one or more of such entities and persons both jointly and severally, and if more than one person or entity executes this Guaranty, the obligations and liabilities hereunder of Guarantor are and shall be both joint and several. If Borrower is a corporation, partnership, limited liability company or association, each reference herein to the term “Borrower” shall include any successor entity to Borrower. If there is more than one guaranty of the obligations of Borrower, the liabilities of all Guarantors are joint and several. As used in this Guaranty, neuter terms include the masculine and feminine, and vice versa.

2.Guarantor’s Liability. Guarantor agrees, represents and warrants to Lender as follows:

4125961.4 | 100775-01963

(a) In addition to the Recourse Obligations, Guarantor unconditionally guarantees and agrees to pay to Lender, on demand at any time from and after an Event of Default (as defined in the Loan Agreement), in lawful money of the United States of America, (i) the Maximum Guaranty Amount (as herein defined), provided that no amount shall be payable under this clause (i) until the Lender has accelerated the Loan as a consequence of such Event of Default, the Loan has otherwise matured pursuant to the stated maturity date contained in the Loan Documents, or Borrower is in breach of any or all of subparagraphs 1(b)(i), (ii) or (iii) above, (ii) the Recourse Obligations, and (iii) the fees, expenses and costs enumerated in paragraph 16 below (individually and collectively, “Fees and Costs”). This Guaranty is a guaranty of payment and not of collection. Any payment received by Lender from Guarantor, Borrower or any other Person or from proceeds of Collateral granted by Borrower or any other Person shall not reduce Guarantor’s liability hereunder, except to the extent of the permanent reduction of the Loan. As used herein, (x) the term “Maximum Guaranty Amount” means an amount equal to the product of (i) twenty-five percent (25%) and (ii) the outstanding principal amount of the Loan as set forth in a written notice from Lender to Guarantor that an Event of Default has occurred under the Loan Agreement and that Lender has accelerated the Loan (or the Loan has otherwise matured pursuant to the stated maturity date contained in the Loan Documents, or Borrower is in breach of any or all of subparagraphs 1(b)(i), (ii) or (iii) above) and is entitled to recover the Maximum Guaranty Amount pursuant to this Guaranty, and setting forth the outstanding principal amount of the Loan as of the date of such notice, subject to the provisions of Section 2(b), and (y) the terms Maximum Guaranty Amount, Recourse Obligations and Fees and Costs mean, individually and collectively, “Obligations”.

(b) Notwithstanding anything herein to the contrary, (i) unless and until Lender makes written demand (“Demand”) on Guarantor for payment of the Maximum Guaranty Amount, any payment made by Guarantor on the outstanding principal amount of the Loan shall be considered a voluntary payment by Guarantor and shall not be credited against the Maximum Guaranty Amount; and (ii) in the event Guarantor makes any payment following a Demand that is applied to the Maximum Guaranty Amount, in addition to all other rights and remedies available to Lender under the Loan Documents, Borrower shall not be entitled to any further Advances under the Loan and the Loan shall not be eligible for reinstatement as a revolving line of credit.. For the avoidance of doubt, any default notice provided to Guarantor is not a Demand unless included in the default notice is a written demand on Guarantor for payment of the Maximum Guaranty Amount.

(c) Guarantor shall continue to be liable under this Guaranty and the provisions hereof shall remain in full force and effect notwithstanding (i) any modification, agreement or stipulation between Borrower and Lender, or their respective successors and assigns, with respect to the Loan Documents or the obligations encompassed thereby, including, without limitation, the Obligations; or (ii) Lender’s waiver of or failure to enforce any of the terms, covenants or conditions contained in the Loan Documents or in any modification thereof; or (iii) any release of Borrower or any other guarantor from any liability with respect to the Obligations; (iv) any release or subordination of any real or personal property then held by Lender as security for the performance of the Obligations; (v) any disability of Borrower, or the dissolution, insolvency, or bankruptcy of Borrower, Guarantor, or any other party at any time

4125961.4 | 100775-01964

liable for the payment of any or all of the Obligations; (vi) the unenforceability or invalidity of any or all of the Obligations or any of the Loan Documents; (vii) any payment by Borrower or any other party to Lender is held to constitute a preference under applicable bankruptcy or insolvency law or if for any other reason Lender is required to refund any payment or pay the amount thereof to someone else; (viii) the settlement or compromise of any of the Obligations; (ix) the non-perfection of any security interest or lien securing any or all of the Obligations; or (x) any impairment of any collateral securing any or all of the Obligations.

(d) Guarantor’s liability under this Guaranty shall continue until all sums due under the Note have been paid in full and until all of Borrower’s other obligations to Lender have been paid and performed in full, and shall not be reduced by virtue of any payment by Borrower of any amount due under the Note or under any of the Loan Documents or by Lender’s recourse to any collateral or security. Guarantor acknowledges that Lender may apply any payment made by Borrower to Lender to any obligation of Borrower to Lender under the terms of any Loan Documents in such amounts and such manner as Lender may elect, regardless of whether such application complies with any instruction or designation given or made by Borrower with respect to such payment and agrees that any such application shall not in any manner reduce, extinguish or otherwise affect the liability of Guarantor hereunder.

(e) Guarantor acknowledges that it has and will continue to have full and complete access to any and all information concerning the transactions contemplated by the Loan Documents or referred to therein, the value of the assets owned or to be acquired by Borrower, Borrower’s financial status and its ability to pay and perform its obligations under the Loan Documents. Guarantor further warrants and represents that it has reviewed and approved copies of the Loan Documents and is fully informed of the remedies Lender may pursue, with or without notice to Borrower, in the event of default under the Note or other Loan Documents. So long as any of the Obligations remains unsatisfied or owing to Lender, Guarantor shall keep itself fully informed as to all aspects of Borrower’s financial condition and the performance of Borrower’s obligations under the Loan Documents.

(f) If acceleration of the time for payment of any amount payable by Borrower under the Loan Documents is stayed upon the insolvency, bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to acceleration under the terms of the Loan Documents shall nonetheless be payable by Guarantor hereunder forthwith on demand by Lender.

(g) Lender is not required to inquire into the powers of Borrower or Guarantor or of the officers, directors, or other agents acting or purporting to act on their behalf, and any indebtedness or obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.

3.Fair Consideration; Solvency

(a) Guarantor represents and warrants to Lender that: (i) Guarantor is receiving fair consideration and reasonably equivalent value for its execution of this Guaranty; (ii) Guarantor is not now insolvent, nor will the execution of this Guaranty render Guarantor

4125961.4 | 100775-01965

insolvent; (iii) the execution of this Guaranty will not leave Guarantor with unreasonably small capital or assets in order to conduct the business of Guarantor as it is currently conducted; (iv) the obligations incurred under this Guaranty have not been incurred with the intent to hinder, delay, or defraud present or future creditors; and (v) the execution of this Guaranty is not intended or believed by Guarantor to be an incurrence of an obligation or debt of Guarantor beyond Guarantor’s ability to pay such obligation or debt as it becomes due.

(b) Guarantor acknowledges that: (i) the execution of this Guaranty by Guarantor is a necessary condition for the extension of a loan by Lender to Borrower; and (ii) the loan by Lender to Borrower are of substantial economic benefit to Borrower and, therefore, beneficial to Guarantor.

4.Fraudulent Transfer

. In the event that, notwithstanding the representations, warranties and acknowledgements of Guarantor contained in Section 3 above, the incurring of the obligations under this Guaranty is found, by a final, non-appealable judgment or order of a court, to constitute a fraudulent transfer under the Uniform Fraudulent Transfer Act (Arizona Revised Statutes (“ARS”) Section 44-1001 et seq., as amended, and any successor statute), the Bankruptcy Code (Title 11 of the United States Code), or any similar statutes, then the amount of the Recourse Obligations of Guarantor pursuant to this Guaranty shall be reduced to $1.00 less than the amount that would otherwise make this Guaranty a fraudulent conveyance. The limitation on the liability of Guarantor contained in this Section 4 shall not limit any right of Lender against Guarantor available at law or in equity, including, without limitation, rights of Lender against Guarantor based upon any inaccuracy of, or the failure of Guarantor to comply with, the provisions of Section 3 above.

5.Independent Obligation

. The obligations of Guarantor hereunder are separate and independent of the obligations of Borrower and of every other guarantor, and a separate action or actions may be brought and prosecuted against Guarantor regardless of whether an action is brought against Borrower or any other guarantor or whether Borrower or any other guarantor is joined in any such action or actions, or whether Lender forecloses upon, sells or otherwise disposes of or collects any collateral securing the Loan. This Guaranty may be enforced against Guarantor regardless of whether a judicial or non-judicial foreclosure sale is held under any security agreement, deed of trust, mortgage, or other security instrument securing all or any part of the Loan.

6.Nature of Guaranty. The liability of Guarantor under this Guaranty is a guaranty of payment and performance and not of collection, and is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of the Loan Documents or other instruments relating to the creation or performance of the Obligations or the pursuit by Lender of any remedies which it now has or may hereafter have with respect thereto under the Loan Documents, at law, in equity or otherwise.

7.Guarantor Waivers. Guarantor hereby fully and completely waives, releases and relinquishes: (a) all notices to Guarantor, to Borrower, or to any other person or entity,

4125961.4 | 100775-01966

including, without limitation, notices of the acceptance of this Guaranty, or the creation, renewal, extension, modification or accrual of any of Borrower’s obligations to Lender under the Loan Documents and, except to the extent set forth herein, enforcement of any right or remedy with respect thereto, and notice of any other matters relating thereto; (b) diligence and demand of payment, presentment, protest, dishonor and notice of dishonor; (c) any statute of limitations affecting Guarantor’s liability hereunder or the enforcement thereof; (d) all defenses and claims based on principles of suretyship and/or guaranty; (e) any and all benefits under ARS Sections 12-1641 through 121646, Section 44-142 and Rule 17(e) of the Arizona Rules of Civil Procedure, as now enacted or hereafter modified, amended or replaced; and (f) any “one action” or “anti-deficiency” law, including, without limitation, ARS Sections 33-814 and 33-729, as now enacted or hereafter modified, amended or replaced. Notwithstanding any foreclosure of the lien of any security agreement, deed of trust, mortgage, or other security instrument with respect to any or all of any real or personal property secured thereby, whether by the exercise of the power of sale, by an action for judicial foreclosure or by an acceptance of a deed in lieu of foreclosure, Guarantor shall remain bound under this Guaranty. Guarantor further agrees that Lender may enforce this Guaranty upon the occurrence and during the continuation of an Event of Default, notwithstanding the existence of any dispute between Borrower and Lender with respect to the existence of the Event of Default or performance of any of Borrower’s obligations under the Loan Documents, or any counterclaim, setoff or other claim which Borrower may allege against Lender with respect thereto (provided that Guarantor is not waiving its right to assert in good faith that no Event of Default then exists or is continuing as a defense to payment under this Guaranty). Moreover, Guarantor agrees that its obligations shall not be affected by any circumstances which constitute a legal or equitable discharge of a guarantor or surety.

8.No Duty To Pursue Others.Guarantor agrees that Lender may enforce this Guaranty without the necessity of resorting to or exhausting any security or collateral and without the necessity of proceeding against Borrower or any other guarantor, including, without limitation, any other Guarantor named herein. Guarantor hereby waives the right to require Lender to proceed against Borrower, to proceed against any other guarantor, including, without limitation, any other Guarantor named herein, to foreclose any lien on any real or personal property, to exercise any right or remedy under the Loan Documents, to pursue any other remedy or to enforce any other right.

9.Authorization of Lender

. Guarantor authorizes Lender, without notice or demand, and without affecting Guarantor’s liability hereunder, from time to time to: (a) amend, modify, or restate any instrument, document or agreement evidencing or relating to all or any portion of the Obligations; (b) renew, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of Borrower’s obligations under the Loan Documents or any part thereof, including, without limitation, any increase or decrease of the rate of interest thereon or any late charge; (c) take and hold collateral as security for the payment of this Guaranty or Borrower’s obligations under the Loan Documents, and exchange, substitute, subordinate, enforce, waive and release any such collateral; (d) apply any and all payments from Borrower, Guarantor or any other guarantor, or recoveries from any collateral securing all or any

4125961.4 | 100775-01967

portion of the Loan, in such order or manner as Lender in its sole and absolute discretion may determine; (e) direct the order or manner of sale of any collateral securing any part of Borrower’s obligations under the Loan Documents as Lender in its sole and absolute discretion may determine; (f) release or substitute any one or more of the Borrower, Guarantor or any other guarantor, or acquire additional guarantors; and (g) assign its rights under this Guaranty in whole or in part.

10.Waivers of Subrogation and Other Rights and Defenses.

(a) Guarantor agrees that nothing contained herein shall prevent Lender from suing on the Note or from exercising any rights available to it thereunder or under any of the Loan Documents and that the exercise of any of the aforesaid rights shall not constitute a legal or equitable discharge of any Guarantor. Guarantor understands that the exercise by Lender of certain rights and remedies contained in the Loan Documents may affect or eliminate Guarantor’s right of subrogation against Borrower and that Guarantor may therefore incur a partially or totally nonreimbursable liability hereunder; nevertheless, Guarantor hereby authorizes and empowers Lender to exercise, in its sole and absolute discretion, any rights and remedies, or any combination thereof, which may then be available to Lender, because it is the intent and purpose of Guarantor that the obligations hereunder shall be absolute, independent and unconditional under any and all circumstances.

(b) Guarantor hereby waives, releases, and relinquishes any and all rights of reimbursement, contribution, and subrogation, which Guarantor may now or hereafter have against Borrower. Guarantor further agrees that, to the extent the waiver of its rights of subrogation as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation Guarantor may have against Borrower or against any collateral or security shall be junior and subordinate to any right Lender may have against Borrower and to all right, title and interest Lender may have in any collateral or security. Lender may use, sell or dispose of any item of collateral or security as it sees fit without regard to any subrogation right Guarantor may have, and upon disposition or sale, any right of subrogation Guarantor may have shall terminate. With respect to the enforced collection of Borrower’s obligations under the Loan Documents or the foreclosure of any security interest in any personal property collateral then securing any of Borrower’s obligations under the Loan Documents, Lender agrees to give Guarantor ten (10) days’ prior written notice, in the manner set forth in Section 13 hereof, of any sale or disposition of any such personal property collateral, other than collateral which is perishable, threatens to decline speedily in value, is of a type customarily sold on a recognized market, or is cash, cash equivalents, certificates of deposit or the like.

(c) Guarantor’s sole right with respect to any such foreclosure of real or personal property collateral shall be to bid at such sale in accordance with applicable law. Guarantor acknowledges and agrees that Lender may also bid at any such sale and in the event such collateral is sold to Lender in whole or in partial satisfaction of the Obligations, Guarantor shall have no further right or interest with respect thereto. Notwithstanding anything to the contrary contained herein, no provision of this Guaranty shall be deemed to limit, decrease, or in

4125961.4 | 100775-01968

any way to diminish any rights of setoff Lender may have with respect to any cash, cash equivalents, certificates of deposit or the like which may now or hereafter be put on deposit with Lender by Borrower.

(d) If, after the date hereof, an additional guarantor of obligations owed to Lender hereunder is added, then, to the extent any dispute exists at any time between or among any of the guarantors as to Guarantor’s right to contribution or otherwise, Guarantor agrees to indemnify, defend and hold Lender harmless for, from and against any loss, damage, claim, demand, cost or any other liability (including reasonable attorneys’ fees and costs) Lender may suffer as a result of such dispute.

(e) If from time to time Borrower shall have liabilities or obligations to Guarantor (collectively the “Subordinate Obligations”), such Subordinate Obligations shall be subject to the following terms:

(i) The Subordinate Obligations and any and all assignments as security, grants in trust, liens, mortgages, security interests, other encumbrances, and other interests and rights securing such liabilities and obligations shall at all times be fully subordinate with respect to (1) assignment as security, grant in trust, lien, mortgage, security interest, other encumbrance, and other interest and right (if any), (2) time and right of payment and performance, and (3) rights against any collateral therefor (if any), to payment and performance in full of the Obligations and the right of Lender to realize upon any or all security for such Obligations.

(ii) Guarantor agrees that the Subordinate Obligations shall not be secured by any assignment as security, grant in trust, lien, mortgage, security interest, other encumbrance or other interest or right in any property, interests in property, or rights to property of Borrower.

(iii) Guarantor agrees that all promissory notes, accounts receivable, ledgers, records, or any other evidence of Subordinate Obligations shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under the terms of this Guaranty.

(iv) Guarantor agrees that after the occurrence and during the continuance of an Event of Default, no payments of principal or interest may be made or given, directly or indirectly, by or on behalf of the Borrower or received, accepted, retained or applied by Guarantor unless and until the Obligations shall have been paid and performed in full. Prior to the occurrence and continuance of an Event of Default, Guarantor shall have the right to receive payments on the Subordinate Obligations made in the ordinary course of business.

(v) If Guarantor receives any payment from Borrower or any other party on account of the Subordinate Obligations when such payment is not permitted hereunder, such payment shall be held in trust by Guarantor for the benefit of Lender, shall be segregated from the other funds of Guarantor, and shall forthwith be paid by Guarantor to Lender, without

4125961.4 | 100775-01969

affecting the liability of Guarantor under this Guaranty, and applied to payment of the Obligations, whether or not then due.

(vi) Without the prior written consent of Lender, Guarantor shall not (1) file suit against Borrower or exercise or enforce any other creditor’s right it may have against Borrower, or (2) foreclose, repossess, sequester, appoint a receiver or otherwise take steps or institute any action or proceedings (judicial or otherwise, including, without limitation, the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any liens, security interests, collateral rights, judgments or other encumbrances held by Guarantor on assets of Borrower.

(vii) To secure the Obligations, Guarantor grants to Lender a lien and security interest in all Subordinate Obligations and any documents or instruments evidencing or pertaining to the Subordinate Obligations, and in all of Guarantor’s right, title, and interest in and to any payments, property, interests in property, or rights to property acquired or received by Guarantor from Borrower in respect of the Subordinate Obligations.

(viii) In the event of any receivership, bankruptcy, reorganization, rearrangement, debtor’s relief, or other insolvency proceeding involving Borrower as debtor, Lender shall have the right to prove and vote any claim under the Subordinate Obligations and to receive directly from the receiver, trustee or other court custodian all dividends, distributions, and payments made in respect of the Subordinate Obligations. Lender may apply any such dividends, distributions, and payments against the Obligations in such order and manner as Lender may determine in its sole discretion.

11.Guarantor’s Representations and Warranties. As an inducement to Lender to make the Loan and disburse the proceeds of the Loan to Borrower, Guarantor represents and warrants to Lender that the following statements are true, correct and complete as of the date hereof and will be true, correct and complete as of the closing date of the Loan and as of the date that each advance of Loan proceeds is made under the Loan.

(a) No approvals, authorizations or consents of any trustee or holder of any indebtedness or obligation of Guarantor are required for the due execution, delivery and performance by Guarantor of this Guaranty or any of the other Loan Documents to which Guarantor is a party.

(b) This Guaranty and any other Loan Documents to which Guarantor is a party have been duly executed by Guarantor, and are legally valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

(c) There exists no material violation of or material default by Guarantor and no event has occurred which, upon the giving of notice or the passage of time, or both, would constitute a material default with respect to (i) the terms of any instrument evidencing or securing any obligations of Guarantor, (ii) any lease or other agreement to which Guarantor is a

4125961.4 | 100775-019610

party, (iii) any license, permit, statute, ordinance, law, judgment, order, writ, injunction, decree, rule or regulation of any governmental authority, or any determination or award of any arbitrator to or by which Guarantor or Guarantor’s property may be subject or bound, or (iv) any deed of trust, mortgage, security agreement, instrument, or other agreement by which Guarantor or any of its property is bound which, in any such case, is likely, as determined by Lender in its reasonable discretion, to (1) materially and adversely affect the ability of Guarantor to perform its obligations under this Guaranty or any other material instrument, agreement or document to which it is a party, or (2) adversely affect the priority of the liens and security interests created by this Guaranty or any of the other Loan Documents.

(d) There is no action, suit, investigation, proceeding or arbitration (whether or not purportedly on behalf of Guarantor) at law or in equity or before or by any foreign or domestic court or other governmental entity (a “Legal Action”), pending or, to the knowledge of Guarantor, threatened against or affecting Guarantor or any of its assets which could reasonably be expected to materially and adversely affect Guarantor’s ability to perform its obligations under this Guaranty and any of the other Loan Documents to which it is a party. Guarantor is not (i) in violation of any applicable law which violation materially and adversely affects or is reasonably likely to materially and adversely affect Guarantor’s ability to perform its obligations under this Guaranty or any other Loan Documents to which it is a party, or (ii) subject to, or in default with respect to, any other legal requirement that would have a materially adverse effect on Guarantor’s ability to perform its obligations under this Guaranty or any other Loan Documents to which it is a party. There is no Legal Action pending or, to the knowledge of Guarantor, threatened against or affecting Guarantor questioning the validity or the enforceability of this Guaranty or any of the other Loan Documents as to which there is a reasonable likelihood that, upon resolution of such Legal Action, such validity or enforceability will be impaired.

(e) Guarantor has good, sufficient and legal title in all material respects to all properties and assets reflected in its most recent balance sheet or financial statement, as applicable, delivered to Lender.

(f) All tax returns, extension filings, and reports of Guarantor required to be filed by it have been timely filed, and all taxes, assessments, fees and other governmental charges upon Guarantor or upon its properties, assets, income and franchises which are due and payable have been paid when due and payable, except to the extent of items which, in the aggregate, are not material to Guarantor’s financial condition. Guarantor does not know of any proposed tax assessment against it or its property that would be material to its financial condition, and Guarantor has not contracted with any government entity in connection with such taxes.

(g) The financial statements and all financial data previously delivered to Lender in connection with the Loan and/or relating to Guarantor are true, correct and complete in all material respects. Such financial statements fairly present the financial position of the subject thereof as of the date thereof. No material adverse change has occurred in such financial position since the date of the most recent of such statements and, except for this Loan, no borrowings

4125961.4 | 100775-019611

have been made by Guarantor since the date thereof which are secured by, or might reasonably give rise to, a lien or claim against the proceeds of the Loan or any collateral that secures the Loan.

12.Financial Covenants; No Transfers.

(a) Guarantor covenants and agrees to provide to Lender the financial statements required with respect to Guarantor as provided in Schedule 6.5 of the Loan Agreement.

(b) Guarantor covenants and agrees to maintain the financial covenants applicable to Guarantor as provided in Schedule 6.18 of the Loan Agreement.

(c) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or substantially all of Guarantor’s assets or any interest therein. Guarantor further covenants and agrees that no assets belonging to Guarantor (whether or not disclosed in a financial statement or loan application to Lender) have been transferred into an asset protection trust or an irrevocable trust within two (2) years prior to the date of this Guaranty, and Guarantor will not transfer any assets into an asset protection trust or an irrevocable trust while this Guaranty is outstanding without Lender’s prior written consent.

13.Notices. All notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission) and shall be given to such party at its address set forth below. Each such notice, request or other communication shall be effective (a) if given by mail, upon delivery by certified mail to the address specified below (or upon failure of the addressee to accept such delivery), or (b) if given by reputable overnight delivery service, when delivered to a secure location at such address.

    To Lender:    WESTERN ALLIANCE BANK

                2701 East Camelback Road, Suite 110

                Phoenix, Arizona 85016

                Attention: Seth Davis, Senior Director

                Email: sdavis@westernalliancebank.com

            WESTERN ALLIANCE BANK

                2701 East Camelback Road, Suite 110

                Phoenix, Arizona 85016

                Attention: docs@westernalliancebank.com and

                 notefinance@westernalliancebank.com

        To Guarantor:    TERRA PROPERTY TRUST, INC.

    c/o Terra Capital Partners, LLC

    550 Fifth Avenue, Sixth Floor

    New York, NY 10036

    Attention: Vik Uppal and Greg Pinkus

4125961.4 | 100775-019612

    With a copy to:    TERRA CAPITAL PARTNERS, LLC

    550 Fifth Avenue, Sixth Floor

    New York, NY 10036

    Attention: Chief Legal Officer

14.Successors and Assigns. This Guaranty shall be binding upon Guarantor, its successors and assigns and shall inure to the benefit of and shall be enforceable by Lender, its successors, endorsees and assigns.

15.[Reserved].

16.Costs of Enforcement. If any or all of the Obligations are not paid when due, Guarantor agrees to pay all costs of enforcement and collection of such Obligations and preparation therefore (including, without limitation, reasonable attorneys’ fees and any amounts disbursed by Lender in connection with enforcing Lender’s remedies under the Loan Documents) whether or not any action or proceeding is brought (including, without limitation, all such costs incurred in connection with any bankruptcy, receivership, or other court proceedings (whether at the trial or appellate level)) together with interest thereon from the date of demand at the default rate applicable to the Note.

17.WAIVER OF DEFENSES AND RELEASE OF CLAIMS. The undersigned hereby (a) represents that neither the undersigned nor any affiliate or principal of the undersigned has any defenses to or setoffs against any indebtedness or other obligations owing by the undersigned, or by the undersigned’s affiliates or principals, to Lender or Lender’s affiliates (the “Liabilities”), nor any claims against Lender or Lender’s affiliates for any matter whatsoever, related or unrelated to the Liabilities, and (b) releases Lender and Lender’s affiliates, officers, directors, employees and agents from all claims, causes of action, and costs, in law or equity, known or unknown, whether or not matured or contingent, existing as of the date hereof that the undersigned has or may have by reason of any matter of any conceivable kind or character whatsoever, related or unrelated to the Liabilities, including, without limitation, the subject matter of this Guaranty. The foregoing release does not apply, however, to claims for future performance of express contractual obligations that mature after the date hereof that are owing to the undersigned by Lender or Lender’s affiliates. The undersigned acknowledges that Lender has been induced to enter into or continue the Liabilities by, among other things, the waivers and releases in this paragraph.

18.JURY WAIVER. GUARANTOR WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH GUARANTOR AND LENDER MAY BE PARTIES, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO, THIS GUARANTY, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTION OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS GUARANTY. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY

4125961.4 | 100775-019613

MADE BY GUARANTOR, AND GUARANTOR HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. GUARANTOR FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.

19.Right of Setoff. In addition to all liens upon, and rights of setoff against, the monies, instruments, certificates of deposit, securities or other property of Guarantor given to Lender by law, Lender shall have a lien and a right of setoff against, and Guarantor hereby grants to Lender a security interest in, all monies, instruments, certificates of deposit, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Lender, whether held in a general or special account or deposit including any account or deposit held jointly by Guarantor with any other person or entity, or for safekeeping or otherwise, except to the extent specifically prohibited by law. Every such lien, right of setoff and security interest may be exercised without demand upon or notice to Guarantor. No lien, right of setoff, or security interest shall be deemed to have been waived by any act or conduct on the part of Lender, by any neglect to exercise such right of setoff or to enforce such lien or security interest, or by any delay in so doing. The rights and remedies of Lender hereunder are in addition to other rights and remedies (including, without limitation, other rights of setoff) which Lender may have.

20.GOVERNING LAW; JURISDICTION.

i.THIS GUARANTY HAS BEEN DELIVERED IN ARIZONA AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ARIZONA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES.

ii.Guarantor irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Lender or any affiliate of the Lender in any way relating to this Guaranty or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of Arizona sitting in Maricopa County, and of the United States District Court of the District of Arizona, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such Arizona State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in

4125961.4 | 100775-019614

other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty or in any other Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Guaranty or any other Loan Document against the Guarantor or its properties in the courts of any jurisdiction.

21.No Third Party Beneficiaries. This Guaranty is solely for the benefit of Lender, its successors, endorsees and assigns, and is not intended to nor shall it be deemed to be for the benefit of any third party, including Borrower.

22.Severability. If any provision of this Guaranty is unenforceable, the enforceability of the other provisions shall not be affected and they shall remain in full force and effect.

23.Counterparts. This Guaranty may be executed in counterparts, all of which executed counterparts shall together constitute a single document.

24.Counsel. Guarantor acknowledges that Guarantor has had adequate opportunity to carefully read this Guaranty and to consult with an attorney of Guarantor’s choice prior to signing it.

25.Amendments. No amendment or waiver of any provision of this Guaranty or consent to any departure by Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by Lender.

26.Events of Default. Each of the following shall constitute an “Event of Default” under this Guaranty: (i) any breach by Guarantor of its covenants contained in Section 12, (ii) any failure of Guarantor to pay any amount due hereunder within ten (10) Business Days after notice from Lender, or (iii) any default by Guarantor in any other provision hereof that remains uncured thirty (30) days after such default, provided if cure of such default cannot reasonably be accomplished within such 30-day period, then such cure period will be extended to accommodate Guarantor’s reasonable efforts to cure, provided that in no event shall such cure period extend more than 60 days beyond the original notice delivered by Lender to Guarantor as to such default.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

4125961.4 | 100775-019615

IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and year first above written.

GUARANTOR:

TERRA PROPERTY TRUST, INC.,

a Maryland corporation

By:_/s/ Greg Pinkus______________________

Name: Greg Pinkus

Its: Authorized Signatory

4125961.4 | 100775-019616

EX-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 Renton, LLC	Delaware
Terra Driggs, LLC	Delaware
Terra Orange Grove Pref, LLC	Delaware
Terra Harlem Member, LLC	Delaware
Terra City Gardens Pref, LLC	Delaware
Terra 370 Lex LLC	Delaware
Terra University Flats Pref, LLC	Delaware
Terra Campus Park Pref, 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 Lennox LLC	Delaware
Terra Walnut Development, LLC	Delaware
Terra Tailor Lofs Pref, LLC	Delaware
Terra Rockland Pref, LLC	Delaware
Terra Chico Pref, LLC	Delaware
Terra Palm Springs, LLC	Delaware
Terra University Park Mortgage, LLC	Delaware
Terra 870SC, LLC	Delaware

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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

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

I, Vikram S. Uppal, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	March 18, 2021
		/s/ Vikram S. Uppal
		Vikram S. Uppal
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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

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

I, Gregory M. Pinkus, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	March 18, 2021
		/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, 2020, as filed with the Securities Exchange Commission on the date hereof (the “Report”), I, Vikram S. Uppal, Chief Executive Officer, and I, Gregory M. Pinkus, Chief Financial Officer, each certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

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

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

Date:	March 18, 2021
		/s/ Vikram S. Uppal
		Vikram S. Uppal
		Chief Executive Officer
		(Principal Executive Officer)
		/s/ Gregory M. Pinkus
		Gregory M. Pinkus
		Chief Financial Officer and Chief Operating Officer
		(Principal Financial and Principal Accounting Officer)

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

XML

Document and Entity Information Document - USD ($)	12 Months Ended
	Dec. 31, 2020	Mar. 18, 2021	Jun. 30, 2020
Cover [Abstract]
Entity Registrant Name	Terra Property Trust, Inc.
Entity Central Index Key	0001674356
Current Fiscal Year End Date	--12-31
Document Annual Report	true
Document Transition Report	false
Entity Filer Category	Non-accelerated Filer
Document Type	10-K
Document Period End Date	Dec. 31, 2020
Entity File Number	000-56117
Entity Tax Identification Number	81-0963486
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Ex Transition Period	true
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Small Business	true
Entity Emerging Growth Company	true
ICFR Auditor Attestation Flag	false
Entity Shell Company	false
Entity Incorporation, State or Country Code	MD
Entity Address, Address Line One	550 Fifth Avenue
Entity Address, Address Line Two	6th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10036
City Area Code	212
Local Phone Number	753-5100
Title of 12(g) Security	Common Stock $0.01 par value per share
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding		19,487,460
Entity Public Float			$ 0

XML

Consolidated Balance Sheets - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Assets
Cash and cash equivalents	$ 18,607,952	$ 29,609,484
Restricted cash	12,145,616	18,542,163
Cash held in escrow by lender	2,166,755	2,398,053
Marketable securities	1,287,500	0
Loan held for investment, net	422,280,515	378,612,768
Equity investment in a limited partnership	36,259,959	0
Real estate owned, Net
Land, building and building improvements, net	63,385,339	64,751,247
Lease intangible assets, net	9,793,600	12,845,228
Operating lease right-of-use assets	16,105,888	16,112,925
Interest receivable	2,509,589	1,876,799
Other assets	3,934,468	2,594,411
Total assets	588,477,181	527,343,078
Liabilities
Term loan payable, net of deferred financing fees	105,245,801	0
Obligations under participation agreements (Note 8)	71,581,897	103,186,327
Repurchase agreement payable, net of deferred financing fees	0	79,608,437
Mortgage loan payable, net of deferred financing fees and other	44,117,293	44,753,633
Secured borrowing	18,187,663	0
Interest reserve and other deposits held on investments	12,145,616	18,542,163
Operating lease liabilities	16,105,888	16,112,925
Lease intangible liabilities, net (Note 6)	10,249,776	11,424,809
Due to Manager (Note 8)	1,257,098	1,037,168
Interest payable	1,185,502	1,076,231
Accounts payable and accrued expenses	3,968,603	1,749,525
Unearned income	677,856	624,021
Other liabilities	429,123	1,684,106
Total liabilities	285,152,116	279,799,345
Commitments and Contingencies
Equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized and none issued	0	0
Common stock, $0.01 par value, 450,000,000 shares authorized and 19,487,460 and 15,125,681 shares issued and outstanding at December 31, 2020 and 2019, respectively	194,875	151,257
Additional paid-in capital	373,443,672	301,727,297
Accumulated deficit	(70,438,482)	(54,459,821)
Total equity	303,325,065	247,543,733
Total liabilities and equity	588,477,181	527,343,078
Loans Held for Investment
Assets
Loan held for investment, net	417,986,462	375,462,222
Loans Held For Investment Acquired Through Participation
Assets
Loan held for investment, net	4,294,053	3,150,546
12.5% Series A Cumulative Preferred Stock
Equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized and none issued	$ 125,000	$ 125,000

XML

Consolidated Balance Sheet (Parentheticals) - $ / shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	50,000,000	50,000,000
Preferred Stock, Shares Issued	0	0
Common Stock, Par Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	450,000,000	450,000,000
Common Stock, Shares, Issued	19,487,460	15,125,681
Common Stock, Shares, Outstanding	19,487,460	15,125,681
12.5% Series A Cumulative Preferred Stock
Preferred Stock, Shares Authorized	125	125
Preferred Stock, Shares Issued	125	125
Preferred Stock, Shares Outstanding	125	125
Preferred Stock, Dividend Rate, Percentage	12.50%	12.50%

XML

Consolidated Statements of Operations - USD ($)		12 Months Ended
		Dec. 31, 2020	Dec. 31, 2019
Revenues [Abstract]
Interest income		$ 39,392,209	$ 40,888,079
Real estate operating income		10,423,563	9,806,507
Prepayment fee income		0	285,838
Other operating income		505,116	419,101
Total		50,320,888	51,399,525
Operating expenses
Operating expenses reimbursed to Manager		6,041,075	4,875,153
Asset management fee		4,480,706	3,671,474
Asset serving fee		1,008,256	854,096
Provision for loan losses		3,738,758	0
Real estate operating expenses		4,505,119	3,989,911
Depreciation and amortization		4,635,980	3,785,977
Impairment charge		0	1,550,000
Professional Fees	[1]	1,695,876	3,373,554
Directors Fee		190,000	335,000
Other		371,444	172,232
Total Operating Expenses		26,667,214	22,607,397
Operating Income		23,653,674	28,792,128
Other Income and expense
Interest expense from obligations under participation agreements		(8,514,804)	(11,773,346)
Interest expense on repurchase agreement payable		(3,727,466)	(4,713,440)
Interest expense on mortgage loan payable		(2,976,913)	(3,093,284)
Interest expense on revolving credit facility		(1,398,103)	(169,283)
Interest expense on term loan payable		(2,137,651)	0
Interest expense on secured borrowing		(633,850)	0
Net loss on extinguishment of obligations under participation agreements		(319,453)	0
Realized gains on marketable securities		1,160,162	0
Unrealized gains on marketable securities		111,494	0
Income from equity investment in a limited partnership		38,640	0
Other income and expense		(18,397,944)	(19,749,353)
Net income		5,255,730	9,042,775
Preferred stock dividend declared		(15,624)	(15,624)
Net income allocable to common stock		$ 5,240,106	$ 9,027,151
Earnings per share — basic and diluted		$ 0.28	$ 0.60
Weighted-average shares — basic and diluted		18,813,066	14,967,183
Dividends declared per common share		$ 1.16	$ 2.03

[1] Amount for the year ended December 31, 2019 included $2.4 million of professional fees directly incurred, and which were previously deferred, in contemplation of the Company becoming a public entity. In the second quarter of 2019, Management decided to postpone indefinitely the Company’s public offering.

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Consolidated Statements of Operations (Parenthetical)	12 Months Ended
	Dec. 31, 2019 USD ($)
Professional Fees	$ 3,373,554	[1]
Public Offering
Professional Fees	$ 2,400,000

[1] Amount for the year ended December 31, 2019 included $2.4 million of professional fees directly incurred, and which were previously deferred, in contemplation of the Company becoming a public entity. In the second quarter of 2019, Management decided to postpone indefinitely the Company’s public offering.

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Consolidated Statements of Comprehensive Income Statement - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Statement of Other Comprehensive Income [Abstract]
Net income	$ 5,255,730	$ 9,042,775
Other comprehensive income
Net unrealized gains on marketable securities	192,919	0
Reclassification of net realized gains on marketable securities into earnings	(192,919)	0
Other comprehensive income	0	0
Total comprehensive Income	5,255,730	9,042,775
Preferred stock dividend declared	(15,624)	(15,624)
Comprehensive income attributable to common shares	$ 5,240,106	$ 9,027,151

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Consolidated Statements of Changes in Equity - USD ($)	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	12.5% Series A Cumulative Preferred Stock
Balance at beginning (Share) at Dec. 31, 2018			14,912,990				125
Balance beginning at Dec. 31, 2018	$ 265,292,359	$ 0	$ 149,130	$ 298,109,424	$ (33,091,195)	$ 0	$ 125,000
Issuance of common stock (Shares)			212,691
Issuance of common stock	3,620,000		$ 2,127	3,617,873
Payment for repurchase of common stock	0
Distribution declared on common share	(30,395,777)				(30,395,777)
Distributions declared on preferred shares	(15,624)				(15,624)
Net income	9,042,775				9,042,775
Net unrealized gains on marketable securities	0					0
Reclassification of net realized gains on marketable securities into earnings	0					0
Balance at ending (Share) at Dec. 31, 2019			15,125,681				125
Balance ending at Dec. 31, 2019	247,543,733	0	$ 151,257	301,727,297	(54,459,821)	0	$ 125,000
Issuance of common stock (Shares)			4,574,470
Issuance of common stock	75,379,993		$ 45,745	75,334,248
Number of Common Stock Repurchased			(212,691)
Payment for repurchase of common stock	(3,620,000)		$ (2,127)	(3,617,873)
Distribution declared on common share	(21,218,767)				(21,218,767)
Distributions declared on preferred shares	(15,624)				(15,624)
Net income	5,255,730				5,255,730
Net unrealized gains on marketable securities	192,919					192,919
Reclassification of net realized gains on marketable securities into earnings	(192,919)					(192,919)
Balance at ending (Share) at Dec. 31, 2020			19,487,460				125
Balance ending at Dec. 31, 2020	$ 303,325,065	$ 0	$ 194,875	$ 373,443,672	$ (70,438,482)	$ 0	$ 125,000

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Consolidated Statements of Shareholder Equity (Parentheticals) - $ / shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Dividends declared per common share	$ 1.16	$ 2.03
12.5% Series A Cumulative Preferred Stock
Preferred Stock, Dividend Rate, Percentage	12.50%	12.50%

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Net income	$ 5,255,730	$ 9,042,775
Adjustments to reconcile net income to net cash provided by operating activities:
Paid-in-kind interest income, net	(2,937,909)	(1,682,721)
Depreciation and amortization	4,635,980	3,785,977
Provision for loan losses	3,738,758	0
Impairment charge	0	1,550,000
Lease termination fee income	(236,000)	0
Amortization of net purchase premiums on loans	57,155	81,642
Straight-line rent adjustments	(714,334)	(681,920)
Amortization of deferred financing costs	1,644,944	1,993,486
Net loss on extinguishment of obligations under participation agreements	319,453	0
Amortization of above- and below-market rent intangibles	(1,027,129)	(446,997)
Amortization and accretion of investment-related fees, net	(4,140)	(85,764)
Amortization of above-market rent ground lease	(130,348)	(130,348)
Realized gains on marketable securities	(1,160,162)	0
Unrealized gains on marketable securities	(111,494)	0
Income from equity investment in a limited partnership	(38,640)	0
Changes in operating assets and liabilities:
Interest receivable	(632,790)	575,627
Other assets	(956,735)	1,639,202
Due to Manager	(409,927)	(213,485)
Unearned income	(490,233)	553,539
Interest payable	109,271	(135,511)
Accounts payable and accrued expenses	2,245,242	725,749
Other liabilities	(1,229,232)	931,549
Net cash provided by operating activities	7,927,460	17,502,800
Cash flows from investing activities:
Origination and purchase of loans	(108,488,411)	(185,327,219)
Proceeds from repayments of loans	66,144,729	181,131,959
Purchase of partnership interest in a limited partnership	(35,862,692)	0
Purchase of marketable securities	(6,039,567)	0
Proceeds from sale of marketable securities	6,023,723	0
Capital expenditures on real estate	0	(242,071)
Net cash used in investing activities	(78,222,218)	(4,437,331)
Cash flows from financing activities:
Proceeds from borrowings under the term loan	107,584,451	0
Proceeds from borrowings under revolving credit facility	35,000,000.0	16,000,000
Proceeds from borrowings under repurchase agreement	22,860,134	81,134,436
Proceeds from secured borrowing	18,281,848	0
Distributions Paid	(21,234,391)	(30,411,401)
Proceeds from obligations under participation agreements	22,498,765	34,665,630
Repayment of borrowings under repurchase agreement	(103,994,570)	(34,200,000)
Payment for repurchase of common stock	(3,620,000)	0
Repayment of borrowings under revolving credit facility	(35,000,000)	(16,000,000)
Proceeds from issuance of common stock	0	3,620,000
Change in interest reserve and other deposits held on investments	(6,396,547)	1,171,501
Repayment of mortgage principal	(594,255)	(385,520)
Payment of financing costs	(2,361,369)	(405,673)
Repayments of obligations under participation agreements	(5,855,759)	(46,243,595)
Net cash provided by financing activities	52,665,381	8,945,378
Net (decrease) increase in cash, cash equivalents and restricted cash	(17,629,377)	22,010,847
Cash, cash equivalents and restricted cash at beginning of year	50,549,700	28,538,853
Cash, cash equivalents and restricted cash at end of year (Note 2)	32,920,323	50,549,700
Terra Property Trust 2 Inc
Cash flows from financing activities:
Proceeds from issuance of common stock	16,897,074	0
Terra International Fund 3
Cash flows from financing activities:
Proceeds from issuance of common stock	$ 8,600,000	$ 0

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Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows - Supplemental cash information - (Parenthetical) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Statement of Cash Flows [Abstract]
Cash paid for interest	$ 16,317,378	$ 17,308,592

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Consolidated Statement of Cash Flow - Merger (Parenthetical)	Mar. 01, 2020 USD ($) $ / shares shares
Terra Fund 7
Business Combination Common Stock Shares | shares	2,116,785.76
Common Stock, Par Value Per Share | $ / shares	$ 0.01
Terra Property Trust 2 Inc
Equity issued in the Merger	$ 34,630,615
Proceeds from equity issued in the Merger	16,897,074
Business Combination Consideration	17,733,541
Settlement of obligations under participation agreements	17,688,741
Interest receivable	134,543
Other assets	18,384
Accounts payable and accrued expenses	(57,433)
Due to Manager	(50,694)
Net Assets Exchanged	$ 17,733,541

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Consolidated Statements of Cash Flows - Non-cash Proceeds from Issuance of Common Stock to TIF3 REIT (Parenthetical)	Mar. 02, 2020 USD ($)
Terra International Fund 3
Equity issued in the Merger	$ 40,749,378
Proceeds from equity issued to Terra Offshore REIT	8,600,000
Business Combination Consideration	32,149,378
Settlement of obligations under participation agreements	32,112,257
Interest receivable	270,947
Due to Manager	(233,826)
Net Assets Exchanged	$ 32,149,378

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Consolidated Statements of Cash Flows - Non-cash Proceeds from Issuance of Common Stock to TIF3 REIT Narrative (Parenthetical) - Terra International Fund 3 - USD ($)	Mar. 02, 2020	Feb. 27, 2020
Business Combination Common Stock Shares	2,457,684.59
Loans held for investment acquired through participation	$ 32,112,257
Proceeds from issuance of common stock		$ 8,600,000

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Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows - Supplemental Non-Cash Investing Activities - Lease termination (Parenthetical)	Dec. 31, 2020 USD ($)
Lease Termination Fees	$ 588,477,181
Below Market Lease, Net	10,249,776
Contract Termination
Cash	142,620
Furniture and Fixtures	236,000
Lease Termination Fees	378,620
In-place lease intangible assets	869,694
Below Market Lease, Net	(616,392)
Rent receivable	125,318
Net Assets	$ 378,620

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Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows - Supplemental Non-Cash Investing Activities - Deed in Lieu of Foreclosure (Parenthetical)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jan. 09, 2019 USD ($) a
Carrying Value	$ 422,280,515	$ 378,612,768
Interest receivable	$ 2,509,589	$ 1,876,799
First Mortgage
Carrying Value			$ 14,325,000
Interest receivable			439,300
Restricted Cash and Investments			(60,941)
Land Available-for-sale			$ 14,703,359
Area of Land | a			4.9
Mortgage Loans in Process of Foreclosure, Amount			$ 14,300,000
Land
Land			$ 14,703,359

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Business

12 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1. Business

    Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) was incorporated under the general corporation laws of the State of Maryland on December 31, 2015. Terra Property Trust is a real estate credit focused company that originates, structures, funds and manages commercial real estate investments, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments. The Company’s loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. The Company focuses on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties in primary and secondary markets. The Company believes these loans are subject to less competition and offer higher risk adjusted returns than larger loans with similar risk/return metrics.

    On January 1, 2016, Terra Secured Income Fund 5, LLC (“Terra Fund 5”), the Company’s then parent, contributed its consolidated portfolio of net assets to the Company pursuant to a contribution agreement in exchange for shares of the Company’s common stock. Upon receipt of the contribution of the consolidated portfolio of net assets from Terra Fund 5, the Company commenced its operations on January 1, 2016. On March 2, 2020, the Company engaged in a series of transactions pursuant to which the Company issued an aggregate of 4,574,470.35 shares of its common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by the Company, cash of $25.5 million and other working capital. As of December 31, 2020, Terra JV, LLC (“Terra JV”) held 87.4% of the issued and outstanding shares of the Company's common stock with the remainder held by Terra Offshore REIT (Note 3).

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

    The Company’s investment activities are externally managed by Terra REIT Advisors, LLC (“Terra REIT Advisors” or the “Manager”), a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC, pursuant to a management agreement (the “Management Agreement”), under the oversight of the Company’s board of directors (Note 8). The Company does not currently have any employees and does not expect to have any employees. Services necessary for the Company’s business are provided by individuals who are employees of the Manager or by individuals who were contracted by the Company or by the Manager to work on behalf of the Company pursuant to the terms of the Management Agreement.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

    The consolidated financial statements include all of the Company’s accounts and those of its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

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

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

VIE Model

An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make

decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights.

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

Loans Held for Investment

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

Allowance for Loan Losses

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

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

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

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

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

    There may be circumstances where the Company modifies a loan by granting the borrower a concession that it might not otherwise consider when a borrower is experiencing financial difficulty or is expected to experience financial difficulty in the

foreseeable future. Such concessionary modifications are classified as troubled debt restructurings (“TDR”s) unless the modification solely results in a delay in a payment that is insignificant. Loans classified as TDRs are considered impaired loans for reporting and measurement purposes.

Equity Investment in a Limited Partnership

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

Marketable Securities

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

Real Estate Owned, Net

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

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

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

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

Leases

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

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

Revenue Recognition

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

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

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

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

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

Cash, Cash Equivalents and Restricted Cash

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

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

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

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

	December 31,
	2020		2019
Cash and cash equivalents	$	18,607,952	$	29,609,484
Restricted cash	12,145,616		18,542,163
Cash held in escrow by lender	2,166,755		2,398,053
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	32,920,323	$	50,549,700

 Participation Interests

Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. For the investments for which

participation has been granted, the interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations. Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes doubtful. See “Obligations under Participation Agreements” in Note 9 for additional information.

Term Loan

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

Repurchase Agreement

The Company financed certain of its senior loans through repurchase transactions under a master repurchase agreement. The Company accounted for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees.

Fair Value Measurements

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

Deferred Financing Costs

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

Income Taxes

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

     As of December 31, 2020, the Company has satisfied all the requirements for a REIT. No provision for federal income taxes has been included in the consolidated financial statements for the years ended December 31, 2020 and 2019.

    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, 2020 and 2019, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s 2017-2019 federal tax returns remain subject to examination by the Internal Revenue Service.

Earnings Per Share

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

Use of Estimates

    The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. As of December 31, 2020, there has been an ongoing global outbreak of a novel coronavirus (“COVID-19”), which has spread to over 200 countries and territories, including the United States, and has spread to every state in the United States. The World Health Organization has designated COVID-19 as a pandemic, and numerous countries, including the United States, have declared national emergencies with respect to COVID-19. The global impact of the pandemic has been rapidly evolving, and as cases of COVID-19 have continued to be identified in additional countries, many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading and operations of non-essential offices and retail centers. Such actions are creating disruption in global supply chains, and adversely impacting many industries. The pandemic could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2020, however uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of December 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates.

Segment Information

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

Recent Accounting Pronouncements

    In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. In April 2019, the FASB issued additional amendments to clarify the scope of ASU 2016-13 and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. In May 2019, the FASB issued ASU 2019-05 — Targeted Transition Relief, which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In October 2019, the FASB decided that for smaller reporting companies, ASU 2016-13 and related amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company meets the definition of a smaller reporting company under the regulation of the Securities and Exchange Commission. As such, the Company will adopt this ASU and related amendments on January 1, 2023. Management is currently evaluating the impact this change will have on the Company’s consolidated financial statements and disclosures.

    In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of information required by U.S. GAAP. The amendments in ASU 2018-13 added, removed and modified certain fair value measurement disclosure requirements. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year

of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted ASU 2018-13 on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on its consolidated financial statements and disclosures.

    London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. At the end of 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR could be discontinued. Other interest rates used globally could also be discontinued for similar reasons. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The provisions of optional relief include: (i) contract modifications - account for the modification as a continuation of the existing contract without additional analysis; (ii) hedging accounting - continue hedge accounting when certain critical terms of a hedging relationship change; and (iii) held-to-maturity (HTM) debt securities - one-time sale and/or transfer to available for sale or trading may be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. Companies can apply the amendments in ASU 2020-04 immediately. However, ASU 2020-04 will only be available for a limited time (generally through December 31, 2022). The Company is currently evaluating the impact of the reference rate reform and ASU 2020-04 on its consolidated financial statements and disclosures.

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Merger and Issuance of Common Stock to Terra Offshore REIT

12 Months Ended

Dec. 31, 2020

Business Combinations [Abstract]

Business Combination Disclosure

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

Merger

    On February 28, 2020, the Company entered into the Merger Agreement pursuant to which TPT2 was merged with and into the Company, with the Company continuing as the surviving corporation, effective March 1, 2020. In connection with the Merger, each share of common stock, par value $0.01 per share, of TPT2 issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive from the Company a number of shares of common stock, par value $0.01 per share, of the Company equal to an exchange ratio, which was 1.2031. The exchange ratio was based on the relative net asset values of the Company and TPT2 as of December 31, 2019 as adjusted to reflect changes in the net working capital of each of the Company and TPT2 during the period from January 1, 2020 through March 1, 2020, the effective time for the Merger. For purposes of determining the respective fair values of the Company and TPT2, the value of the loans (or participation interests therein) held by each of the Company and TPT2 was the value of such loans (or participation interests) as set forth in the audited financial statements of the Company as of and for the year ended December 31, 2019. As a result, Terra Fund 7, the sole stockholder of TPT2, received 2,116,785.76 shares of common stock of the Company as consideration in the Merger. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder.

    The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Merger:

Total Consideration
Equity issued in the Merger	$	34,630,615
	$	34,630,615
Net Assets of TPT2 Received in the Merger
Loans held for investment acquired through participation	$	17,688,741
Cash and cash equivalents	16,897,074
Interest receivable	134,543
Other assets	18,384
Accounts payable and accrued expenses	(57,433)
Due to Manager	(50,694)
Total identifiable net assets	$	34,630,615

    The fair value of the 2,116,785.76 shares of the Company’s stock issued in the Merger as consideration paid for TPT2 was derived from the fair value per share of the Company as of December 31, 2019 as adjusted to reflect the change in the net working capital of the Company during the period from January 1, 2020 through March 1, 2020, the effective time of the Merger.

    In connection with the Merger, the size of the board of directors of the Company was reduced from eight directors to four directors, with Andrew M. Axelrod, Vikram S. Uppal, Roger H. Beless and Michael L. Evans continuing as directors of the Company.

Issuance of Common Stock to Terra Offshore REIT

    In addition, on March 2, 2020, the Company entered into two separate contribution agreements, one by and among the Company, Terra Offshore REIT and Terra Income Fund International, and another by and among the Company, Terra Offshore REIT and Terra Secured Income Fund 5 International, pursuant to which the Company issued 2,457,684.59 shares of common stock of the Company to Terra Offshore REIT in exchange for the settlement of $32.1 million of participation interests in loans also held by the Company, $8.6 million in cash and other net working capital. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder.

    The fair value of the 2,457,684.59 shares of the Company’s stock issued in the transaction as consideration paid for Terra Offshore REIT was derived from the fair value per share of the Company as of December 31, 2019, which was the most recently determined fair value per share of the Company.

    The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Issuance of Common Stock to Terra Offshore REIT:

Total Consideration
Equity issued to Terra Offshore REIT	$	40,749,378
	$	40,749,378
Net Assets of Terra Offshore REIT Received
Investments through participation interest, at fair value	$	32,112,257
Cash and cash equivalents	8,600,000
Interest receivable	270,947
Due to Manager	(233,826)
Total identifiable net assets	$	40,749,378

On April 29, 2020, the Company repurchased 212,691 shares of common stock at a price of $17.02 per share that the Company had previously sold to Terra Offshore REIT on September 30, 2019 (Note 8).

Terra JV, LLC

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

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

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

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

    As of December 31, 2020, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.

Net Loss on Extinguishment of Obligations Under Participation Agreements

    As discussed in Note 8, in the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties. The obligations under participation agreements were released as a result of the Merger and the Issuance of Common Stock to Terra Offshore REIT. In connection with these transactions, the Company recognized a net loss of $0.3 million for the three months ended March 31, 2020, which was primarily related to transaction costs incurred in connection with both transactions.

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Loans Held for Investment

12 Months Ended

Dec. 31, 2020

Receivables [Abstract]

Investment

Note 4. Loans Held for Investment

Portfolio Summary

The following table provides a summary of the Company’s loan portfolio as of December 31, 2020 and 2019:

	December 31, 2020									December 31, 2019
	Fixed Rate			Floating Rate (1)(2)(3)			Total			Fixed Rate			Floating Rate (1)(2)(3)			Total
Number of loans	6			14			20			8			15			23
Principal balance	$	56,335,792		$	367,838,966		$	424,174,758		$	70,692,767		$	306,695,550		$	377,388,317
Carrying value	$	56,464,310		$	365,816,205		$	422,280,515		$	71,469,137		$	307,143,631		$	378,612,768
Fair value	$	56,284,334		$	363,122,860		$	419,407,194		$	71,516,432		$	307,643,983		$	379,160,415
Weighted-average coupon rate	12.17		%	7.95		%	8.51		%	11.93		%	9.13		%	9.65		%
Weighted-average remaining term (years)	1.78			1.44			1.48			2.28			2.09			2.13

_______________

(1)These loans pay a coupon rate of LIBOR plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.14% and 1.76% as of December 31, 2020 and 2019, respectively.

(2)As of December 31, 2020, amounts included $184.2 million of senior mortgages used as collateral for $107.6 million of borrowings under a term loan (Note 9). These borrowings bear interest at an annual rate of LIBOR plus 4.25% with a LIBOR floor of 1.00% as of December 31, 2020. As of December 31, 2019, amounts included $114.8 million of senior mortgages used as collateral for $81.1 million of borrowings under a repurchase agreement (Note 9). These borrowings bore interest at an annual rate of LIBOR plus a spread ranging from 2.25% to 2.50% as of December 31, 2019. The repurchase agreement was terminated in September 2020.

(3)As of both December 31, 2020 and 2019, twelve of these loans are subject to a LIBOR floor.

Lending Activities

The following table presents the activities of the Company’s loan portfolio for the years ended December 31, 2020 and 2019:

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2020	$	375,462,222	$	3,150,546	$	378,612,768
New loans made	107,359,299		1,129,112		108,488,411
Principal repayments received	(66,144,729)		—		(66,144,729)
PIK interest (1)	4,442,759		—		4,442,759
Net amortization of premiums on loans	(61,391)		—		(61,391)
Accrual, payment and accretion of investment-related fees and other, net	667,060		14,395		681,455
Provision for loan losses	(3,738,758)		—		(3,738,758)
Balance, December 31, 2020	$	417,986,462	$	4,294,053	$	422,280,515

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2019	$	388,243,974	$	—	$	388,243,974
New loans made	182,206,332		3,120,887		185,327,219
Principal repayments received	(181,131,959)		—		(181,131,959)
Foreclosure of collateral (2)	(14,325,000)		—		(14,325,000)
PIK interest (1)	2,476,355		—		2,476,355
Net amortization of premiums on loans	(104,426)		—		(104,426)
Accrual, payment and accretion of investment-related fees, net (3)	(1,903,054)		29,659		(1,873,395)
Balance, December 31, 2019	$	375,462,222	$	3,150,546	$	378,612,768

_______________

(1)Certain loans in the Company’s portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted to $1.5 million and $0.8 million for the years ended December 31, 2020 and 2019, respectively.

(2)On January 9, 2019, the Company acquired 4.9 acres of adjacent land encumbering a $14.3 million first mortgage via deed in lieu of foreclosure in exchange for the relief of the first mortgage and related fees and expenses (Note 6).

(3)Amount for the year ended December 31, 2019 included $0.5 million of deferred origination fees that were previously recorded as unearned income.

Portfolio Information

    The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of December 31, 2020 and 2019:

	December 31, 2020						December 31, 2019
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	254,042,847	$	255,093,989	60.5	%	$	178,130,623	$	178,203,675	47.1	%
Preferred equity investments	141,590,632		142,002,144		33.6	%	157,144,040		157,737,763		41.6	%
Mezzanine loans	28,541,279		28,923,140		6.8	%	42,113,654		42,671,330		11.3	%
Allowance for loan losses	—		(3,738,758)		(0.9)	%	—		—		—	%
Total	$	424,174,758	$	422,280,515	100.0	%	$	377,388,317	$	378,612,768	100.0	%

	December 31, 2020						December 31, 2019
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	182,698,225	$	183,053,751	43.3	%	$	142,055,845	$	141,870,355	37.5	%
Multifamily	87,978,759		88,627,207		21.0	%	76,640,369		77,136,016		20.4	%
Student housing	55,294,414		55,643,591		13.2	%	58,049,717		58,553,496		15.5	%
Hotel	53,392,809		53,687,304		12.7	%	46,598,011		46,731,939		12.3	%
Infill land	27,210,551		27,305,496		6.5	%	36,444,375		36,624,375		9.7	%
Condominium	10,600,000		10,701,924		2.5	%	10,600,000		10,696,587		2.8	%
Industrial	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.8	%
Allowance for loan losses	—		(3,738,758)		(0.9)	%	—		—		—	%
Total	$	424,174,758	$	422,280,515	100.0	%	$	377,388,317	$	378,612,768	100.0	%

	December 31, 2020						December 31, 2019
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	200,279,688	$	200,990,328	47.6	%	$	150,988,463	$	151,108,109	39.9	%
New York	79,187,004		79,310,276		18.8	%	79,734,323		79,896,663		21.1	%
Georgia	74,116,787		74,505,752		17.6	%	61,772,764		61,957,443		16.4	%
North Carolina	33,242,567		33,438,806		7.9	%	32,592,767		32,766,311		8.7	%
Washington	23,500,000		23,682,536		5.6	%	23,500,000		23,661,724		6.2	%
Massachusetts	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.8	%
Texas	3,848,712		3,887,200		0.9	%	3,500,000		3,531,776		0.9	%
Illinois	—		—		—	%	8,004,877		8,071,562		2.1	%
Kansas	—		—		—	%	6,200,000		6,251,649		1.7	%
Other (1)	3,000,000		3,204,375		0.8	%	4,095,123		4,367,531		1.2	%
Allowance for loan losses	—		(3,738,758)		(0.9)	%	—		—		—	%
Total	$	424,174,758	$	422,280,515	100.0	%	$	377,388,317	$	378,612,768	100.0	%

_______________

(1)Other includes a $3.0 million loan with collateral located in South Carolina at both December 31, 2020 and 2019. Other also includes $1.1 million of the unused portion of a credit facility at December 31, 2019.

Loan Risk Rating

    As described in Note 2, 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.

    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, 2020 and 2019:

	December 31, 2020							December 31, 2019
Loan Risk Rating	Number of Loans	Principal Balance		Carrying Value		% of Total		Number of Loans	Principal Balance		Carrying Value		% of Total
1	0	$	—	$	—	—	%	—	$	—	$	—	—	%
2	1	7,000,000		7,000,000		1.6	%	5	50,000,000		50,284,751		13.3	%
3	14	323,696,475		325,284,285		76.4	%	17	322,648,317		323,588,017		85.4	%
4 (1)	3	72,861,587		73,079,804		17.2	%	—	—		—		—	%
5 (1)	1	3,848,712		3,887,200		0.9	%	—	—		—		—	%
Other (2)	1	16,767,984		16,767,984		3.9	%	1	4,740,000		4,740,000		1.3	%
	20	$	424,174,758	426,019,273		100.0	%	23	$	377,388,317	378,612,768		100.0	%
Allowance for loan losses				(3,738,758)							—
Total, net of allowance for loan losses				$	422,280,515						$	378,612,768

_______________

(1)The increase in number of loans with a loan risk rating of “4” and “5” was due to the higher risk in select loans as a result of asset-specific factors that are particularly negatively impacted by the COVID-19 pandemic.

(2)These loans were deemed impaired and removed from the pool of loans on which a general allowance is calculated. For the year ended December 31, 2020, the Company recorded a specific allowance of $2.5 million on this loan as a result of a decline in the fair value of the collateral. For the year ended December 31, 2019, no specific reserve for loan losses was recorded on this loan because the fair value of the collateral was greater than carrying value of the loan. In March 2020, this loan was repaid in full.

    As of December 31, 2020, the Company had three loans with a loan risk rating of “4” and one loan with a loan risk rating of “5”, and recorded a general allowance for loan losses of $1.3 million.

     The following table presents the activity in the Company’s allowance for loan losses for the years ended December 31, 2020 and 2019:

	Years Ended December 31,
	2020		2019
Allowance for loan losses, beginning of period	$	—	$	—
Provision for loan losses	3,738,758		—
Charge-offs	—		—
Recoveries	—		—
Allowance for loan losses, end of period	$	3,738,758	$	—

    The allowance for loan losses reserve reflects the macroeconomic impact of the COVID-19 pandemic on commercial real estate markets generally and is not specific to any loan losses or impairments in our portfolio. See Note 2 for further discussion of COVID-19.

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Equity Investment in a Limited Partnership

12 Months Ended

Dec. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure

Note 5. Equity Investment in a Limited Partnership

On August 3, 2020, the Company entered into a subscription agreement with Terra Real Estate Credit Opportunities Fund, LP (“Terra RECO”) whereby the Company committed to fund up to $50.0 million to purchase a limited partnership interest in Terra RECO. Terra RECO’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. Terra RECO may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). The general partner of Terra RECO is Terra Real Estate Credit Opportunities Fund GP, LLC, which is a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC. As of December 31, 2020, the unfunded commitment was $14.1 million.

The Company evaluated its equity interest in Terra RECO and determined it does not have a controlling financial interest and is not the primarily beneficiary. Accordingly, the equity interest in Terra RECO is accounted for as an equity method investment. As of December 31, 2020, the Company owned a 90.3%, or $36.3 million, of equity interest in Terra RECO. For the year ended December 31, 2020, the Company recorded equity income from Terra RECO of $38,640 and did not receive any distributions from Terra RECO.

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

	December 31, 2020
Investments at fair value (cost of $44,174,031)	$	44,715,979
Other assets	5,331,840
Total assets	50,047,819
Obligations under participation agreement (proceeds of $6,222,830)	6,347,478
Other liabilities	4,204,147
Total liabilities	$	10,551,625
Partners’ capital	$	39,496,194

	Year Ended December 31, 2020
Total investment income	$	239,837
Total expenses	614,362
Net investment loss	(374,525)
Unrealized appreciation on investments	417,300
Net increase in partners' capital resulting from operations	$	42,775

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Real Estate Owned, Net

12 Months Ended

Dec. 31, 2020

Real Estate [Abstract]

Real Estate Disclosure

Note 6. Real Estate Owned, Net

Real Estate Activities

2020 — In June 2020, the Company received a notice from a tenant occupying a portion of the office building that the Company acquired in July 2018 via foreclosure of their intention to terminate the lease. In connection with the lease termination effective September 4, 2020, the Company received from the tenant lease termination fee of $0.4 million, which included approximately $0.2 million of cash and $0.2 million of the furniture and fixtures in the office space. The furniture and fixtures have a remaining useful life of 2.5 years and are being depreciated on a straight-line basis over the remaining useful life. Additionally, the Company wrote off the related unamortized in-place lease intangible assets of $0.9 million, unamortized below-market rent intangible liabilities of $0.6 million and rent receivable of $0.1 million. There was no gain or loss recognized on the lease termination.

2019 —    On January 9, 2019, the Company acquired 4.9 acres of adjacent land encumbering a first mortgage via deed in lieu of foreclosure in exchange for the payment of the first mortgage and related fees and expenses.

    The following table summarizes the carrying value of the first mortgage prior to the deed in lieu of foreclosure on January 9, 2019:

Carrying Value of First Mortgage
Loan held for investment	$	14,325,000
Interest receivable	439,300
Restricted cash applied against loan principal amount	(60,941)
	$	14,703,359

    The table below summarizes the allocation of the estimated fair value of the real estate acquired on January 9, 2019 based on the policy described in Note 2:

Assets Acquired
Real estate owned:
Land	$	14,703,359

    The Company capitalized transaction costs of approximately $0.2 million to land.

For the year ended December 31, 2019, the Company recorded an impairment charge of $1.6 million on the land in order to reduce the carrying value of the land to its estimated fair value, which was the estimated selling price less the cost of sale.

Real Estate Owned, Net

    Real estate owned is comprised of 4.9 acres of adjacent 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:

	December 31, 2020						December 31, 2019
	Cost		Accumulated Depreciation/Amortization		Net		Cost		Accumulated Depreciation/Amortization		Net
Real estate:
Land	$	13,395,430	$	—	$	13,395,430	$	13,395,430	$	—	$	13,395,430
Building and building improvements	51,725,969		(3,125,143)		48,600,826		51,725,969		(1,831,980)		49,893,989
Tenant improvements	1,854,640		(670,090)		1,184,550		1,854,640		(392,812)		1,461,828
Furniture and fixtures	236,000		(31,467)		204,533		—		—		—
Total real estate	67,212,039		(3,826,700)		63,385,339		66,976,039		(2,224,792)		64,751,247
Lease intangible assets:
In-place lease	15,852,232		(6,172,747)		9,679,485		15,852,232		(3,138,675)		12,713,557
Above-market rent	156,542		(42,427)		114,115		156,542		(24,871)		131,671
Total intangible assets	16,008,774		(6,215,174)		9,793,600		16,008,774		(3,163,546)		12,845,228
Lease intangible liabilities:
Below-market rent	(3,371,314)		1,702,800		(1,668,514)		(3,371,314)		658,115		(2,713,199)
Above-market ground lease	(8,896,270)		315,008		(8,581,262)		(8,896,270)		184,660		(8,711,610)
Total intangible liabilities	(12,267,584)		2,017,808		(10,249,776)		(12,267,584)		842,775		(11,424,809)
Total real estate	$	70,953,229	$	(8,024,066)	$	62,929,163	$	70,717,229	$	(4,545,563)	$	66,171,666

Real Estate Operating Revenues and Expenses

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

	Years Ended December 31,
	2020		2019
Real estate operating revenues:
Lease revenue	$	8,150,041	$	7,683,843
Other operating income	2,273,522		2,122,664
Total	$	10,423,563	$	9,806,507
Real estate operating expenses:
Utilities	$	166,003	$	191,657
Real estate taxes	1,925,999		1,194,192
Repairs and maintenances	659,934		618,755
Management fees	224,732		252,164
Lease expense, including amortization of above-market ground lease	1,134,152		1,135,096
Other operating expenses	394,299		598,047
Total	$	4,505,119	$	3,989,911

Leases

    On July 30, 2018, the Company foreclosed on a multi-tenant office building in full satisfaction of a first mortgage and related fees and expenses. In connection with the foreclosure, the Company assumed four leases whereby the Company is the lessor to the leases. These four tenant leases had remaining lease terms ranging from 6.3 years to 8.8 years as of July 30, 2018 and provide for annual fixed rent increase. Three of the tenant leases each provides two options to renew the lease for five years each and the remaining tenant lease provides one option to renew the lease for five years.

    In addition, the Company assumed 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 68.3 years 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 was scheduled for November 1, 2020, however the Company is currently negotiating with the landlord to determine the fair value of the land, on which the ground rent is based. Since future rent increase on the ground lease is unknown, the Company did not include the future rent increase in calculating the present value of future rent payments. The ground lease does not provide for renewal options.

    On the date of foreclosure, the Company performed lease classification test on the tenant leases as well as the ground lease in accordance with ASC 840. The result of the lease classification test indicated that the tenant leases and the ground lease shall be classified as operating leases on the date of foreclosure.

    On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) using a modified retrospective transition approach and chose not to adjust comparable periods (Note 2). The Company elected to use the package of practical expedients for its existing leases whereby the Company did not need to reassess whether a contract is or contains a lease, lease classification and initial direct costs. As a result, the leases continue to be classified as operating leases under ASC 842, Leases. The adoption of ASU 2016-02 did not have any impact on the tenant leases; however, for the ground lease, the Company recognized $16.1 million of both operating lease right-of-use assets and operating lease liabilities on its consolidated balance sheets. No cumulative effect adjustment was recorded because there was no change to operating lease cost. In addition, as of January 1, 2019, the Company had $0.5 million of unamortized leasing commission (initial direct costs) on the tenant leases. The Company elected to continue to amortize the remaining leasing commission through the end of the lease terms.

Scheduled Future Minimum Rent Income 

    Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at December 31, 2020 are as follows: 

Years Ending December 31,	Total
2021	$	6,628,573
2022	7,132,812
2023	7,363,647
2024	7,600,861
2025	4,111,257
Thereafter	1,199,623
Total	$	34,036,773

Scheduled Annual Net Amortization of Intangibles 

    Based on the intangible assets and liabilities recorded at December 31, 2020, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows:

Years Ending December 31,	Net Decrease in Real Estate Operating Revenue (1)		Increase in Depreciation and Amortization (1)		Decrease in Rent Expense (1)		Total
2021	(338,220)		2,062,060		(130,348)		1,593,492
2022	(338,220)		2,062,060		(130,348)		1,593,492
2023	(338,220)		2,062,060		(130,348)		1,593,492
2024	(338,220)		2,062,060		(130,348)		1,593,492
2025	(181,608)		1,431,245		(130,348)		1,119,289
Thereafter	(19,911)		—		(7,929,522)		(7,949,433)
Total	$	(1,554,399)	$	9,679,485	$	(8,581,262)	$	(456,176)

_______________

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

Supplemental Ground Lease Disclosures

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

	December 31,
	2020			2019
Operating lease
Operating lease right-of-use assets	$	16,105,888		$	16,112,925
Operating lease liabilities	$	16,105,888		$	16,112,925
Weighted average remaining lease term — operating lease (years)	65.8			66.8
Weighted average discount rate — operating lease	7.9		%	7.9		%

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

	Years Ended December 31,
	2020		2019
Operating lease cost	$	1,264,500	$	1,265,445

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

	Years Ended December 31,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,264,500	$	1,265,445
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	1,264,500	$	1,265,445

    Maturities of operating lease liabilities are as follows:

Years Ending December 31,	Operating Lease
2021	1,264,500
2022	1,264,500
2023	1,264,500
2024	1,264,500
2025	1,264,500
Thereafter	76,871,063
Total lease payments	83,193,563
Less: Imputed interest	(67,087,675)
Total	$	16,105,888

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Fair Value Measurements

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block]

Note 7. Fair Value Measurements

    The Company adopted the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:

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

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

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

financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment.

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

As of December 31, 2020 and 2019, 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, term loan payable, mortgage loan payable, repurchase agreement payable and revolving credit facility payable. 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.

Financial Instruments Carried at Fair Value on a Recurring Basis

    From time to time, the Company may invest in short-term debt and equity securities which are classified as available-for-sale securities, which are presented at fair value 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, as of December 31, 2020, according to the fair value hierarchy:

	December 31, 2020
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Equity securities	$	1,287,500	$	—	$	—	$	1,287,500
Debt securities	—		—		—		—
Total	$	1,287,500	$	—	$	—	$	1,287,500

    The following table presents the activities of the marketable securities for the periods presented.

	Years Ended December 31,
	2020		2019
Beginning balance	$	—	$	—
Purchases	6,039,567		—
Proceeds from sale	(6,023,723)		—
Realized gains on marketable securities	1,160,162		—
Unrealized gains on marketable securities	111,494		—
Ending balance	$	1,287,500	$	—

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 fees, and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets:

		December 31, 2020						December 31, 2019
	Level	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Loans:
Loans held for investment, net	3	$	419,924,758	$	421,725,220	$	415,113,225	$	374,267,430	$	375,462,222	$	375,956,154
Loans held for investment acquired through participation, net	3	4,250,000		4,294,053		4,293,969		3,120,887		3,150,546		3,204,261
Allowance for loan losses		—		(3,738,758)		—		—		—		—
Total loans		$	424,174,758	$	422,280,515	$	419,407,194	$	377,388,317	$	378,612,768	$	379,160,415
Liabilities:
Term loan payable	3	$	107,584,451	$	105,245,801	$	107,248,555	$	—	$	—	$	—
Obligations under participation agreements	3	71,266,303		71,581,897		70,693,207		102,564,795		103,186,327		103,188,783
Mortgage loan payable	3	44,020,225		44,117,293		44,348,689		44,614,480		44,753,633		44,947,378
Secured borrowing	3	18,281,848		18,187,663		17,037,032		—		—		—
Repurchase agreement payable	3	—		—		—		81,134,436		79,608,437		81,134,436
Total liabilities		$	241,152,827	$	239,132,654	$	239,327,483	$	228,313,711	$	227,548,397	$	229,270,597

    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, 2020 and 2019 due to their short-term nature.

Valuation Process for Fair Value Measurement

    The fair value of the Company’s investment in equity securities is determined based on quoted prices in an active market and is classified as Level 1 of the fair value hierarchy.

    Market quotations are not readily available for the Company’s real estate-related loan investments, all of which are included in Level 3 of the fair value hierarchy, and therefore these investments are valued utilizing a yield approach, i.e. a discounted cash flow methodology to arrive at an estimate of the fair value of each respective investment in the portfolio using an estimated market yield. In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, including 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.

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

The following table summarizes the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of December 31, 2020 and 2019. 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, 2020		Primary Valuation Technique	Unobservable Inputs	December 31, 2020
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	415,113,225	Discounted cash flow	Discount rate	5.29	%	20.05	%	10.38	%
Loans held for investment acquired through participation, net	4,293,969		Discounted cash flow	Discount rate	12.89	%	12.89	%	12.89	%
Total Level 3 Assets	$	419,407,194
Liabilities:
Term loan payable	$	107,248,555	Discounted cash flow	Discount rate	5.25	%	5.25	%	5.25	%
Obligations under Participation Agreements	70,693,207		Discounted cash flow	Discount rate	9.75	%	20.05	%	12.58	%
Mortgage loan payable	44,348,689		Discounted cash flow	Discount rate	6.08	%	6.08	%	6.08	%
Secured borrowing	17,037,032		Discounted cash flow	Discount rate	11.25	%	11.25	%	11.25	%
Total Level 3 Liabilities	$	239,327,483

	Fair Value at December 31, 2019		Primary Valuation Technique	Unobservable Inputs	December 31, 2019
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	375,956,154	Discounted cash flow	Discount rate	4.71	%	14.95	%	9.77	%
Loans held for investment acquired through participation, net	3,204,261		Discounted cash flow	Discount rate	11.90	%	11.90	%	11.90	%
Total Level 3 Assets	$	379,160,415
Liabilities:
Obligations under Participation Agreements	$	103,188,783	Discounted cash flow	Discount rate	9.00	%	14.95	%	11.99	%
Mortgage loan	44,947,378		Discounted cash flow	Discount rate	6.08	%	6.08	%	6.08	%
Repurchase agreement payable	81,134,436		Discounted cash flow	Discount rate	4.11	%	4.75	%	4.33	%
Total Level 3 Liabilities	$	229,270,597

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Related Party Transactions

12 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

Related Party Transactions Disclosure

Note 8. Related Party Transactions

Management Agreement

The Company entered into a 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,
	2020		2019
Origination and extension fee expense (1)(2)	$	1,383,960	$	1,992,492
Asset management fee	4,480,706		3,671,474
Asset servicing fee	1,008,256		854,096
Operating expenses reimbursed to Manager	6,041,075		4,875,153
Disposition fee (3)	504,611		1,408,055
Total	$	13,418,608	$	12,801,270

_______________

(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 year ended December 31, 2020 excluded $0.4 million of origination fee paid to the Manager in connection with the Company’s equity investment in a limited partnership. This origination fee was capitalized to the carrying value of the equity investment as transaction cost.

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

Origination and Extension Fee Expense

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

Asset Management Fee

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

Asset Servicing Fee

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

Transaction Breakup Fee

    In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of December 31, 2020 and 2019, 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.

Distributions Paid

    For the year ended December 31, 2020, the Company made distributions to Terra Fund 5, Terra JV and Terra Offshore REIT in the aggregate $21.2 million, of which $16.0 million were returns of capital (Note 11). For the year ended December 31, 2019, the Company made distributions to Terra Fund 5 and Terra Offshore REIT totaling $30.4 million, of which $21.4 million were returns of capital (Note 11).

Due to Manager

    As of December 31, 2020 and 2019, approximately $1.3 million and $1.0 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.

Merger and Issuance of Common Stock to Terra Offshore REIT

    As discussed in Note 3, on March 1, 2020, TPT2 merged with and into the Company with the Company continuing as the surviving company. In connection with the Merger, the Company issued 2,116,785.76 shares of common stock of the Company to Terra Fund 7, the sole stockholder of TPT2, as consideration in the Merger. In addition, on March 2, 2020, Terra Offshore REIT contributed cash and released obligations under the participation agreements to the Company (Note 3) in exchange for the issuance of 2,457,684.59 shares of common stock of the Company. As described in Note 3, Terra Fund 7 contributed the shares of the Company’s common stock received as consideration in the Merger to Terra JV and became a co-managing member of Terra JV pursuant to the JV Agreement. The JV Agreement and related stockholders agreement between Terra JV and the Company, dated March 2, 2020, provide for the joint approval of Terra Fund 5 and Terra Fund 7 with respect to certain major decisions that are taken by Terra JV and the Company. As of December 31, 2020, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT; and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.

Terra Real Estate Credit Opportunities Fund, LP

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

Terra International Fund 3, L.P.

    On September 30, 2019, the Company entered into a Contribution and Repurchase Agreement with Terra International Fund 3, L.P. (“Terra International 3”) and Terra Offshore REIT, a wholly-owned subsidiary of Terra International 3.

    Pursuant to this agreement, Terra International 3, through Terra Offshore REIT, contributed cash in the amount of $3.6 million to the Company in exchange for 212,691 shares of common stock, at a price of $17.02 per share. In addition, Terra International 3 agreed to contribute to the Company future cash proceeds, if any, raised from time to time by it, and the Company agreed to issue shares of common stock to Terra International 3 in exchange for any such future cash proceeds, in each case pursuant to and in accordance with the terms and conditions specified in the agreement. The shares were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder.

    Under Cayman securities law, when there is a change in the terms of the offering, previously admitted partners have rights to rescind their subscription. On September 24, 2019, Terra International 3 amended its private placement memorandum to change its term from finite life to perpetual life with limited opportunity for liquidity, as well as to change the selling commission structure and to provide for a dividend reinvestment plan. As a result of the change in the terms of the offering, Terra International 3 received requests to rescind all of the units of its limited partnership interest at a price of $100,000 per unit. On April 29, 2020, the Company repurchased, at a price of $17.02 per share, the 212,691 shares of common stock that the Company had previously sold to Terra Offshore REIT on September 30, 2019. Terra International 3 honored all of the rescission requests that it had received with proceeds from the repurchase.

Participation Agreements

In the normal course of business, the Company may enter into participation agreements (“PAs”) with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the “Participants”). The purpose of the PAs is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity.

ASC 860, Transfers and Servicing (“ASC 860”), establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as

secured borrowings under ASC 860 (See “Participation interests” in Note 2 and “Obligations under Participation Agreements” in Note 9).

Participation Interests Purchased by the Company

The below table lists the loan interests participated in by the Company via PAs as of December 31, 2020 and 2019. In accordance with the terms of each PA, 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.

	December 31, 2020			December 31, 2019
	Participating Interests	Principal Balance	Carrying Value	Participating Interests	Principal Balance	Carrying Value
LD Milpitas Mezz, LP (1)	25.00%	4,250,000	4,294,053	25.00%	3,120,887	3,150,546

________________

(1)On June 27, 2018, the Company entered into a participation agreement with Terra Income Fund 6, Inc. (“Terra Fund 6”) to purchase a 25% participation interest, or $4.3 million, in a $17.0 million mezzanine loan. As of December 31, 2020, all of the commitment has been funded.

Transfers of Participation Interest by the Company

    The following tables summarize the loans that were subject to PAs with affiliated entities as of December 31, 2020 and 2019:

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2020
	Principal Balance		Carrying Value		% Transferred		Principal Balance (6)		Carrying Value (6)
14th & Alice Street Owner, LLC (5)	$	32,625,912	$	32,877,544	80.00	%	$	26,100,729	$	26,211,548
370 Lex Part Deux, LLC (2)	53,874,507		53,912,363		35.00	%	18,856,078		18,856,077
City Gardens 333 LLC (2)	28,303,628		28,307,408		14.00	%	3,962,509		3,963,010
Orange Grove Property Investors, LLC (2)	10,600,000		10,701,924		80.00	%	8,480,000		8,561,523
RS JZ Driggs, LLC (2)	8,544,513		8,629,929		50.00	%	4,272,257		4,314,965
Stonewall Station Mezz LLC (2)	10,442,567		10,537,512		44.00	%	4,594,730		4,635,937
The Bristol at Southport, LLC (5)	23,500,000		23,682,536		21.28	%	5,000,000		5,038,837
	$	167,891,127	$	168,649,216			$	71,266,303	$	71,581,897

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2019
	Principal Balance		Carrying Value		% Transferred		Principal Balance (6)		Carrying Value (6)
14th & Alice Street Owner, LLC (5)	$	12,932,034	$	12,957,731	80.00	%	$	10,345,627	$	10,387,090
2539 Morse, LLC (1)(3)(7)	7,000,000		7,067,422		40.00	%	2,800,001		2,825,519
370 Lex Part Deux, LLC (2)(4)(7)	48,349,948		48,425,659		47.00	%	22,724,476		22,724,476
Austin H. I. Owner LLC (1)(7)	3,500,000		3,531,776		30.00	%	1,050,000		1,059,532
City Gardens 333 LLC (1)(2)(3)(4)(7)	28,049,717		28,056,179		47.00	%	13,182,584		13,184,648
High Pointe Mezzanine Investments,    LLC (3)(7)	3,000,000		3,263,285		37.20	%	1,116,000		1,217,160
NB Private Capital, LLC (1)(2)(3)(4)(7)	20,000,000		20,166,610		72.40	%	14,480,392		14,601,021
Orange Grove Property Investors, LLC (2)	10,600,000		10,696,587		80.00	%	8,480,000		8,557,205
RS JZ Driggs, LLC (2)	8,200,000		8,286,629		50.00	%	4,100,000		4,142,264
SparQ Mezz Borrower, LLC (1)(3)(7)	8,700,000		8,783,139		36.81	%	3,202,454		3,231,689
Stonewall Station Mezz LLC (2)	9,792,767		9,875,162		44.00	%	4,308,817		4,344,635
The Bristol at Southport, LLC (1)(3)(4)(7)	23,500,000		23,661,724		42.44	%	9,974,444		10,043,088
TSG-Parcel 1, LLC (1)(2)(7)	18,000,000		18,180,000		37.78	%	6,800,000		6,868,000
	$	201,624,466	$	202,951,903			$	102,564,795	$	103,186,327

________________

(1)Participant was Terra Secured Income Fund 5 International, an affiliated fund advised by the Manager.

(2)Participant is Terra Fund 6, an affiliated fund advised by Terra Income Advisors.

(3)Participant was Terra Income Fund International, an affiliated fund advised by the Manager.

(4)Participant was TPT2, an affiliated fund managed by the Manager.

(5)Participant is a third-party.

(6)Amounts transferred may not agree to the proportionate share of the principal balance and fair value due to the rounding of percentage transferred.

(7)As discussed in Note 3, in March 2020, the Company settled an aggregate of $49.8 million of participation interests in loans held by the Company with TPT2 and Terra Offshore REIT, which Terra Offshore REIT received from Terra Secured Income Fund 5 International and Terra Income Fund International. In connection with the Merger and the Issuance of Common Stock to Terra Offshore REIT, the related participation obligations were settled.

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 PA. 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 PAs 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.

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 are recorded as secured borrowing. For the loan for which a portion is transferred, the 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.

The following table summarizes the loan that was transferred to a third-party that was accounted for as secured borrowing as of December 31, 2020.

					Transfers Treated as Secured Borrowing as of December 31, 2020
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
Windy Hill PV Five CM, LLC	$	26,454,910	$	26,407,494	69.11	%	$	18,281,848	$	18,187,663
	$	26,454,910	$	26,407,494			$	18,281,848	$	18,187,663

Co-investment

In January 2018, the Company and Terra Fund 6 co-invested in an $8.9 million mezzanine loan that bears interest at an annual fixed rate of 12.75% and matured on March 31, 2019. In March 2019, the maturity of this loan was extended to July 1, 2019. In June 2019, the maturity of this loan was further extended to September 30, 2019. In August 2019, the loan was repaid in full.

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Debt

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Debt Disclosure

Note 9. Debt

Term Loan

On September 3, 2020, Terra Mortgage Capital I, LLC (the “Issuer” or the “Seller” ), 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 provides 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 Class B Holder is the parent of the Issuer and a wholly-owned subsidiary of the Company, and the sole holder of the Class B Notes. The Class B Holder is consolidated by the Company and the Term Loan represents amount due to Goldman under the Indenture and Credit Agreement. In addition, pursuant to the terms and conditions of the Indenture and Credit Agreement, Goldman has agreed to provide $3.6 million of additional future advances (the “Committed Advances”), and may provide up to $11.6 million of additional future discretionary advances, in connection with certain outstanding funding commitments under mortgage assets owned by the Issuer and financed under the Indenture and Credit Agreement (the “Mortgage Assets”).

The stated maturity date of the Debt is March 14, 2025. The Term Loan bears 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 Benchmark Rate will convert to an alternate index rate following the occurrence of certain transition events (the “Alternate Benchmark Rate”). Except as described below, and provided there is no default under the Indenture and Credit Agreement, the Class B Notes are entitled to residual amounts collected by the Issuer in respect of Mortgage Assets, after payment of debt service on the Term Loan.

The Indenture and Credit Agreement is a term loan and does not contain any mark-to-market or margin provisions. Within a specified period following a monetary or material non-monetary default under a Mortgage Asset, the Class B Holder is required to prepay the portion of the Term Loan that is allocable to such Mortgage Asset (such prepayment is without premium, yield maintenance or other penalty). In connection with entering into the Indenture and Credit Agreement, the Company incurred $2.4 million of deferred financing costs, including a $1.3 million upfront fee paid to Goldman, which are being amortized to interest expense over the term of the facility. The Issuer also pays, with respect to the Committed Advances, an annual fee, payable monthly, equal to the Benchmark Rate or Alternate Benchmark Rate, as applicable, subject to a floor of 1.0% per annum, plus 4.25%.

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 guarantees 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 guarantees the payment of the aggregate outstanding amount of the Term Loan upon the occurrence of certain bankruptcy events. Under the Guaranty, the Company is 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. As of December 31, 2020, the Company is in compliance with these covenants.

The Term Loan is secured by first-priority security interests in substantially all of the assets of the Issuer, including all of the Mortgage Assets (other than excluded property and subject to certain permitted liens), including specified cash accounts that include the accounts into which Mortgage Asset proceeds are or will be paid. The Mortgage Assets are serviced and administered by an independent third-party servicer.

The principal and interest on the Term Loan are repaid before repayment of the principal on the Class B Notes on each payment date of each month in accordance with the priority of payments as set forth in the Indenture and Credit Agreement, beginning in September 2020. Such payments are subject to certain fees for taxes, filings and administrative expenses. Upon the occurrence of a Term Loan Principal Trigger Event (as defined below), 100% of the payment of the principal proceeds are applied to the Term Loan principal after payment of certain fees and other amounts as described in the Indenture and Credit Agreement. A “Term Loan Principal Trigger Event” means as of any date of determination, an event that will be deemed to have occurred on the first date on which the aggregate principal balance of the Mortgage Assets is less than or equal to the product of (x) 75% multiplied by (y) the aggregate principal balance of the Mortgage Assets as of the closing date, plus any future advances made on such Mortgage Assets prior to such date of determination. As of December 31, 2020, there was no Term Loan Principal Trigger Event. The Class B Notes and the Term Loan are redeemable by the Issuer upon the occurrence of certain tax events in accordance with the terms and provisions of the Indenture and Credit Agreement.

The following tables present detailed information with respect to each borrowing under the Term Loan as of December 31, 2020:

	December 31, 2020
	Mortgage Assets						Borrowings Under the Term Loan (1)(2)
	Principal Amount		Carrying Value		Fair Value
330 Tryon DE LLC	$	22,800,000	$	22,901,294	$	22,869,879	13,680,000
1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP	50,808,453		51,068,554		50,982,247		29,897,848
AGRE DCP Palm Springs, LLC	45,294,097		45,506,051		45,519,030		24,894,939
MSC Fields Peachtree Retreat, LLC	23,308,334		23,437,198		23,428,860		13,985,001
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,039,456		17,994,495		10,800,000
University Park Berkeley, LLC	23,990,786		24,131,808		24,162,710		14,326,663
	$	184,201,670	$	185,084,361	$	184,957,221	$	107,584,451

_______________

(1)Borrowings under the Term Loan bear interest at LIBOR plus 4.25% with a LIBOR floor of 1.00%, or 5.25% as of December 31, 2020 using LIBOR of 0.14%.

(2)The maturity of the Term Loan is March 14, 2025, however the maturity of each borrowing under the Term Loan matches the maturity of the respective Mortgage Asset.

For the year ended December 31, 2020, the Company received proceeds from the Term Loan of $107.6 million, including $2.4 million of Committed Advances and $2.2 million of discretionary advances, and made no repayments. There was no Term Loan for the year ended December 31, 2019. As of December 31, 2020, the remaining amount for Committed Advances and discretionary advances was $1.2 million and $9.4 million, respectively.

Repurchase Agreement

    On December 12, 2018, Terra Mortgage Capital I, LLC entered into an Uncommitted Master Repurchase Agreement (the “Master Repurchase Agreement”) with Goldman Sachs Bank USA. The Master Repurchase Agreement provided for advances

of up to $150.0 million in the aggregate, which the Company used to finance certain secured performing commercial real estate loans.

    Advances under the Master Repurchase Agreement accrued interest at a per annum pricing rate equal to the sum of (i) the 30-day LIBOR and (ii) the applicable spread, and had a maturity date of December 12, 2020. The actual terms of financing for each asset was determined at the time of financing in accordance with the Master Repurchase Agreement.

The Master Repurchase Agreement contained margin call provisions that provide Goldman with certain rights in the event of a decline in the market value of the assets purchased under the Master Repurchase Agreement. Upon the occurrence of a margin deficit event, Goldman required the Seller to make a payment to reduce the outstanding obligation to eliminate any margin deficit. For the period from January 1, 2020 to the date of the termination of the Master Repurchase Agreement on September 3, 2020, the Company received a margin call on one of the borrowings and as a result, made a repayment of $3.4 million to reduce the outstanding obligation under the Master Repurchase Agreement.

    In connection with the Master Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of Goldman (the “Guarantee Agreement”), pursuant to which the Company would guarantee the obligations of the Seller under the Master Repurchase Agreement. Subject to certain exceptions, the maximum liability under the Master Repurchase Agreement would not exceed 50% of the then currently outstanding repurchase obligations under the Master Repurchase Agreement.

On September 3, 2020, the Company terminated the Master Repurchase Agreement and replaced it with the Term Loan as described above. In connection with the termination of the Master Repurchase Agreement, the Issuer repurchased all of its assets sold to Goldman pursuant to the Master Repurchase Agreement with the proceeds from the Term Loan, and Goldman released all security interests in such assets. In addition, Goldman unconditionally released the Company from, and terminated, the Guarantee Agreement in favor of Goldman, dated as of December 12, 2018, which provided for the guarantee by the Company of the obligations of the Issuer under the Master Repurchase Agreement, subject to certain exceptions and limitations.

The Master Repurchase Agreement and the Guarantee Agreement contained 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 contained financial covenants, which required the Company to maintain: (i) liquidity of at least 10% of the then-current outstanding amount under the Master Repurchase Agreement; (ii) cash liquidity of at least the greater of $5 million or 5% of the then-current outstanding amount under the Master Repurchase Agreement; (iii) tangible net worth at an amount equal to or greater than 75% of the Company’s tangible net worth as of December 12, 2018, 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 3.00 to 1.00. As of December 31, 2019, the Company was in compliance with these covenants.

    In connection with entering into the Master Repurchase Agreement, the Company incurred $2.8 million of deferred financing costs, which were being amortized to interest expense over the term of the facility. In connection with the termination of the Master Repurchase Agreement, the remaining $0.5 million of unamortized deferred financing costs were carried over to the Term Loan to be amortized over the term of the Term Loan. As of December 31, 2019, unamortized deferred financing costs were $1.5 million.

    The following table presents summary information with respect to the Company’s outstanding borrowing under the Master Repurchase Agreement as of December 31, 2019:

	December 31, 2019
Arrangement	Weighted Average Rate (1)		Amount Outstanding		Amount Remaining Available		Weighted Average Term (2)
Master Repurchase Agreement	4.3	%	$	81,134,436	$	68,865,564	1.55 years

_______________

(1)Amount is calculated using LIBOR of 1.76% as of December 31, 2019.

(2)The weighted average term is determined based on the current maturity of the corresponding loan. Each transaction under the facility has its own specific term. The Company may extend the maturity date of the Master Repurchase Agreement for a period of one year, subject to satisfaction of certain conditions.

    The following table presents detailed information with respect to each borrowing under the Master Repurchase Agreement as of December 31, 2019:

	December 31, 2019
	Collateral						Borrowings Under Master Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
330 Tryon DE LLC	$	22,800,000	$	22,891,149	$	22,906,207	2/15/2019	$	17,100,000	LIBOR+2.25% (LIBOR floor of 2.49%)
1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP	38,464,429		38,510,650		38,655,000		3/7/2019	24,040,268		LIBOR+2.35%
AGRE DCP Palm Springs, LLC	30,184,357		30,174,455		30,326,076		12/23/2019	22,638,268		LIBOR+2.50% (LIBOR floor of 1.8%)
MSC Fields Peachtree Retreat, LLC	23,308,335		23,446,793		23,418,996		3/25/2019	17,355,900		LIBOR+2.25% (LIBOR floor of 2.00%)
	$	114,757,121	$	115,023,047	$	115,306,279		$	81,134,436

    For the years ended December 31, 2020 and 2019, the Company borrowed $22.9 million and $81.1 million under the Master Repurchase Agreement, respectively, for the financing of new and follow-on investments, and made repayments of $104.0 million and $34.2 million, respectively.

Revolving Credit Facility

    On June 20, 2019, Terra LOC Portfolio I, LLC, a special-purpose indirect wholly-owned subsidiary of the Company, entered into a credit agreement with Israel Discount Bank of New York to provide for revolving credit loans of up to $35.0 million in the aggregate (“Revolving Credit Facility”), which the Company expects to use for short term financing needed to bridge the timing of anticipated loans repayments and funding obligations. Borrowings under the Revolving Credit Facility can be either prime rate loans or LIBOR rate loans and accrue interest at an annual rate of prime rate plus 1% or LIBOR plus 4% with a floor of 6%. The Revolving Credit Facility was scheduled to mature on June 20, 2020. The Revolving Credit Facility was amended to extend the maturity to October 2, 2020. On October 2, 2020, the Company amended the Revolving Credit Facility and reduced the commitment amount to $15.0 million. In connection with this amendment, the interest rate was changed to prime rate plus 1% or LIBOR plus 4% with a floor of 4.5% and the maturity was extended to September 2, 2021. On March 16, 2021, the Revolving Credit Facility was terminated. In connection with obtaining the Revolving Credit Facility, the Company incurred deferred financing costs of $0.3 million, which was amortized over the original term of the facility. As of December 31, 2020, there was no amount outstanding under the Revolving Credit Facility.

    The Revolving Credit Facility required the Company to maintain: (i) an EBITDA to interest expense ratio of not less than 1.00; (ii) cash liquidity of at least $7.0 million; (iii) tangible net worth of at least $200.0 million; and (iii) a total indebtedness to tangible net worth ratio of not more than 1.75 to 1.00. Additionally, the Revolving Credit Facility required Terra LOC Portfolio I, LLC to maintain a tangible net worth of at least $100.0 million. As of December 31, 2020 and 2019, both the Company and Terra LOC Portfolio I, LLC were in compliance with these covenants.

    For the years ended December 31, 2020 and 2019, the Company borrowed $35.0 million and $16.0 million under the Revolving Credit Facility, respectively, and made repayments of $35.0 million and $16.0 million, respectively.

Mortgage Loan Payable

    As of December 31, 2020, the Company had a $44.0 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, 2020 and 2019:

					December 31, 2020				December 31, 2019
Lender	Current Interest Rate	Maturity Date (1)	Principal Amount		Carrying Value		Carrying Value of Collateral		Carrying Value		Carrying Value of Collateral
Centennial Bank	LIBOR + 3.85% (LIBOR Floor of 2.23%)	September 27, 2022	$	44,020,225	$	44,117,293	$	49,533,733	$	44,753,633	$	52,776,236

_______________

(1)In September 2020, the Company exercised the option to extend the maturity of the mortgage loan payable by two years.

Scheduled Debt Principal Payments

    Scheduled debt principal payments for each of the five calendar years following December 31, 2020 are as follows:

Years Ending December 31,	Total
2021	—
2022	44,020,225
2023	—
2024	—
2025	107,584,451
Thereafter	—
	151,604,676
Unamortized deferred financing costs	(2,241,582)
Total	$	149,363,094

     At December 31, 2020 and 2019, the unamortized deferred financing costs were $2.2 million and $1.4 million, respectively.

Obligations Under Participation Agreements and Secured Borrowing

As discussed in Note 2, 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, as applicable. As of December 31, 2020 and 2019, obligations under participation agreements had a carrying value of approximately $71.6 million and $103.2 million, respectively, and the carrying value of the loans that are associated with these obligations under participation agreements was approximately $168.6 million and $203.0 million, respectively, (see “Participation Agreements” in Note 8). Additionally, as of December 31, 2020, secured borrowing had a carrying value of approximately $18.2 million and the carrying value of the loan that is associated with the secured borrowing was $26.4 million. The weighted-average interest rate on the obligations under participation agreements and secured borrowing was approximately 10.2% and 11.8% as of December 31, 2020 and 2019, respectively.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure

Note 10. Commitments and Contingencies

Impact of COVID-19

    As further discussed in Note 2, the full extent of the impact of COVID-19 on the global economy generally, and the Company’s business in particular, is uncertain. As of December 31, 2020, no contingencies have been recorded on the Company’s consolidated balance sheet as a result of COVID-19, however as the global pandemic continues and the economic implications worsen, it may have long-term impacts on the Company’s financial condition, results of operations, and cash flows. Refer to Note 2 for further discussion of COVID-19.

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 $67.9 million and $116.7 million as of December 31, 2020 and 2019, respectively. The Company expects to maintain sufficient cash on hand to fund such unfunded commitments, primarily through matching these commitments with principal repayments on outstanding loans.

Unfunded Investment Commitment

As discussed in Note 8, On August 3, 2020, the Company entered into a subscription agreement with Terra RECO whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in Terra RECO. As of December 31, 2020, the unfunded investment commitment was $14.1 million.

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.

The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company 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. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material adverse effect upon its financial condition or results of operations.

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

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Equity

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 11. Equity

Earnings Per Share

The following table presents earnings per share for the years ended December 31, 2020 and 2019:

	Years Ended December 31,
	2020		2019
Net income	$	5,255,730	$	9,042,775
Preferred stock dividend declared	(15,624)		(15,624)
Net income allocable to common stock	$	5,240,106	$	9,027,151
Weighted-average shares outstanding — basic and diluted	18,813,066		14,967,183
Earnings per share — basic and diluted	$	0.28	$	0.60

Preferred Stock Classes

Preferred Stock

    The Company’s charter gives it authority to issue 50,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”). The Company’s board of directors 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, 2020 and 2019, there were no Preferred Stock issued or outstanding.

Series A Preferred Stock

    On November 30, 2016, the Company’s board of directors 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.

    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 Stock holders’ 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

As discussed in Note 3, on March 1, 2020, TPT2 merged with and into the Company with the Company continuing as the surviving corporation. In connection with the Merger, the Company issued 2,116,785.76 shares of common stock of the Company to Terra Fund 7, the sole stockholder of TPT2, as consideration in the Merger. In addition, on March 2, 2020, the Company issued 2,457,684.59 shares of common stock of the Company in exchange for the settlement of certain participation interests in loans held by the Company and cash. As described in Note 3, Terra Fund 7 contributed the shares of the Company’s common stock received as consideration in the Merger to Terra JV and became a co-managing member of Terra JV pursuant to the JV Agreement. The JV Agreement and related stockholders agreement between Terra JV and the Company, dated March 2, 2020, provide for the joint approval of Terra Fund 5 and Terra Fund 7 with respect to certain major decisions that are taken by Terra JV and the Company. As of December 31, 2020, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.    

    On September 30, 2019, the Company issued 212,691 shares of its common stock to Terra Offshore REIT at a price of $17.02 per share for total proceeds of $3.6 million. On April 29, 2020, the Company repurchased, at a price of $17.02 per share, the 212,691 shares it previously sold to Terra Offshore REIT (Note 7).

Distributions

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

    For the year ended December 31, 2020, the Company made distributions to Terra Fund 5, Terra JV and Terra Offshore REIT in the aggregate of $21.2 million, of which $16.0 million were returns of capital. For the year ended December 31, 2019, the Company made distributions to Terra Fund 5 and Terra Offshore REIT totaling $30.4 million, of which $21.4 million were returns of capital. Additionally, for both the years ended December 31, 2020 and 2019, 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, 2020 and 2019, 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,
	2020		2019
Ordinary income	$	0.48	$	0.78
Return of capital	0.68		1.25
	$	1.16	$	2.03

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Subsequent Events

12 Months Ended

Dec. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

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 one below that would require adjustment to, or disclosure in, the Company’s consolidated financial statements.

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 matures on March 12, 2023 with an annual 12-month extension available at the Company’s option, which are subject to certain conditions.

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 will guarantee 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 will be required to maintain (i) a minimum total net worth of $250.0 million; (ii) a $2.0 million quarterly operating profit; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00.

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 pledged a $11.5 million first mortgage to the borrowing base and drew down $8.0 million on the Revolving Line of Credit.

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Schedule III - Real Estate and Accumulated Depreciation

12 Months Ended

Dec. 31, 2020

SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract]

Investment in Real Estate and Accumulated Depreciation Disclosure

Schedule III – Real Estate and Accumulated Depreciation

As of December 31, 2020

			Initial Costs				Cost Capitalized Subsequent to Acquisition		Decrease in Net Investment (1)		Gross Amount at Period End
Description	Encumbrance		Land		Building, Building Improvements and Furniture and Fixtures						Land		Building, Building Improvements and Furniture and Fixtures		Total		Accumulated Depreciation		Date of Construction	Date Acquired	Life Used for Depreciation
Office building in Santa Monica, CA	$	44,020,225	$	—	$	51,308,076	$	2,508,533	$	—	$	—	$	53,816,609	$	53,816,609	$	3,826,700	2002-2004	July 30, 2018	40 years
Land in Conshohocken, PA	—		14,703,359		—		242,071		(1,550,000)		13,395,430		—		13,395,430		—		N/A	January 9, 2019	N/A
	$	44,020,225	$	14,703,359	$	51,308,076	$	2,750,604	$	(1,550,000)	$	13,395,430	$	53,816,609	$	67,212,039	$	3,826,700

___________________________

(1)For the year ended December 31, 2019, the Company recorded an impairment charge of $1.6 million on the 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.

At December 31, 2020, the aggregate cost of real estate for federal income tax purposes was $57.6 million.

    The changes in total real estate assets and accumulated depreciation for the year ended December 31, 2020 are as follows:

	Real Estate Asset			Accumulated Depreciation
	Year Ended December 31, 2020			Year Ended December 31, 2020
Balance, beginning of year	$	66,976,039	Balance, beginning of year	$	2,224,792
Acquisition through foreclosure	—		Depreciation for the year	1,601,908
Improvements	236,000		Balance, end of year	$	3,826,700
Impairment charge	—
Balance, end of year	$	67,212,039

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Schedule IV – Mortgage Loans on Real Estate

12 Months Ended

Dec. 31, 2020

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

Investment in Mortgage Loans on Real Estate

Schedule IV – Mortgage Loans on Real Estate

As of December 31, 2020

Portfolio Company (1)

Collateral Location

Property Type

Interest Payment Rates

Maximum Maturity Date (2)

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

$

—

$

7,000,000

$

7,000,000

Austin H. I. Owner LLC (3)

US - TX

Hotel

12.5

%

10/6/2020

Interest Only

—

3,848,712

3,887,200

High Pointe Mezzanine Investments, LLC (4)

US - SC

Student housing

15.0

%

1/6/2024

Interest Only

—

3,000,000

3,204,375

LD Milipitas Mezz, LLC (5)

US - CA

Hotel

LIBOR +10.25% (2.75% Floor)

6/27/2023

Interest Only

—

4,250,000

4,294,053

Stonewall Station Mezz LLC (4)(6)(7)

US - NC

Land

12.0% current 2.0% PIK

5/31/2023

Interest Only

—

10,442,567

10,537,512

—

28,541,279

28,923,140

First Mortgages:

14th & Alice Street Owner, LLC (6)(8)

US - CA

Multifamily

LIBOR + 5.75% (3.25% Floor)

3/5/2022

Interest Only

—

32,625,912

32,877,544

1389 Peachtree St, LP; 1401 Peachtree St, LP;    1409 Peachtree St, LP (9)

US - GA

Office

LIBOR + 4.5%

3/10/2024

Interest Only

—

50,808,453

51,068,554

330 Tryon DE LLC (9)

US - NC

Office

LIBOR + 3.85% (2.51% Floor)

3/1/2024

Interest Only

—

22,800,000

22,901,294

870 Santa Cruz, LLC

US - CA

Office

LIBOR + 6.75% (0.5% Floor)

12/15/2025

Interest Only

—

10,760,355

10,724,590

AGRE DCP Palm Springs, LLC (9)(10)

US - CA

Hotel

LIBOR +4.75% (1.8% Floor)

1/1/2025

Interest Only

—

45,294,097

45,506,051

MSC Fields Peachtree Retreat, LLC (9)

US - GA

Multifamily

LIBOR + 3.85% (2.0% Floor)

4/1/2024

Interest Only

—

23,308,334

23,437,198

Patrick Henry Recovery Acquisition, LLC (9)

US - CA

Office

LIBOR + 2.95% (1.5% Floor)

12/1/2024

Interest Only

—

18,000,000

18,039,456

University Park Berkeley, LLC (9)(11)

US - CA

Student housing

LIBOR + 4.2% (1.5% Floor)

3/5/2025

Interest Only

—

23,990,786

24,131,808

Windy Hill PV Five CM, LLC (12)

US - CA

Office

LIBOR + 6.0% (2.05% Floor)

9/20/2023

Interest Only

—

26,454,910

26,407,494

—

254,042,847

255,093,989

Terra Property Trust, Inc.

Schedule IV – Mortgage Loans on Real Estate (Continued)

As of December 31, 2020

Portfolio Company (1)	Collateral Location	Property Type	Interest Payment Rates		Maximum Maturity Date (2)	Periodic Payment Terms	Prior Liens		Face Amount		Carrying Amount
Preferred equity investments:
370 Lex Part Deux, LLC (6)(7)	US - NY	Office	LIBOR + 8.25% (2.44% Floor)		1/9/2025	Interest Only	—		53,874,507		53,912,363
City Gardens 333 LLC (6)(7)	US - CA	Student housing	LIBOR + 9.95% (2.0% Floor)		4/1/2023	Interest Only	—		28,303,628		28,307,408
Orange Grove Property Investors, LLC (6)(7)	US - CA	Condominium	LIBOR + 8.0% (4.0% Floor)		6/1/2022	Interest Only	—		10,600,000		10,701,924
REEC Harlem Holdings Company LLC	US - NY	Land	LIBOR + 12.5%		3/9/2025	Interest Only	—		16,767,984		16,767,984
RS JZ Driggs, LLC (6)(7)(13)	US - NY	Multifamily	12.3	%	8/1/2021	Interest Only	—		8,544,513		8,629,929
The Bristol at Southport, LLC (6)(8)	US - WA	Multifamily	12.0	%	9/22/2022	Interest Only	—		23,500,000		23,682,536
							—		141,590,632		142,002,144
Allowance for loan losses							—		—		(3,738,758)
Total investments							$	—	$	424,174,758	$	422,280,515

___________________________

(1)All of the Company’s loans have a prepayment penalty provision.

(2)Maximum maturity date assumes all extension options are exercised.

(3)This loan is currently past due. The Company is currently evaluating the options of recovering the principal amount, including foreclosing on the collateral. The latest appraisal the Company received in August 2020 indicates that the value of the collateral is sufficient to recover the principal amount.

(4)The Company entered into a forbearance agreement with the borrower to allow for more time to make the interest payment.

(5)On June 27, 2018, the Company entered into a participation agreement with Terra Income Fund 6, Inc. to purchase a 25% interest, or $4.3 million, in a mezzanine loan.

(6)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 Agreements” in Note 9 and “Transfers of Participation Interest by the Company” in Note 8 in the accompanying notes to the consolidated financial statements.

(7)The Company sold a portion of its interest in this loan through a participation agreement to Terra Income Fund 6, Inc., an affiliated fund advised by the Terra Income Advisors, an affiliate of the Company’s sponsor and Manager (Note 8).

(8)The Company sold a portion of its interest in this loan to a third-party through a participation agreement (Note 8).

(9)These loans were used as collateral for $107.6 million borrowing under a term loan (Note 9).

(10)In July 2020, the Company amended the loan agreement to change the interest rate to PIK 15% for the period from July 2020 through January 2021.

(11)In December 2020, the Company entered into a forbearance agreement with the borrower pursuant to which interest is accrued on the loan during the 90-day forbearance period from November 2020 to January 2021. In connection with entering into the forbearance agreement, the spread on the interest rate was increased to 4.2% and the exit fee was increased to 0.75%.

(12)In March 2020, the Company entered into a financing transaction where a third-party purchased an A-note position. However, the sale did not qualify for sale accounting and therefore, the gross amount of the loan remains in the consolidated balance sheets. The liability is reflected as secured borrowing in the consolidated balance sheets.

(13)This loan is currently past due. Given the loan is in default, the Company issued a demand notice and is currently in control of the sale process. The Company expects the sales proceeds to repay the principal in full.

	Reconciliation of Mortgage Loans on Real Estate
	Year Ended December 31, 2020
Balance, beginning of year	$	378,612,768
Additions during period:
New mortgage loans	108,488,411
PIK interest	4,442,759
Accrual, payment and accretion of exit fees, net	681,455
Deductions during the period:
Collections of principals	(66,144,729)
Amortization of premium	(61,391)
Provision for loan losses	(3,738,758)
Balance, end of year	$	422,280,515

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Consolidation

Principles of Consolidation

    The consolidated financial statements include all of the Company’s accounts and those of its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

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

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

VIE Model

VIE Model

An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make

decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. Under the VIE model, limited partnerships are considered VIE unless the limited partners hold substantive kick-out or participating rights over the general partner. The Company consolidates entities that are VIEs when the Company determines it is the primary beneficiary. Generally, the primary beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

Finance Receivable Policy

Loans Held for Investment

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

Allowance for Loan Losses Policy

Allowance for Loan Losses

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

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

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

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

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

    There may be circumstances where the Company modifies a loan by granting the borrower a concession that it might not otherwise consider when a borrower is experiencing financial difficulty or is expected to experience financial difficulty in the

foreseeable future. Such concessionary modifications are classified as troubled debt restructurings (“TDR”s) unless the modification solely results in a delay in a payment that is insignificant. Loans classified as TDRs are considered impaired loans for reporting and measurement purposes.

Equity Investments in a Limited Partnership

Equity Investment in a Limited Partnership

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

Marketable Securities Policy

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

Real Estate Owned

Real Estate Owned, Net

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

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

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

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

Lessee, Leases Policy

Leases

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

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

Revenue Recognition

Revenue Recognition

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

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

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

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

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

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash

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

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

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

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

	December 31,
	2020		2019
Cash and cash equivalents	$	18,607,952	$	29,609,484
Restricted cash	12,145,616		18,542,163
Cash held in escrow by lender	2,166,755		2,398,053
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	32,920,323	$	50,549,700

Participation Interests

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

Term Loan

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

Repurchase Agreements

Repurchase Agreement The Company financed certain of its senior loans through repurchase transactions under a master repurchase agreement. The Company accounted for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees.

Fair Value Measurement Policy

Fair Value Measurements

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

The Company adopted the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:

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

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

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

financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment.

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

As of December 31, 2020 and 2019, 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, term loan payable, mortgage loan payable, repurchase agreement payable and revolving credit facility payable. 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.

Deferred Financing Costs Policy

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

Income Tax Policy

Income Taxes

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

     As of December 31, 2020, the Company has satisfied all the requirements for a REIT. No provision for federal income taxes has been included in the consolidated financial statements for the years ended December 31, 2020 and 2019.

    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, 2020 and 2019, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s 2017-2019 federal tax returns remain subject to examination by the Internal Revenue Service.

Earnings Per Share Policy

Earnings Per Share

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

Use of Estimates Policy

Use of Estimates

    The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. As of December 31, 2020, there has been an ongoing global outbreak of a novel coronavirus (“COVID-19”), which has spread to over 200 countries and territories, including the United States, and has spread to every state in the United States. The World Health Organization has designated COVID-19 as a pandemic, and numerous countries, including the United States, have declared national emergencies with respect to COVID-19. The global impact of the pandemic has been rapidly evolving, and as cases of COVID-19 have continued to be identified in additional countries, many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading and operations of non-essential offices and retail centers. Such actions are creating disruption in global supply chains, and adversely impacting many industries. The pandemic could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2020, however uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of December 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates.

Segment Reporting Policy

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

New Accounting Pronouncements Policy

Recent Accounting Pronouncements

    In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. In April 2019, the FASB issued additional amendments to clarify the scope of ASU 2016-13 and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. In May 2019, the FASB issued ASU 2019-05 — Targeted Transition Relief, which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In October 2019, the FASB decided that for smaller reporting companies, ASU 2016-13 and related amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company meets the definition of a smaller reporting company under the regulation of the Securities and Exchange Commission. As such, the Company will adopt this ASU and related amendments on January 1, 2023. Management is currently evaluating the impact this change will have on the Company’s consolidated financial statements and disclosures.

    In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of information required by U.S. GAAP. The amendments in ASU 2018-13 added, removed and modified certain fair value measurement disclosure requirements. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year

of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted ASU 2018-13 on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on its consolidated financial statements and disclosures.

    London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. At the end of 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR could be discontinued. Other interest rates used globally could also be discontinued for similar reasons. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The provisions of optional relief include: (i) contract modifications - account for the modification as a continuation of the existing contract without additional analysis; (ii) hedging accounting - continue hedge accounting when certain critical terms of a hedging relationship change; and (iii) held-to-maturity (HTM) debt securities - one-time sale and/or transfer to available for sale or trading may be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. Companies can apply the amendments in ASU 2020-04 immediately. However, ASU 2020-04 will only be available for a limited time (generally through December 31, 2022). The Company is currently evaluating the impact of the reference rate reform and ASU 2020-04 on its consolidated financial statements and disclosures.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Cash, Cash Equivalents and Investments [Table Text Block]

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:

	December 31,
	2020		2019
Cash and cash equivalents	$	18,607,952	$	29,609,484
Restricted cash	12,145,616		18,542,163
Cash held in escrow by lender	2,166,755		2,398,053
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	32,920,323	$	50,549,700

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Merger and Issuance of Common Stock to Terra Offshore REIT (Tables)

12 Months Ended

Dec. 31, 2020

Business Acquisition

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Merger:

Total Consideration
Equity issued in the Merger	$	34,630,615
	$	34,630,615
Net Assets of TPT2 Received in the Merger
Loans held for investment acquired through participation	$	17,688,741
Cash and cash equivalents	16,897,074
Interest receivable	134,543
Other assets	18,384
Accounts payable and accrued expenses	(57,433)
Due to Manager	(50,694)
Total identifiable net assets	$	34,630,615

Terra Offshore Funds

Business Acquisition

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Issuance of Common Stock to Terra Offshore REIT:

Total Consideration
Equity issued to Terra Offshore REIT	$	40,749,378
	$	40,749,378
Net Assets of Terra Offshore REIT Received
Investments through participation interest, at fair value	$	32,112,257
Cash and cash equivalents	8,600,000
Interest receivable	270,947
Due to Manager	(233,826)
Total identifiable net assets	$	40,749,378

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Loans Held for Investment (Tables)

12 Months Ended

Dec. 31, 2020

Receivables [Abstract]

Summary Investment Holdings

The following table provides a summary of the Company’s loan portfolio as of December 31, 2020 and 2019:

	December 31, 2020									December 31, 2019
	Fixed Rate			Floating Rate (1)(2)(3)			Total			Fixed Rate			Floating Rate (1)(2)(3)			Total
Number of loans	6			14			20			8			15			23
Principal balance	$	56,335,792		$	367,838,966		$	424,174,758		$	70,692,767		$	306,695,550		$	377,388,317
Carrying value	$	56,464,310		$	365,816,205		$	422,280,515		$	71,469,137		$	307,143,631		$	378,612,768
Fair value	$	56,284,334		$	363,122,860		$	419,407,194		$	71,516,432		$	307,643,983		$	379,160,415
Weighted-average coupon rate	12.17		%	7.95		%	8.51		%	11.93		%	9.13		%	9.65		%
Weighted-average remaining term (years)	1.78			1.44			1.48			2.28			2.09			2.13

_______________

(1)These loans pay a coupon rate of LIBOR plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.14% and 1.76% as of December 31, 2020 and 2019, respectively.

(2)As of December 31, 2020, amounts included $184.2 million of senior mortgages used as collateral for $107.6 million of borrowings under a term loan (Note 9). These borrowings bear interest at an annual rate of LIBOR plus 4.25% with a LIBOR floor of 1.00% as of December 31, 2020. As of December 31, 2019, amounts included $114.8 million of senior mortgages used as collateral for $81.1 million of borrowings under a repurchase agreement (Note 9). These borrowings bore interest at an annual rate of LIBOR plus a spread ranging from 2.25% to 2.50% as of December 31, 2019. The repurchase agreement was terminated in September 2020.

(3)As of both December 31, 2020 and 2019, twelve of these loans are subject to a LIBOR floor.

Investment Holdings, Schedule of Investments

The following table presents the activities of the Company’s loan portfolio for the years ended December 31, 2020 and 2019:

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2020	$	375,462,222	$	3,150,546	$	378,612,768
New loans made	107,359,299		1,129,112		108,488,411
Principal repayments received	(66,144,729)		—		(66,144,729)
PIK interest (1)	4,442,759		—		4,442,759
Net amortization of premiums on loans	(61,391)		—		(61,391)
Accrual, payment and accretion of investment-related fees and other, net	667,060		14,395		681,455
Provision for loan losses	(3,738,758)		—		(3,738,758)
Balance, December 31, 2020	$	417,986,462	$	4,294,053	$	422,280,515

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2019	$	388,243,974	$	—	$	388,243,974
New loans made	182,206,332		3,120,887		185,327,219
Principal repayments received	(181,131,959)		—		(181,131,959)
Foreclosure of collateral (2)	(14,325,000)		—		(14,325,000)
PIK interest (1)	2,476,355		—		2,476,355
Net amortization of premiums on loans	(104,426)		—		(104,426)
Accrual, payment and accretion of investment-related fees, net (3)	(1,903,054)		29,659		(1,873,395)
Balance, December 31, 2019	$	375,462,222	$	3,150,546	$	378,612,768

_______________

(1)Certain loans in the Company’s portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted to $1.5 million and $0.8 million for the years ended December 31, 2020 and 2019, respectively.

(2)On January 9, 2019, the Company acquired 4.9 acres of adjacent land encumbering a $14.3 million first mortgage via deed in lieu of foreclosure in exchange for the relief of the first mortgage and related fees and expenses (Note 6).

(3)Amount for the year ended December 31, 2019 included $0.5 million of deferred origination fees that were previously recorded as unearned income.

Schedule of Accounts, Notes, Loans and Financing Receivable

The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of December 31, 2020 and 2019:

	December 31, 2020						December 31, 2019
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	254,042,847	$	255,093,989	60.5	%	$	178,130,623	$	178,203,675	47.1	%
Preferred equity investments	141,590,632		142,002,144		33.6	%	157,144,040		157,737,763		41.6	%
Mezzanine loans	28,541,279		28,923,140		6.8	%	42,113,654		42,671,330		11.3	%
Allowance for loan losses	—		(3,738,758)		(0.9)	%	—		—		—	%
Total	$	424,174,758	$	422,280,515	100.0	%	$	377,388,317	$	378,612,768	100.0	%

	December 31, 2020						December 31, 2019
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	182,698,225	$	183,053,751	43.3	%	$	142,055,845	$	141,870,355	37.5	%
Multifamily	87,978,759		88,627,207		21.0	%	76,640,369		77,136,016		20.4	%
Student housing	55,294,414		55,643,591		13.2	%	58,049,717		58,553,496		15.5	%
Hotel	53,392,809		53,687,304		12.7	%	46,598,011		46,731,939		12.3	%
Infill land	27,210,551		27,305,496		6.5	%	36,444,375		36,624,375		9.7	%
Condominium	10,600,000		10,701,924		2.5	%	10,600,000		10,696,587		2.8	%
Industrial	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.8	%
Allowance for loan losses	—		(3,738,758)		(0.9)	%	—		—		—	%
Total	$	424,174,758	$	422,280,515	100.0	%	$	377,388,317	$	378,612,768	100.0	%

	December 31, 2020						December 31, 2019
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	200,279,688	$	200,990,328	47.6	%	$	150,988,463	$	151,108,109	39.9	%
New York	79,187,004		79,310,276		18.8	%	79,734,323		79,896,663		21.1	%
Georgia	74,116,787		74,505,752		17.6	%	61,772,764		61,957,443		16.4	%
North Carolina	33,242,567		33,438,806		7.9	%	32,592,767		32,766,311		8.7	%
Washington	23,500,000		23,682,536		5.6	%	23,500,000		23,661,724		6.2	%
Massachusetts	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.8	%
Texas	3,848,712		3,887,200		0.9	%	3,500,000		3,531,776		0.9	%
Illinois	—		—		—	%	8,004,877		8,071,562		2.1	%
Kansas	—		—		—	%	6,200,000		6,251,649		1.7	%
Other (1)	3,000,000		3,204,375		0.8	%	4,095,123		4,367,531		1.2	%
Allowance for loan losses	—		(3,738,758)		(0.9)	%	—		—		—	%
Total	$	424,174,758	$	422,280,515	100.0	%	$	377,388,317	$	378,612,768	100.0	%

_______________

(1)Other includes a $3.0 million loan with collateral located in South Carolina at both December 31, 2020 and 2019. Other also includes $1.1 million of the unused portion of a credit facility at December 31, 2019.

Loan Risk Rating

    As described in Note 2, 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.

    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, 2020 and 2019:

	December 31, 2020							December 31, 2019
Loan Risk Rating	Number of Loans	Principal Balance		Carrying Value		% of Total		Number of Loans	Principal Balance		Carrying Value		% of Total
1	0	$	—	$	—	—	%	—	$	—	$	—	—	%
2	1	7,000,000		7,000,000		1.6	%	5	50,000,000		50,284,751		13.3	%
3	14	323,696,475		325,284,285		76.4	%	17	322,648,317		323,588,017		85.4	%
4 (1)	3	72,861,587		73,079,804		17.2	%	—	—		—		—	%
5 (1)	1	3,848,712		3,887,200		0.9	%	—	—		—		—	%
Other (2)	1	16,767,984		16,767,984		3.9	%	1	4,740,000		4,740,000		1.3	%
	20	$	424,174,758	426,019,273		100.0	%	23	$	377,388,317	378,612,768		100.0	%
Allowance for loan losses				(3,738,758)							—
Total, net of allowance for loan losses				$	422,280,515						$	378,612,768

_______________

(1)The increase in number of loans with a loan risk rating of “4” and “5” was due to the higher risk in select loans as a result of asset-specific factors that are particularly negatively impacted by the COVID-19 pandemic.

(2)These loans were deemed impaired and removed from the pool of loans on which a general allowance is calculated. For the year ended December 31, 2020, the Company recorded a specific allowance of $2.5 million on this loan as a result of a decline in the fair value of the collateral. For the year ended December 31, 2019, no specific reserve for loan losses was recorded on this loan because the fair value of the collateral was greater than carrying value of the loan. In March 2020, this loan was repaid in full.

Financing Receivable, Allowance for Credit Loss

The following table presents the activity in the Company’s allowance for loan losses for the years ended December 31, 2020 and 2019:

	Years Ended December 31,
	2020		2019
Allowance for loan losses, beginning of period	$	—	$	—
Provision for loan losses	3,738,758		—
Charge-offs	—		—
Recoveries	—		—
Allowance for loan losses, end of period	$	3,738,758	$	—

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Equity Investment in a Limited Partnership (Tables)

12 Months Ended

Dec. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

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

	December 31, 2020
Investments at fair value (cost of $44,174,031)	$	44,715,979
Other assets	5,331,840
Total assets	50,047,819
Obligations under participation agreement (proceeds of $6,222,830)	6,347,478
Other liabilities	4,204,147
Total liabilities	$	10,551,625
Partners’ capital	$	39,496,194

	Year Ended December 31, 2020
Total investment income	$	239,837
Total expenses	614,362
Net investment loss	(374,525)
Unrealized appreciation on investments	417,300
Net increase in partners' capital resulting from operations	$	42,775

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Real Estate Owned, Net (Tables)

12 Months Ended

Dec. 31, 2020

Real Estate [Abstract]

Real Estate Investment Financial Statements, Disclosure

The following table summarizes the carrying value of the first mortgage prior to the deed in lieu of foreclosure on January 9, 2019:

Carrying Value of First Mortgage
Loan held for investment	$	14,325,000
Interest receivable	439,300
Restricted cash applied against loan principal amount	(60,941)
	$	14,703,359

    The table below summarizes the allocation of the estimated fair value of the real estate acquired on January 9, 2019 based on the policy described in Note 2:

Assets Acquired
Real estate owned:
Land	$	14,703,359

Schedule of Real Estate Properties

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

	December 31, 2020						December 31, 2019
	Cost		Accumulated Depreciation/Amortization		Net		Cost		Accumulated Depreciation/Amortization		Net
Real estate:
Land	$	13,395,430	$	—	$	13,395,430	$	13,395,430	$	—	$	13,395,430
Building and building improvements	51,725,969		(3,125,143)		48,600,826		51,725,969		(1,831,980)		49,893,989
Tenant improvements	1,854,640		(670,090)		1,184,550		1,854,640		(392,812)		1,461,828
Furniture and fixtures	236,000		(31,467)		204,533		—		—		—
Total real estate	67,212,039		(3,826,700)		63,385,339		66,976,039		(2,224,792)		64,751,247
Lease intangible assets:
In-place lease	15,852,232		(6,172,747)		9,679,485		15,852,232		(3,138,675)		12,713,557
Above-market rent	156,542		(42,427)		114,115		156,542		(24,871)		131,671
Total intangible assets	16,008,774		(6,215,174)		9,793,600		16,008,774		(3,163,546)		12,845,228
Lease intangible liabilities:
Below-market rent	(3,371,314)		1,702,800		(1,668,514)		(3,371,314)		658,115		(2,713,199)
Above-market ground lease	(8,896,270)		315,008		(8,581,262)		(8,896,270)		184,660		(8,711,610)
Total intangible liabilities	(12,267,584)		2,017,808		(10,249,776)		(12,267,584)		842,775		(11,424,809)
Total real estate	$	70,953,229	$	(8,024,066)	$	62,929,163	$	70,717,229	$	(4,545,563)	$	66,171,666

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,
	2020		2019
Real estate operating revenues:
Lease revenue	$	8,150,041	$	7,683,843
Other operating income	2,273,522		2,122,664
Total	$	10,423,563	$	9,806,507
Real estate operating expenses:
Utilities	$	166,003	$	191,657
Real estate taxes	1,925,999		1,194,192
Repairs and maintenances	659,934		618,755
Management fees	224,732		252,164
Lease expense, including amortization of above-market ground lease	1,134,152		1,135,096
Other operating expenses	394,299		598,047
Total	$	4,505,119	$	3,989,911

Schedule of Future Minimum Rental Payments for Operating Leases

Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at December 31, 2020 are as follows: 

Years Ending December 31,	Total
2021	$	6,628,573
2022	7,132,812
2023	7,363,647
2024	7,600,861
2025	4,111,257
Thereafter	1,199,623
Total	$	34,036,773

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Based on the intangible assets and liabilities recorded at December 31, 2020, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows:

Years Ending December 31,	Net Decrease in Real Estate Operating Revenue (1)		Increase in Depreciation and Amortization (1)		Decrease in Rent Expense (1)		Total
2021	(338,220)		2,062,060		(130,348)		1,593,492
2022	(338,220)		2,062,060		(130,348)		1,593,492
2023	(338,220)		2,062,060		(130,348)		1,593,492
2024	(338,220)		2,062,060		(130,348)		1,593,492
2025	(181,608)		1,431,245		(130,348)		1,119,289
Thereafter	(19,911)		—		(7,929,522)		(7,949,433)
Total	$	(1,554,399)	$	9,679,485	$	(8,581,262)	$	(456,176)

_______________

(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.

Ground Lease Disclosure

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

	December 31,
	2020			2019
Operating lease
Operating lease right-of-use assets	$	16,105,888		$	16,112,925
Operating lease liabilities	$	16,105,888		$	16,112,925
Weighted average remaining lease term — operating lease (years)	65.8			66.8
Weighted average discount rate — operating lease	7.9		%	7.9		%

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

	Years Ended December 31,
	2020		2019
Operating lease cost	$	1,264,500	$	1,265,445

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

	Years Ended December 31,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,264,500	$	1,265,445
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	1,264,500	$	1,265,445

Lessee, Operating Lease, Liability, Maturity

Maturities of operating lease liabilities are as follows:

Years Ending December 31,	Operating Lease
2021	1,264,500
2022	1,264,500
2023	1,264,500
2024	1,264,500
2025	1,264,500
Thereafter	76,871,063
Total lease payments	83,193,563
Less: Imputed interest	(67,087,675)
Total	$	16,105,888

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Of Marketable Securities

The following tables present fair value measurements of marketable securities, by major class, as of December 31, 2020, according to the fair value hierarchy:

	December 31, 2020
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Equity securities	$	1,287,500	$	—	$	—	$	1,287,500
Debt securities	—		—		—		—
Total	$	1,287,500	$	—	$	—	$	1,287,500

Marketable Securities

The following table presents the activities of the marketable securities for the periods presented.

	Years Ended December 31,
	2020		2019
Beginning balance	$	—	$	—
Purchases	6,039,567		—
Proceeds from sale	(6,023,723)		—
Realized gains on marketable securities	1,160,162		—
Unrealized gains on marketable securities	111,494		—
Ending balance	$	1,287,500	$	—

Fair Value Measurements, Nonrecurring

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 fees, and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets:

		December 31, 2020						December 31, 2019
	Level	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Loans:
Loans held for investment, net	3	$	419,924,758	$	421,725,220	$	415,113,225	$	374,267,430	$	375,462,222	$	375,956,154
Loans held for investment acquired through participation, net	3	4,250,000		4,294,053		4,293,969		3,120,887		3,150,546		3,204,261
Allowance for loan losses		—		(3,738,758)		—		—		—		—
Total loans		$	424,174,758	$	422,280,515	$	419,407,194	$	377,388,317	$	378,612,768	$	379,160,415
Liabilities:
Term loan payable	3	$	107,584,451	$	105,245,801	$	107,248,555	$	—	$	—	$	—
Obligations under participation agreements	3	71,266,303		71,581,897		70,693,207		102,564,795		103,186,327		103,188,783
Mortgage loan payable	3	44,020,225		44,117,293		44,348,689		44,614,480		44,753,633		44,947,378
Secured borrowing	3	18,281,848		18,187,663		17,037,032		—		—		—
Repurchase agreement payable	3	—		—		—		81,134,436		79,608,437		81,134,436
Total liabilities		$	241,152,827	$	239,132,654	$	239,327,483	$	228,313,711	$	227,548,397	$	229,270,597

Fair Value Measurement Inputs and Valuation Techniques

The following table summarizes the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of December 31, 2020 and 2019. 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, 2020		Primary Valuation Technique	Unobservable Inputs	December 31, 2020
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	415,113,225	Discounted cash flow	Discount rate	5.29	%	20.05	%	10.38	%
Loans held for investment acquired through participation, net	4,293,969		Discounted cash flow	Discount rate	12.89	%	12.89	%	12.89	%
Total Level 3 Assets	$	419,407,194
Liabilities:
Term loan payable	$	107,248,555	Discounted cash flow	Discount rate	5.25	%	5.25	%	5.25	%
Obligations under Participation Agreements	70,693,207		Discounted cash flow	Discount rate	9.75	%	20.05	%	12.58	%
Mortgage loan payable	44,348,689		Discounted cash flow	Discount rate	6.08	%	6.08	%	6.08	%
Secured borrowing	17,037,032		Discounted cash flow	Discount rate	11.25	%	11.25	%	11.25	%
Total Level 3 Liabilities	$	239,327,483

	Fair Value at December 31, 2019		Primary Valuation Technique	Unobservable Inputs	December 31, 2019
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	375,956,154	Discounted cash flow	Discount rate	4.71	%	14.95	%	9.77	%
Loans held for investment acquired through participation, net	3,204,261		Discounted cash flow	Discount rate	11.90	%	11.90	%	11.90	%
Total Level 3 Assets	$	379,160,415
Liabilities:
Obligations under Participation Agreements	$	103,188,783	Discounted cash flow	Discount rate	9.00	%	14.95	%	11.99	%
Mortgage loan	44,947,378		Discounted cash flow	Discount rate	6.08	%	6.08	%	6.08	%
Repurchase agreement payable	81,134,436		Discounted cash flow	Discount rate	4.11	%	4.75	%	4.33	%
Total Level 3 Liabilities	$	229,270,597

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

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

	Years Ended December 31,
	2020		2019
Origination and extension fee expense (1)(2)	$	1,383,960	$	1,992,492
Asset management fee	4,480,706		3,671,474
Asset servicing fee	1,008,256		854,096
Operating expenses reimbursed to Manager	6,041,075		4,875,153
Disposition fee (3)	504,611		1,408,055
Total	$	13,418,608	$	12,801,270

_______________

(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 year ended December 31, 2020 excluded $0.4 million of origination fee paid to the Manager in connection with the Company’s equity investment in a limited partnership. This origination fee was capitalized to the carrying value of the equity investment as transaction cost.

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

The below table lists the loan interests participated in by the Company via PAs as of December 31, 2020 and 2019. In accordance with the terms of each PA, 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.

	December 31, 2020			December 31, 2019
	Participating Interests	Principal Balance	Carrying Value	Participating Interests	Principal Balance	Carrying Value
LD Milpitas Mezz, LP (1)	25.00%	4,250,000	4,294,053	25.00%	3,120,887	3,150,546

________________

(1)On June 27, 2018, the Company entered into a participation agreement with Terra Income Fund 6, Inc. (“Terra Fund 6”) to purchase a 25% participation interest, or $4.3 million, in a $17.0 million mezzanine loan. As of December 31, 2020, all of the commitment has been funded.

The following tables summarize the loans that were subject to PAs with affiliated entities as of December 31, 2020 and 2019:

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2020
	Principal Balance		Carrying Value		% Transferred		Principal Balance (6)		Carrying Value (6)
14th & Alice Street Owner, LLC (5)	$	32,625,912	$	32,877,544	80.00	%	$	26,100,729	$	26,211,548
370 Lex Part Deux, LLC (2)	53,874,507		53,912,363		35.00	%	18,856,078		18,856,077
City Gardens 333 LLC (2)	28,303,628		28,307,408		14.00	%	3,962,509		3,963,010
Orange Grove Property Investors, LLC (2)	10,600,000		10,701,924		80.00	%	8,480,000		8,561,523
RS JZ Driggs, LLC (2)	8,544,513		8,629,929		50.00	%	4,272,257		4,314,965
Stonewall Station Mezz LLC (2)	10,442,567		10,537,512		44.00	%	4,594,730		4,635,937
The Bristol at Southport, LLC (5)	23,500,000		23,682,536		21.28	%	5,000,000		5,038,837
	$	167,891,127	$	168,649,216			$	71,266,303	$	71,581,897

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2019
	Principal Balance		Carrying Value		% Transferred		Principal Balance (6)		Carrying Value (6)
14th & Alice Street Owner, LLC (5)	$	12,932,034	$	12,957,731	80.00	%	$	10,345,627	$	10,387,090
2539 Morse, LLC (1)(3)(7)	7,000,000		7,067,422		40.00	%	2,800,001		2,825,519
370 Lex Part Deux, LLC (2)(4)(7)	48,349,948		48,425,659		47.00	%	22,724,476		22,724,476
Austin H. I. Owner LLC (1)(7)	3,500,000		3,531,776		30.00	%	1,050,000		1,059,532
City Gardens 333 LLC (1)(2)(3)(4)(7)	28,049,717		28,056,179		47.00	%	13,182,584		13,184,648
High Pointe Mezzanine Investments,    LLC (3)(7)	3,000,000		3,263,285		37.20	%	1,116,000		1,217,160
NB Private Capital, LLC (1)(2)(3)(4)(7)	20,000,000		20,166,610		72.40	%	14,480,392		14,601,021
Orange Grove Property Investors, LLC (2)	10,600,000		10,696,587		80.00	%	8,480,000		8,557,205
RS JZ Driggs, LLC (2)	8,200,000		8,286,629		50.00	%	4,100,000		4,142,264
SparQ Mezz Borrower, LLC (1)(3)(7)	8,700,000		8,783,139		36.81	%	3,202,454		3,231,689
Stonewall Station Mezz LLC (2)	9,792,767		9,875,162		44.00	%	4,308,817		4,344,635
The Bristol at Southport, LLC (1)(3)(4)(7)	23,500,000		23,661,724		42.44	%	9,974,444		10,043,088
TSG-Parcel 1, LLC (1)(2)(7)	18,000,000		18,180,000		37.78	%	6,800,000		6,868,000
	$	201,624,466	$	202,951,903			$	102,564,795	$	103,186,327

________________

(1)Participant was Terra Secured Income Fund 5 International, an affiliated fund advised by the Manager.

(2)Participant is Terra Fund 6, an affiliated fund advised by Terra Income Advisors.

(3)Participant was Terra Income Fund International, an affiliated fund advised by the Manager.

(4)Participant was TPT2, an affiliated fund managed by the Manager.

(5)Participant is a third-party.

(6)Amounts transferred may not agree to the proportionate share of the principal balance and fair value due to the rounding of percentage transferred.

(7)As discussed in Note 3, in March 2020, the Company settled an aggregate of $49.8 million of participation interests in loans held by the Company with TPT2 and Terra Offshore REIT, which Terra Offshore REIT received from Terra Secured Income Fund 5 International and Terra Income Fund International. In connection with the Merger and the Issuance of Common Stock to Terra Offshore REIT, the related participation obligations were settled.

The following table summarizes the loan that was transferred to a third-party that was accounted for as secured borrowing as of December 31, 2020.

					Transfers Treated as Secured Borrowing as of December 31, 2020
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
Windy Hill PV Five CM, LLC	$	26,454,910	$	26,407,494	69.11	%	$	18,281,848	$	18,187,663
	$	26,454,910	$	26,407,494			$	18,281,848	$	18,187,663

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Debt (Tables)

12 Months Ended

Dec. 31, 2020

Debt Instrument

Mortgage Loan Payable

The following table presents certain information about the mortgage loan payable as of December 31, 2020 and 2019:

					December 31, 2020				December 31, 2019
Lender	Current Interest Rate	Maturity Date (1)	Principal Amount		Carrying Value		Carrying Value of Collateral		Carrying Value		Carrying Value of Collateral
Centennial Bank	LIBOR + 3.85% (LIBOR Floor of 2.23%)	September 27, 2022	$	44,020,225	$	44,117,293	$	49,533,733	$	44,753,633	$	52,776,236

_______________

(1)In September 2020, the Company exercised the option to extend the maturity of the mortgage loan payable by two years.

Schedule of Long-term Debt Instruments

Scheduled debt principal payments for each of the five calendar years following December 31, 2020 are as follows:

Years Ending December 31,	Total
2021	—
2022	44,020,225
2023	—
2024	—
2025	107,584,451
Thereafter	—
	151,604,676
Unamortized deferred financing costs	(2,241,582)
Total	$	149,363,094

Indenture and credit Agreement

Debt Instrument

Schedule of Debt

The following tables present detailed information with respect to each borrowing under the Term Loan as of December 31, 2020:

	December 31, 2020
	Mortgage Assets						Borrowings Under the Term Loan (1)(2)
	Principal Amount		Carrying Value		Fair Value
330 Tryon DE LLC	$	22,800,000	$	22,901,294	$	22,869,879	13,680,000
1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP	50,808,453		51,068,554		50,982,247		29,897,848
AGRE DCP Palm Springs, LLC	45,294,097		45,506,051		45,519,030		24,894,939
MSC Fields Peachtree Retreat, LLC	23,308,334		23,437,198		23,428,860		13,985,001
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,039,456		17,994,495		10,800,000
University Park Berkeley, LLC	23,990,786		24,131,808		24,162,710		14,326,663
	$	184,201,670	$	185,084,361	$	184,957,221	$	107,584,451

_______________

(1)Borrowings under the Term Loan bear interest at LIBOR plus 4.25% with a LIBOR floor of 1.00%, or 5.25% as of December 31, 2020 using LIBOR of 0.14%.

(2)The maturity of the Term Loan is March 14, 2025, however the maturity of each borrowing under the Term Loan matches the maturity of the respective Mortgage Asset.

Master Repurchase Agreement

Debt Instrument

Schedule of Debt

The following table presents summary information with respect to the Company’s outstanding borrowing under the Master Repurchase Agreement as of December 31, 2019:

	December 31, 2019
Arrangement	Weighted Average Rate (1)		Amount Outstanding		Amount Remaining Available		Weighted Average Term (2)
Master Repurchase Agreement	4.3	%	$	81,134,436	$	68,865,564	1.55 years

_______________

(1)Amount is calculated using LIBOR of 1.76% as of December 31, 2019.

(2)The weighted average term is determined based on the current maturity of the corresponding loan. Each transaction under the facility has its own specific term. The Company may extend the maturity date of the Master Repurchase Agreement for a period of one year, subject to satisfaction of certain conditions.

The following table presents detailed information with respect to each borrowing under the Master Repurchase Agreement as of December 31, 2019:

	December 31, 2019
	Collateral						Borrowings Under Master Repurchase Agreement
	Principal Amount		Carrying Value		Fair Value		Borrowing Date	Principal Amount		Interest Rate
330 Tryon DE LLC	$	22,800,000	$	22,891,149	$	22,906,207	2/15/2019	$	17,100,000	LIBOR+2.25% (LIBOR floor of 2.49%)
1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP	38,464,429		38,510,650		38,655,000		3/7/2019	24,040,268		LIBOR+2.35%
AGRE DCP Palm Springs, LLC	30,184,357		30,174,455		30,326,076		12/23/2019	22,638,268		LIBOR+2.50% (LIBOR floor of 1.8%)
MSC Fields Peachtree Retreat, LLC	23,308,335		23,446,793		23,418,996		3/25/2019	17,355,900		LIBOR+2.25% (LIBOR floor of 2.00%)
	$	114,757,121	$	115,023,047	$	115,306,279		$	81,134,436

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Equity (Tables)

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table presents earnings per share for the years ended December 31, 2020 and 2019:

	Years Ended December 31,
	2020		2019
Net income	$	5,255,730	$	9,042,775
Preferred stock dividend declared	(15,624)		(15,624)
Net income allocable to common stock	$	5,240,106	$	9,027,151
Weighted-average shares outstanding — basic and diluted	18,813,066		14,967,183
Earnings per share — basic and diluted	$	0.28	$	0.60

Investment Company, Per share information

The following table presents distributions per share, declared and paid during the years ended December 31, 2020 and 2019, 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,
	2020		2019
Ordinary income	$	0.48	$	0.78
Return of capital	0.68		1.25
	$	1.16	$	2.03

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Business (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Mar. 02, 2020	Dec. 31, 2019
Investment Company, Financial Highlights [Line Items]
Loan held for investment, net	$ 422,280,515		$ 378,612,768
Cash		$ 25,500,000
Operations Commenced Date	Jan. 01, 2016
Common Stock, Shares, Issued	19,487,460	4,574,470.35	15,125,681
Participating Mortgage Loans, Participation Liabilities, Amount		$ 49,800,000
Minimum
Investment Company, Financial Highlights [Line Items]
Loan held for investment, net	$ 10,000,000
Maximum
Investment Company, Financial Highlights [Line Items]
Loan held for investment, net	$ 50,000,000
Partnership interest
Investment Company, Financial Highlights [Line Items]
Equity Method Investment, Ownership Percentage	87.40%

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Summary of Significant Accounting Policies (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Cash and cash equivalents	$ 18,607,952	$ 29,609,484
Restricted cash	12,145,616	18,542,163
Cash held in escrow by lender	2,166,755	2,398,053
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$ 32,920,323	$ 50,549,700	$ 28,538,853

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Merger and Issuance of Common Stock to Terra Offshore REIT - Narratives - Mergers (Details) - $ / shares	Mar. 01, 2020	Dec. 31, 2020	Dec. 31, 2019
Business Acquisition
Common Stock, Par Value		$ 0.01	$ 0.01
Terra Fund 7
Business Acquisition
Business Combination Common Stock Shares	2,116,785.76
Common Stock, Par Value	$ 0.01
Terra PropertyTrust
Business Acquisition
Common Stock, Par Value	0.01
Terra Property Trust 2 Inc | Common Stock
Business Acquisition
Business Acquisition Share Conversion Rate	$ 1.2031

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Merger and Issuance of Common Stock to Terra Offshore REIT - Summary of the assets acquired and liabilities assumed (Details) - Terra Property Trust 2 Inc	Mar. 01, 2020 USD ($)
Business Acquisition
Equity issued in the Merger	$ 34,630,615
Total Consideration	34,630,615
Net Assets of TPT2 Received in the Merger
Loans held for investment acquired through participation	17,688,741
Cash and cash equivalents	16,897,074
Interest receivable	134,543
Other assets	18,384
Accounts payable and accrued expenses	(57,433)
Due to Manager	(50,694)
Total identifiable net assets	$ 34,630,615

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Merger and Issuance of Common Stock to Terra Offshore REIT - Narratives - Issuance of Common Stock to Terra Offshore Funds (Details)	Apr. 29, 2020 $ / shares shares	Mar. 02, 2020 USD ($) numberOfAgreements shares	Dec. 31, 2020 shares	Dec. 31, 2019 shares
Business Acquisition
Number of contribution agreements | numberOfAgreements		2
Common Stock, Shares, Issued		4,574,470.35	19,487,460	15,125,681
Terra Offshore Funds
Business Acquisition
Settlement of participation interests in loans held | $		$ 32,100,000
Proceeds from issuance of common stock | $		$ 8,600,000
Stock issued in the transaction as consideration		2,457,684.59
Stock Repurchased During Period, Shares	212,691
Share Price | $ / shares	$ 17.02

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Merger and Issuance of Common Stock to Terra Offshore REIT - Issuance of Common Stock to Terra Offshore Funds (Details) - Terra Offshore Funds	Mar. 02, 2020 USD ($)
Business Acquisition
Equity issued in the Merger	$ 40,749,378
Total Consideration	40,749,378
Settlement of obligations under participation agreements	32,112,257
Cash and cash equivalents acquired in Merger	8,600,000
Interest receivable	270,947
Due to Manager	(233,826)
Total identifiable net assets	$ 40,749,378

XML

Merger and Issuance of Common Stock to Terra Offshore REIT - Narratives - Terra JV, LLC (Details)	12 Months Ended
	Dec. 31, 2020	Mar. 02, 2020	Feb. 28, 2020
Terra JV
Business Acquisition
Equity Method Investment, Ownership Percentage	87.40%
Terra Fund 5
Business Acquisition
Equity Method Investment, Ownership Percentage			98.60%
Terra Fund 5 | Terra JV
Business Acquisition
Limited Partners, Ownership Interest	87.60%
Threshold For Nomination Rights		10.00%
Terra Fund 7 | Terra JV
Business Acquisition
Limited Partners, Ownership Interest	12.40%

XML

Merger and Issuance of Common Stock to Terra Offshore REIT - Narratives - Net loss on Obligations Under Participation Agreement (Details) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($)
Business Combination, Separately Recognized Transactions [Line Items]
Net loss recognized	$ 0.3

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Loans Held for Investment - Summary of the Companys loan portfolio (Details)	12 Months Ended
	Dec. 31, 2020 USD ($) Loans	Dec. 31, 2019 USD ($) Loans
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	20	23
Principal Balance	$ 424,174,758	$ 377,388,317
Carrying Value	422,280,515	378,612,768
Fair value - Assets	$ 419,407,194	$ 379,160,415
Weighted-average coupon rate	8.51%	9.65%
Weighted-average remaining term (years)	1 year 5 months 23 days	2 years 1 month 17 days
Fixed Rate
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	6	8
Principal Balance	$ 56,335,792	$ 70,692,767
Loans Receivable with Fixed Rates of Interest	56,464,310	71,469,137
Fair value - Assets	$ 56,284,334	$ 71,516,432
Weighted-average coupon rate	12.17%	11.93%
Weighted-average remaining term (years)	1 year 9 months 10 days	2 years 3 months 10 days
Floating rate
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	14	15
Principal Balance	$ 367,838,966	$ 306,695,550
Loans Receivable with Variable Rates of Interest	365,816,205	307,143,631
Fair value - Assets	$ 363,122,860	$ 307,643,983
Weighted-average coupon rate	7.95%	9.13%
Weighted-average remaining term (years)	1 year 5 months 8 days	2 years 1 month 2 days

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Loans Held for Investment - Summary of the Company's loan portfolio - subnote (Details)	Dec. 31, 2020 USD ($) Loans	Dec. 31, 2019 USD ($) Loans
Accounts, Notes, Loans and Financing Receivable
Repurchase agreement payable, net of deferred financing fees	$ 0	$ 79,608,437
Number Of Loans | Loans	20	23
Principal Balance	$ 424,174,758	$ 377,388,317
Obligations Under Participation Agreements
Accounts, Notes, Loans and Financing Receivable
Principal Balance	167,891,127	201,624,466
Debt Instrument, Face Amount	71,266,303	102,564,795
Floating rate
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 367,838,966	$ 306,695,550
Floating rate | LIBOR
Accounts, Notes, Loans and Financing Receivable
Basis Spread	0.14%	1.76%
Floating rate | Minimum | LIBOR
Accounts, Notes, Loans and Financing Receivable
Basis Spread		2.25%
Floating rate | Maximum | LIBOR
Accounts, Notes, Loans and Financing Receivable
Basis Spread		2.50%
Floating rate | Floor rate | LIBOR
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	12	12
Repurchase Agreements | Floating rate
Accounts, Notes, Loans and Financing Receivable
Debt Instrument, Face Amount		$ 81,100,000
Indenture and credit Agreement | Floating rate
Accounts, Notes, Loans and Financing Receivable
Debt Instrument, Face Amount	$ 107,600,000
Collateral
Accounts, Notes, Loans and Financing Receivable
Principal Balance	184,201,670	114,757,121
Collateral | Floating rate
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 184,200,000	$ 114,800,000
Collateral | Floating rate | LIBOR
Accounts, Notes, Loans and Financing Receivable
Basis Spread	4.25%
Collateral | Floating rate | Floor rate | LIBOR
Accounts, Notes, Loans and Financing Receivable
Basis Spread	1.00%

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Loans Held for Investment - Activities of the Companys loan portfolio (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable
Beginning balance	$ 378,612,768
PIK interest	2,937,909	$ 1,682,721
Provision for loan losses	(3,738,758)	0
Ending balance	422,280,515	378,612,768
Real Estate Loan
Accounts, Notes, Loans and Financing Receivable
Beginning balance	378,612,768	388,243,974
New loans made	108,488,411	185,327,219
Proceeds from Principal Repayments on Loans and Leases Held-for-investment	(66,144,729)	(181,131,959)
Foreclosure of collateral		(14,325,000)
PIK interest	4,442,759	2,476,355
Net amortization of premiums on loans	(61,391)	(104,426)
Accrual, payment and accretion of investment-related fees and other, net	681,455	(1,873,395)
Provision for loan losses	(3,738,758)
Ending balance	422,280,515	378,612,768
Loans Held for Investment | Real Estate Loan
Accounts, Notes, Loans and Financing Receivable
Beginning balance	375,462,222	388,243,974
New loans made	107,359,299	182,206,332
Proceeds from Principal Repayments on Loans and Leases Held-for-investment	(66,144,729)	(181,131,959)
Foreclosure of collateral		(14,325,000)
PIK interest	4,442,759	2,476,355
Net amortization of premiums on loans	(61,391)	(104,426)
Accrual, payment and accretion of investment-related fees and other, net	667,060	(1,903,054)
Provision for loan losses	(3,738,758)
Ending balance	417,986,462	375,462,222
Loans Held For Investment Acquired Through Participation | Real Estate Loan
Accounts, Notes, Loans and Financing Receivable
Beginning balance	3,150,546	0
New loans made	1,129,112	3,120,887
Proceeds from Principal Repayments on Loans and Leases Held-for-investment	0	0
Foreclosure of collateral		0
PIK interest	0	0
Net amortization of premiums on loans	0	0
Accrual, payment and accretion of investment-related fees and other, net	14,395	29,659
Provision for loan losses	0
Ending balance	$ 4,294,053	$ 3,150,546

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Loans Held for Investment - Activity of loan receivables - subnote (Details)	12 Months Ended
	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jan. 09, 2019 USD ($) a
Accounts, Notes, Loans and Financing Receivable
PIK interest	$ 2,937,909	$ 1,682,721
Accretion (Amortization) of Discounts and Premiums, Investments	4,140	85,764
Loans Held for Investment
Accounts, Notes, Loans and Financing Receivable
Accretion (Amortization) of Discounts and Premiums, Investments		500,000
Obligations Under Participation Agreements
Accounts, Notes, Loans and Financing Receivable
PIK interest	$ 1,500,000	$ 800,000
First Mortgage
Accounts, Notes, Loans and Financing Receivable
Area of Land | a			4.9
Mortgage Loans in Process of Foreclosure, Amount			$ 14,300,000

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Loans Held for Investment - Loan Structure (Details) - USD ($)	Dec. 31, 2020		Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 424,174,758		$ 377,388,317
Carrying value	$ 422,280,515		$ 378,612,768
% of Total	100.00%		100.00%
Allowance for Loan and Lease Losses, Real Estate	$ (3,738,758)	[1]	$ 0
Percent Of Allowance Of Loan Losses	(0.90%)		0.00%
First Mortgage
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 254,042,847		$ 178,130,623
Carrying value	$ 255,093,989		$ 178,203,675
% of Total	60.50%		47.10%
Preferred equity investment
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 141,590,632		$ 157,144,040
Carrying value	$ 142,002,144		$ 157,737,763
% of Total	33.60%		41.60%
Mezzanine Loans
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 28,541,279		$ 42,113,654
Carrying value	$ 28,923,140		$ 42,671,330
% of Total	6.80%		11.30%

[1] All of the Company’s loans have a prepayment penalty provision.

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Loans Held for Investment - Property Type (Details) - USD ($)	Dec. 31, 2020		Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 424,174,758		$ 377,388,317
Carrying value	$ 422,280,515		$ 378,612,768
% of Total	100.00%		100.00%
Allowance for Loan and Lease Losses, Real Estate	$ (3,738,758)	[1]	$ 0
Percent Of Allowance Of Loan Losses	(0.90%)		0.00%
Office
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 182,698,225		$ 142,055,845
Carrying value	$ 183,053,751		$ 141,870,355
% of Total	43.30%		37.50%
Multifamily
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 87,978,759		$ 76,640,369
Carrying value	$ 88,627,207		$ 77,136,016
% of Total	21.00%		20.40%
Student Housing
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 55,294,414		$ 58,049,717
Carrying value	$ 55,643,591		$ 58,553,496
% of Total	13.20%		15.50%
Hotel
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 53,392,809		$ 46,598,011
Carrying value	$ 53,687,304		$ 46,731,939
% of Total	12.70%		12.30%
Infill land
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 27,210,551		$ 36,444,375
Carrying value	$ 27,305,496		$ 36,624,375
% of Total	6.50%		9.70%
Condominium
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 10,600,000		$ 10,600,000
Carrying value	$ 10,701,924		$ 10,696,587
% of Total	2.50%		2.80%
Industrial
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 7,000,000		$ 7,000,000
Carrying value	$ 7,000,000		$ 7,000,000
% of Total	1.70%		1.80%

[1] All of the Company’s loans have a prepayment penalty provision.

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Loans Held for Investment - Geographic Locations (Details) - USD ($)	Dec. 31, 2020		Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 424,174,758		$ 377,388,317
Carrying value	$ 422,280,515		$ 378,612,768
% of Total	100.00%		100.00%
Allowance for Loan and Lease Losses, Real Estate	$ (3,738,758)	[1]	$ 0
Percent Of Allowance Of Loan Losses	(0.90%)		0.00%
California
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 200,279,688		$ 150,988,463
Carrying value	$ 200,990,328		$ 151,108,109
% of Total	47.60%		39.90%
New York
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 79,187,004		$ 79,734,323
Carrying value	$ 79,310,276		$ 79,896,663
% of Total	18.80%		21.10%
Georgia
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 74,116,787		$ 61,772,764
Carrying value	$ 74,505,752		$ 61,957,443
% of Total	17.60%		16.40%
North Carolina
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 33,242,567		$ 32,592,767
Carrying value	$ 33,438,806		$ 32,766,311
% of Total	7.90%		8.70%
Washington
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 23,500,000		$ 23,500,000
Carrying value	$ 23,682,536		$ 23,661,724
% of Total	5.60%		6.20%
Illinois
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 0		$ 8,004,877
Carrying value	$ 0		$ 8,071,562
% of Total	0.00%		2.10%
MA
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 7,000,000		$ 7,000,000
Carrying value	$ 7,000,000		$ 7,000,000
% of Total	1.70%		1.80%
Kansas
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 0		$ 6,200,000
Carrying value	$ 0		$ 6,251,649
% of Total	0.00%		1.70%
TX
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 3,848,712		$ 3,500,000
Carrying value	$ 3,887,200		$ 3,531,776
% of Total	0.90%		0.90%
Other (1)
Accounts, Notes, Loans and Financing Receivable
Principal Balance	$ 3,000,000		$ 4,095,123
Carrying value	$ 3,204,375		$ 4,367,531
% of Total	0.80%		1.20%

[1] All of the Company’s loans have a prepayment penalty provision.

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Loans Held for Investment - Geographic Locations - Subnotes (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable
Remaining borrowing capacity		$ 0
Carrying value	$ 422,280,515	378,612,768
Other
Accounts, Notes, Loans and Financing Receivable
Remaining borrowing capacity		1,100,000
Carrying value	3,204,375	4,367,531
South Carolina
Accounts, Notes, Loans and Financing Receivable
Carrying value	$ 3,000,000.0	$ 3,000,000

XML

Loans Held for Investment - Loan risk rating (Details)	Dec. 31, 2020 USD ($) Loans		Dec. 31, 2019 USD ($) Loans
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	20		23
Principal Balance	$ 424,174,758		$ 377,388,317
Carrying Value	$ 426,019,273		$ 378,612,768
% of Total	100.00%		100.00%
Allowance for Loan and Lease Losses, Real Estate	$ (3,738,758)	[1]	$ 0
Total, net of allowance for loan losses	$ 422,280,515		$ 378,612,768
1
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	0		0
Principal Balance	$ 0		$ 0
Carrying Value	$ 0		$ 0
% of Total	0.00%		0.00%
2
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	1		5
Principal Balance	$ 7,000,000		$ 50,000,000
Carrying Value	$ 7,000,000		$ 50,284,751
% of Total	1.60%		13.30%
3
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	14		17
Principal Balance	$ 323,696,475		$ 322,648,317
Carrying Value	$ 325,284,285		$ 323,588,017
% of Total	76.40%		85.40%
4
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	3		0
Principal Balance	$ 72,861,587		$ 0
Carrying Value	$ 73,079,804		$ 0
% of Total	17.20%		0.00%
5
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	1		0
Principal Balance	$ 3,848,712		$ 0
Carrying Value	$ 3,887,200		$ 0
% of Total	0.90%		0.00%
Other
Accounts, Notes, Loans and Financing Receivable
Number Of Loans | Loans	1		1
Principal Balance	$ 16,767,984		$ 4,740,000
Carrying Value	$ 16,767,984		$ 4,740,000
% of Total	3.90%		1.30%

[1] All of the Company’s loans have a prepayment penalty provision.

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Loans Held for Investment - Loan risk rating - subnote (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable
Provision for loan losses	$ 3,738,758	$ 0
Other
Accounts, Notes, Loans and Financing Receivable
Provision for loan losses	$ 2,500,000	$ 0

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Loans Held for Investment - Allowance for loan losses (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Receivables [Abstract]
Allowance for loan losses, beginning of period	$ 0	$ 0
Provision for loan losses	3,738,758	0
Charge-offs	0	0
Recoveries	0	0
Allowance for loan losses, end of period	$ 3,738,758	$ 0

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Loans Held for Investment - Narratives - Allowance for loan losses (Details)	12 Months Ended
	Dec. 31, 2020 USD ($) Loans	Dec. 31, 2019 USD ($) Loans
Accounts, Notes, Loans and Financing Receivable
Number Of Loans	20	23
Provision for loan losses | $	$ 3,738,758	$ 0
4
Accounts, Notes, Loans and Financing Receivable
Number Of Loans	3	0
5
Accounts, Notes, Loans and Financing Receivable
Number Of Loans	1	0
General
Accounts, Notes, Loans and Financing Receivable
Provision for loan losses | $	$ 1,300,000

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Equity Investment in a Limited Partnership - Summarized financial information of the Company’s equity investment (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Schedule of Equity Method Investments
Other assets	$ 3,934,468	$ 2,594,411
Assets	588,477,181	527,343,078
Obligations under participation agreements (Note 8)	71,581,897	103,186,327
Other liabilities	429,123	1,684,106
Liabilities	285,152,116	$ 279,799,345
Terra Real Estate Credit Opportunities Fund
Schedule of Equity Method Investments
Investment Owned, at Fair Value	44,715,979
Other assets	5,331,840
Assets	50,047,819
Obligations under participation agreements (Note 8)	6,347,478
Other liabilities	4,204,147
Liabilities	10,551,625
Partners' Capital	39,496,194
Investment Income	239,837
Total expenses	614,362
Net investment loss	(374,525)
Unrealized appreciation on investments	417,300
Increase in Partners' Capital	$ 42,775

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Equity Investment in a Limited Partnership - Summarized financial information of the Company’s equity investment - Parenthetical (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Schedule of Equity Method Investments
Carrying Value	$ 422,280,515	$ 378,612,768
Proceeds from obligations under participation agreements	22,498,765	$ 34,665,630
Terra Real Estate Credit Opportunities Fund
Schedule of Equity Method Investments
Carrying Value	44,174,031
Proceeds from obligations under participation agreements	$ 6,222,830

XML

Equity Investment in a Limited Partnership - Narratives (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Aug. 03, 2020
Schedule of Equity Method Investments
Unfunded Commitment Outstanding	$ 67,900,000	$ 116,700,000
Equity investment in a limited partnership	36,259,959	0
Income from equity investment in a limited partnership	38,640	$ 0
Terra Real Estate Credit Opportunities Fund
Schedule of Equity Method Investments
Other Commitment	50,000,000.0		$ 50,000,000.0
Terra Real Estate Credit Opportunities Fund
Schedule of Equity Method Investments
Unfunded Commitment Outstanding	$ 14,100,000
Equity Method Investment, Ownership Percentage	90.30%

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Real Estate Owned, Net - Lease Activities (Details) - USD ($)	8 Months Ended
	Sep. 04, 2020	Dec. 31, 2020	Mar. 02, 2020	Dec. 31, 2019
Real Estate
Cash			$ 25,500,000
Lease Termination Fees		$ 588,477,181		$ 527,343,078
Below Market Lease, Net		10,249,776		$ 11,424,809
Contract Termination
Real Estate
Cash	$ 200,000	142,620
Furniture and Fixtures	200,000	236,000
Lease Termination Fees	400,000	378,620
In-place lease intangible assets	900,000	869,694
Below Market Lease, Net	600,000	(616,392)
Rent receivable	$ 100,000	$ 125,318
Property, Plant and Equipment, Remaining Useful Life	2 years 6 months

XML

Real Estate Owned, Net - Carrying value of first mortgage (Details)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jan. 09, 2019 USD ($) a
Real Estate
Carrying Value	$ 422,280,515	$ 378,612,768
Interest receivable	$ 2,509,589	$ 1,876,799
First Mortgage
Real Estate
Carrying Value			$ 14,325,000
Interest receivable			439,300
Restricted Cash and Investments			(60,941)
Land Available-for-sale			$ 14,703,359
Area of Land | a			4.9

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Real Estate Owned, Net Real Estate Owned, Net - Fair value of the real estate acquired (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Jan. 09, 2019
Real Estate
Impairment charge	$ 0	$ 1,550,000
Land
Real Estate
Payments to Acquire Land			$ 14,703,359
Impairment charge		$ 1,600,000
Investment in Real Estate and Accumulated Depreciation, Cost Capitalized Subsequent to Acquisition, Land			$ 200,000

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Real Estate Owned, Net - Real Estate Owned Net (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Real Estate
Real Estate Investment Property, Net	$ 63,385,339	$ 64,751,247
Finite-Lived Intangible Assets, Net	(456,176)
Below Market Lease, Net	10,249,776	11,424,809
Real Estate Investment
Real Estate
Real Estate Investment Property, at Cost	70,953,229	70,717,229
Real Estate Investment Property, Accumulated Depreciation	(8,024,066)	(4,545,563)
Real Estate Investment Property, Net	62,929,163	66,171,666
Finite-Lived Intangible Assets, Gross	16,008,774	16,008,774
Finite-Lived Intangible Assets, Accumulated Amortization	(6,215,174)	(3,163,546)
Finite-Lived Intangible Assets, Net	9,793,600	12,845,228
Finite Lived Intangible Liabilities Gross	(12,267,584)	(12,267,584)
Finite Lived Intangible Liabilities Accumulated Amortization	2,017,808	842,775
Finite Lived Intangible Liability Net	(10,249,776)	(11,424,809)
Real Estate Investment | Real Estate
Real Estate
Real Estate Investment Property, at Cost	67,212,039	66,976,039
Real Estate Investment Property, Accumulated Depreciation	(3,826,700)	(2,224,792)
Real Estate Investment Property, Net	63,385,339	64,751,247
Real Estate Investment | Land
Real Estate
Real Estate Investment Property, at Cost	13,395,430	13,395,430
Real Estate Investment Property, Accumulated Depreciation	0	0
Real Estate Investment Property, Net	13,395,430	13,395,430
Real Estate Investment | Building and Building Improvements
Real Estate
Real Estate Investment Property, at Cost	51,725,969	51,725,969
Real Estate Investment Property, Accumulated Depreciation	(3,125,143)	(1,831,980)
Real Estate Investment Property, Net	48,600,826	49,893,989
Real Estate Investment | Tenant Improvement
Real Estate
Real Estate Investment Property, at Cost	1,854,640	1,854,640
Real Estate Investment Property, Accumulated Depreciation	(670,090)	(392,812)
Real Estate Investment Property, Net	1,184,550	1,461,828
Real Estate Investment | Furniture and fixtures
Real Estate
Real Estate Investment Property, at Cost	236,000	0
Real Estate Investment Property, Accumulated Depreciation	(31,467)	0
Real Estate Investment Property, Net	204,533	0
Real Estate Investment | In-place lease
Real Estate
Finite-Lived Intangible Assets, Gross	15,852,232	15,852,232
Finite-Lived Intangible Assets, Accumulated Amortization	(6,172,747)	(3,138,675)
Finite-Lived Intangible Assets, Net	9,679,485	12,713,557
Real Estate Investment | Above Market Leases
Real Estate
Finite-Lived Intangible Assets, Gross	156,542	156,542
Finite-Lived Intangible Assets, Accumulated Amortization	(42,427)	(24,871)
Finite-Lived Intangible Assets, Net	114,115	131,671
Real Estate Investment | Below Market Rent
Real Estate
Finite Lived Intangible Liabilities Gross	(3,371,314)	(3,371,314)
Finite Lived Intangible Liabilities Accumulated Amortization	1,702,800	658,115
Finite Lived Intangible Liability Net	(1,668,514)	(2,713,199)
Real Estate Investment | Above Market Ground Lease
Real Estate
Finite Lived Intangible Liabilities Gross	(8,896,270)	(8,896,270)
Finite Lived Intangible Liabilities Accumulated Amortization	315,008	184,660
Finite Lived Intangible Liability Net	$ (8,581,262)	$ (8,711,610)

XML

Real Estate Owned, Net - Components of real estate operating revenues and expenses (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Real Estate
Real estate operating income	$ 10,423,563	$ 9,806,507
Total	50,320,888	51,399,525
Real estate operating expenses
Asset management fee	4,480,706	3,671,474
Real Estate Operating Expenses	4,505,119	3,989,911
Real Estate Investment
Real Estate
Lease revenue	8,150,041	7,683,843
Other operating income	2,273,522	2,122,664
Real estate operating income	10,423,563	9,806,507
Real estate operating expenses
Utilities	166,003	191,657
Real estate taxes	1,925,999	1,194,192
Repairs and maintenances	659,934	618,755
Asset management fee	224,732	252,164
Lease expense, including amortization of above-market ground lease	1,134,152	1,135,096
Other operating expenses	394,299	598,047
Real Estate Operating Expenses	$ 4,505,119	$ 3,989,911

XML

Real Estate Owned, Net - Future Minimum Rent Income (Details)	Dec. 31, 2020 USD ($)
Real Estate [Abstract]
2021	$ 6,628,573
2022	7,132,812
2023	7,363,647
2024	7,600,861
2025	4,111,257
Thereafter	1,199,623
Total	$ 34,036,773

XML

Real Estate Owned, Net - Annual Net Amortization of Intangibles (Details)	Dec. 31, 2020 USD ($)
Real Estate
2021	$ 1,593,492
2022	1,593,492
2023	1,593,492
2024	1,593,492
2025	1,119,289
Thereafter	(7,949,433)
Total	(456,176)
Net Decrease in Real Estate Operating Revenue
Real Estate
2021	(338,220)
2022	(338,220)
2023	(338,220)
2024	(338,220)
2025	(181,608)
Thereafter	(19,911)
Total	(1,554,399)
In-place lease
Real Estate
2021	2,062,060
2022	2,062,060
2023	2,062,060
2024	2,062,060
2025	1,431,245
Thereafter	0
Total	9,679,485
Decrease in rent expense
Real Estate
2021	(130,348)
2022	(130,348)
2023	(130,348)
2024	(130,348)
2025	(130,348)
Thereafter	(7,929,522)
Total	$ (8,581,262)

XML

Real Estate Owned, Net - Supplemental ground lease balance sheet information (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019	Jan. 01, 2019	Jul. 30, 2018
Real Estate
Operating lease right-of-use assets	$ 16,105,888	$ 16,112,925
Operating lease liabilities	16,105,888	16,112,925
Ground Lease
Real Estate
Operating lease right-of-use assets	16,105,888	16,112,925	$ 16,100,000
Operating lease liabilities	$ 16,105,888	$ 16,112,925
Weighted average remaining lease term — operating lease (years)	65 years 9 months 18 days	66 years 9 months 18 days		68 years 3 months 18 days
Weighted average discount rate — operating lease	7.90%	7.90%

XML

Real Estate Owned, Net - Component of lease expense (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Ground Lease
Real Estate
Operating lease cost	$ 1,264,500	$ 1,265,445

XML

Real Estate Owned, Net - Cash information related to the ground lease (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Real Estate [Abstract]
Operating cash flows from operating leases	$ 1,264,500	$ 1,265,445
Right-of-use assets obtained in exchange for lease obligations, Operating leases	$ 1,264,500	$ 1,265,445

XML

Real Estate Owned, Net - Maturities of operating lease liabilities (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Real Estate [Abstract]
2021	$ 1,264,500
2022	1,264,500
2023	1,264,500
2024	1,264,500
2025	1,264,500
Thereafter	76,871,063
Total lease payment	83,193,563
Less: Imputed interest	(67,087,675)
Operating lease liabilities	$ 16,105,888	$ 16,112,925

XML

Real Estate Owned, Net - Narratives - Leases (Details)	7 Months Ended
	Jul. 30, 2018 lease	Dec. 31, 2020 USD ($) a	Dec. 31, 2019 USD ($)	Jan. 01, 2019 USD ($)
Real Estate
Number Of Lease Remaining | lease	4
BaseRentRenewalTerm	5 years
Operating lease right-of-use assets		$ 16,105,888	$ 16,112,925
Operating Leases, Income Statement, Initial Direct Costs				$ 500,000
Real Estate Investment
Real Estate
Area of Land | a		4.9
Ground Lease
Real Estate
Operating Lease, Weighted Average Remaining Lease Term	68 years 3 months 18 days	65 years 9 months 18 days	66 years 9 months 18 days
Percent of Fair Market Value of Land	9.00%
Operating lease right-of-use assets		$ 16,105,888	$ 16,112,925	$ 16,100,000
Multi Tenant Office Building | Minimum
Real Estate
Operating Lease, Weighted Average Remaining Lease Term	6 years 3 months 18 days
Multi Tenant Office Building | Maximum
Real Estate
Operating Lease, Weighted Average Remaining Lease Term	8 years 9 months 18 days

XML

Fair Value Measurements - Fair value measurements of marketable securities (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	$ 1,287,500	$ 0	$ 0
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	1,287,500
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	0
Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	1,287,500
Equity securities | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	1,287,500
Equity securities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	0
Equity securities | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	0
Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	0
Debt securities | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	0
Debt securities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	0
Debt securities | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Marketable securities	$ 0

XML

Fair Value Measurements - Activities of the marketable securities (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Fair value measurement [Abstract]
Beginning balance	$ 0	$ 0
Purchases	6,039,567	0
Proceeds from sale	(6,023,723)	0
Realized gains on marketable securities	1,160,162	0
Unrealized gains on marketable securities	111,494	0
Ending balance	$ 1,287,500	$ 0

XML

Fair value measurement - Not carried at Fair Value (Details) - USD ($)		Dec. 31, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Principal Balance		$ 424,174,758	$ 377,388,317
Carrying value, net	[1]	422,280,515
Fair value - Assets		419,407,194	379,160,415
Carrying Value		105,245,801	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Principal Balance		424,174,758	377,388,317
Allowance for loan losses		(3,738,758)	0
Carrying value, net		422,280,515	378,612,768
Fair value - Assets		419,407,194	379,160,415
Principal Balance		241,152,827	228,313,711
Carrying Value		239,132,654	227,548,397
Fair Value		239,327,483	229,270,597
Level 3 | Loans Held for Investment
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Principal Balance		419,924,758	374,267,430
Carrying Value		421,725,220	375,462,222
Fair value - Assets		415,113,225	375,956,154
Level 3 | Loans Held For Investment Acquired Through Participation
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Principal Balance		4,250,000	3,120,887
Carrying Value		4,294,053	3,150,546
Fair value - Assets		4,293,969	3,204,261
Level 3 | Term loans payable
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Principal Balance		107,584,451	0
Carrying Value		105,245,801	0
Fair Value		107,248,555	0
Level 3 | Obligations Under Participation Agreements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Principal Balance		71,266,303	102,564,795
Carrying Value		71,581,897	103,186,327
Fair Value		70,693,207	103,188,783
Level 3 | Mortgage Agreement Payable
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Principal Balance		44,020,225	44,614,480
Carrying Value		44,117,293	44,753,633
Fair Value		44,348,689	44,947,378
Level 3 | Secured Borrowing
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Principal Balance		18,281,848	0
Carrying Value		18,187,663	0
Fair Value		17,037,032	0
Level 3 | Repurchase Agreement Payable
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Principal Balance		0	81,134,436
Carrying Value		0	79,608,437
Fair Value		$ 0	$ 81,134,436

[1] All of the Company’s loans have a prepayment penalty provision.

XML

Fair Value Measurements - Valuation techniques (Details)		Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Fair Value Measurement Inputs and Valuation Techniques
Fair value - Assets		$ 419,407,194	$ 379,160,415
Principal amount	[1]	424,174,758
Level 3
Fair Value Measurement Inputs and Valuation Techniques
Fair value - Assets		419,407,194	379,160,415
Fair value - Liabilities		239,327,483	229,270,597
Level 3 | Loans Held for Investment
Fair Value Measurement Inputs and Valuation Techniques
Fair value - Assets		415,113,225	375,956,154
Level 3 | Loans Held For Investment Acquired Through Participation
Fair Value Measurement Inputs and Valuation Techniques
Fair value - Assets		4,293,969	3,204,261
Level 3 | Term loans payable
Fair Value Measurement Inputs and Valuation Techniques
Fair value - Liabilities		107,248,555	0
Level 3 | Obligations Under Participation Agreements
Fair Value Measurement Inputs and Valuation Techniques
Fair value - Liabilities		70,693,207	103,188,783
Level 3 | Mortgage Agreement Payable
Fair Value Measurement Inputs and Valuation Techniques
Fair value - Liabilities		44,348,689	44,947,378
Level 3 | Secured Borrowing
Fair Value Measurement Inputs and Valuation Techniques
Fair value - Liabilities		17,037,032	0
Level 3 | Repurchase Agreement Payable
Fair Value Measurement Inputs and Valuation Techniques
Fair value - Liabilities		$ 0	$ 81,134,436
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held for Investment | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.0529	0.0471
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held for Investment | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.2005	0.1495
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held for Investment | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.1038	0.0977
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment Acquired Through Participation | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.1289	0.1190
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment Acquired Through Participation | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.1289	0.1190
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment Acquired Through Participation | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.1289	0.1190
Level 3 | Discounted Cash Flow | Discount Rate | Term loans payable | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.0525
Level 3 | Discounted Cash Flow | Discount Rate | Term loans payable | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.0525
Level 3 | Discounted Cash Flow | Discount Rate | Term loans payable | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.0525
Level 3 | Discounted Cash Flow | Discount Rate | Obligations Under Participation Agreements | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.0975	0.0900
Level 3 | Discounted Cash Flow | Discount Rate | Obligations Under Participation Agreements | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.2005	0.1495
Level 3 | Discounted Cash Flow | Discount Rate | Obligations Under Participation Agreements | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.1258	0.1199
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage Agreement Payable | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.0608	0.0608
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage Agreement Payable | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.0608	0.0608
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage Agreement Payable | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.0608	0.0608
Level 3 | Discounted Cash Flow | Discount Rate | Secured Borrowing | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.1125
Level 3 | Discounted Cash Flow | Discount Rate | Secured Borrowing | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.1125
Level 3 | Discounted Cash Flow | Discount Rate | Secured Borrowing | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input		0.1125
Level 3 | Discounted Cash Flow | Discount Rate | Repurchase Agreement Payable | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input			0.0411
Level 3 | Discounted Cash Flow | Discount Rate | Repurchase Agreement Payable | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input			0.0475
Level 3 | Discounted Cash Flow | Discount Rate | Repurchase Agreement Payable | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input			0.0433

[1] All of the Company’s loans have a prepayment penalty provision.

XML

Related Party Transactions - Summary of fees paid and costs reimbursed to the Manager (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Related Party Transaction
Origination And Extension Fee Expense	$ 1,383,960	$ 1,992,492
Asset management fee	4,480,706	3,671,474
Asset servicing fee	1,008,256	854,096
Operating expenses reimbursed to Manager	6,041,075	4,875,153
Disposition Fee	504,611	1,408,055
Total expenses	$ 13,418,608	$ 12,801,270

XML

Related Party Transactions - Summary of fees paid and costs reimbursed to the Manager - subnote (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Related Party Transaction
Origination And Extension Fee Expense	$ 1,383,960	$ 1,992,492
Terra Real Estate Credit Opportunities Fund
Related Party Transaction
Origination And Extension Fee Expense	$ 400,000

XML

Related Party Transactions - Participation Interests Purchased (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Related Party Transaction
Principal Balance	$ 424,174,758	$ 377,388,317
Carrying Value	$ 422,280,515	$ 378,612,768
LD Milpitas Mezz, LP
Related Party Transaction
Participating Interests	25.00%	25.00%
Principal Balance	$ 4,250,000	$ 3,120,887
Carrying Value	$ 4,294,053	$ 3,150,546

XML

Related Party Transactions - Participation Interests Purchased - Subnote (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019	Jun. 27, 2018
Related Party Transaction
Principal Balance	$ 424,174,758	$ 377,388,317
Terra Income Fund Six Inc
Related Party Transaction
Participating Interests			25.00%
Principal Balance			$ 4,300,000
Terra Income Fund Six Inc | Mezzanine Loans
Related Party Transaction
Principal Balance			$ 17,000,000.0

XML

Related Party Transactions - Transfers of Participation Interest (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Related Party Transaction
Principal Balance	$ 424,174,758	$ 377,388,317
Carrying Value	422,280,515	378,612,768
Carrying Value	105,245,801	0
Obligations Under Participation Agreements
Related Party Transaction
Principal Balance	167,891,127	201,624,466
Carrying Value	168,649,216	202,951,903
Principal Balance	71,266,303	102,564,795
Carrying Value	71,581,897	103,186,327
Obligations Under Participation Agreements | 14th & Alice Street Owner, LLC
Related Party Transaction
Principal Balance	32,625,912	12,932,034
Carrying Value	$ 32,877,544	$ 12,957,731
% Transferred	80.00%	80.00%
Principal Balance	$ 26,100,729	$ 10,345,627
Carrying Value	26,211,548	10,387,090
Obligations Under Participation Agreements | 2539 Morse, LLC
Related Party Transaction
Principal Balance		7,000,000
Carrying Value		$ 7,067,422
% Transferred		40.00%
Principal Balance		$ 2,800,001
Carrying Value		2,825,519
Obligations Under Participation Agreements | 370 Lex Part Deux, LLC
Related Party Transaction
Principal Balance	53,874,507	48,349,948
Carrying Value	$ 53,912,363	$ 48,425,659
% Transferred	35.00%	47.00%
Principal Balance	$ 18,856,078	$ 22,724,476
Carrying Value	18,856,077	22,724,476
Obligations Under Participation Agreements | Austin H. I. Owner LLC
Related Party Transaction
Principal Balance		3,500,000
Carrying Value		$ 3,531,776
% Transferred		30.00%
Principal Balance		$ 1,050,000
Carrying Value		1,059,532
Obligations Under Participation Agreements | City Gardens 333 LLC (2)
Related Party Transaction
Principal Balance	28,303,628	28,049,717
Carrying Value	$ 28,307,408	$ 28,056,179
% Transferred	14.00%	47.00%
Principal Balance	$ 3,962,509	$ 13,182,584
Carrying Value	3,963,010	13,184,648
Obligations Under Participation Agreements | High Pointe Mezzanine Investments, LLC
Related Party Transaction
Principal Balance		3,000,000
Carrying Value		$ 3,263,285
% Transferred		37.20%
Principal Balance		$ 1,116,000
Carrying Value		1,217,160
Obligations Under Participation Agreements | NB Private Capital, LLC
Related Party Transaction
Principal Balance		20,000,000
Carrying Value		$ 20,166,610
% Transferred		72.40%
Principal Balance		$ 14,480,392
Carrying Value		14,601,021
Obligations Under Participation Agreements | Orange Grove Property Investors, LLC
Related Party Transaction
Principal Balance	10,600,000	10,600,000
Carrying Value	$ 10,701,924	$ 10,696,587
% Transferred	80.00%	80.00%
Principal Balance	$ 8,480,000	$ 8,480,000
Carrying Value	8,561,523	8,557,205
Obligations Under Participation Agreements | RS JZ Driggs, LLC
Related Party Transaction
Principal Balance	8,544,513	8,200,000
Carrying Value	$ 8,629,929	$ 8,286,629
% Transferred	50.00%	50.00%
Principal Balance	$ 4,272,257	$ 4,100,000
Carrying Value	4,314,965	4,142,264
Obligations Under Participation Agreements | SparQ Mezz Borrower, LLC
Related Party Transaction
Principal Balance		8,700,000
Carrying Value		$ 8,783,139
% Transferred		36.81%
Principal Balance		$ 3,202,454
Carrying Value		3,231,689
Obligations Under Participation Agreements | Stonewall Station Mezz LLC
Related Party Transaction
Principal Balance	10,442,567	9,792,767
Carrying Value	$ 10,537,512	$ 9,875,162
% Transferred	44.00%	44.00%
Principal Balance	$ 4,594,730	$ 4,308,817
Carrying Value	4,635,937	4,344,635
Obligations Under Participation Agreements | The Bristol at Southport, LLC
Related Party Transaction
Principal Balance	23,500,000	23,500,000
Carrying Value	$ 23,682,536	$ 23,661,724
% Transferred	21.28%	42.44%
Principal Balance	$ 5,000,000	$ 9,974,444
Carrying Value	5,038,837	10,043,088
Obligations Under Participation Agreements | TSG-Parcel 1, LLC
Related Party Transaction
Principal Balance		18,000,000
Carrying Value		$ 18,180,000
% Transferred		37.78%
Principal Balance		$ 6,800,000
Carrying Value		$ 6,868,000
Secured borrowing
Related Party Transaction
Principal Balance	26,454,910
Carrying Value	26,407,494
Principal Balance	18,281,848
Carrying Value	18,187,663
Secured borrowing | Windy Hill PV Five CM, LLC
Related Party Transaction
Principal Balance	26,454,910
Carrying Value	$ 26,407,494
% Transferred	69.11%
Principal Balance	$ 18,281,848
Carrying Value	$ 18,187,663

XML

Related Party Transactions - Transfers of Participation Interest - Subnote (Details) - USD ($)	Mar. 31, 2020	Mar. 02, 2020
Related Party Transaction
Participating Mortgage Loans, Participation Liabilities, Amount		$ 49,800,000
TPT 2 and Terra Offshore Funds
Related Party Transaction
Participating Mortgage Loans, Participation Liabilities, Amount	$ 49,800,000

XML

Related Party Transactions - Narratives (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Related Party Transaction
Asset Servicing Fee Annual Rate	0.25%
Property Management Fee, Percent Fee	1.00%
Termination fee	$ 0	$ 0
Distribution Paid
Dividends, Common Stock	21,218,767	30,395,777
Due to Manager (Note 8)	1,257,098	1,037,168
Terra Fund 5
Distribution Paid
Dividends, Common Stock		30,400,000
Investment Company, Return of Capital Distribution		$ 21,400,000
Terra Fund 5, Terra JV and TIF3
Distribution Paid
Dividends, Common Stock	21,200,000
Investment Company, Return of Capital Distribution	$ 16,000,000.0
Limited Partner
Related Party Transaction
Percent of Origination Fees Payable	1.00%
Percent of principal amount of loan extended	1.00%
Loans Disposition Fee Due to Manager Percent	1.00%
Disposition and Extension Fee Payment Term	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.

XML

Related Party Transactions - Merger and Asset Contribution (Details) - $ / shares	Mar. 02, 2020	Mar. 01, 2020	Dec. 31, 2020	Dec. 31, 2019
Related Party Transaction
Common Stock, Par Value Per Share			$ 0.01	$ 0.01
Terra Fund 7
Related Party Transaction
Business Combination Common Stock Shares		2,116,785.76
Common Stock, Par Value Per Share		$ 0.01
Terra International Fund 3
Related Party Transaction
Business Combination Common Stock Shares	2,457,684.59
Terra JV
Related Party Transaction
Equity Method Investment, Ownership Percentage			87.40%
Terra JV | Terra Fund 5
Related Party Transaction
Equity Method Investment, Ownership Percentage			87.60%
Terra JV | Terra Fund 7
Related Party Transaction
Equity Method Investment, Ownership Percentage			12.40%

XML

Related Party Disclosures - Terra Real Estate Credit Opportunities Fund, L.P. (Details) - USD ($) $ in Millions	Dec. 31, 2020	Aug. 03, 2020
Terra Real Estate Credit Opportunities Fund
Related Party Transaction
Other Commitment	$ 50.0	$ 50.0

XML

Related Party Transactions - Narratives - Terra International 3 (Details) - USD ($)		9 Months Ended
	Apr. 29, 2020	Sep. 30, 2019	Dec. 31, 2020	Mar. 02, 2020	Dec. 31, 2019
Related Party Transaction
Common Stock, Shares, Issued			19,487,460	4,574,470.35	15,125,681
Terra International Fund 3
Related Party Transaction
Proceeds from Contributed Capital		$ 3,600,000
Common Stock, Shares, Issued		212,691
Stock Repurchased During Period, Shares	212,691
Share Price	$ 17.02	$ 17.02
Shares Issued, Price Per Share		$ 100,000

XML

Related Party Transactions - Narratives - Co-investment (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019	Jan. 31, 2018
Related Party Transaction
Principal Balance	$ 424,174,758	$ 377,388,317
Co-investment
Related Party Transaction
Debt Instrument, Interest Rate, Stated Percentage			12.75%
Principal Balance			$ 8,900,000

XML

Debt - Indenture and Credit Agreement (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Sep. 03, 2020
Debt Instrument
Payment of financing costs	$ 2,361,369	$ 405,673
Indenture and credit Agreement
Debt Instrument
Description of Variable Rate Basis	LIBOR
Indenture and credit Agreement | Committed advance
Debt Instrument
Current borrowing capacity			$ 3,600,000
Indenture and credit Agreement | Discretionary advance
Debt Instrument
Current borrowing capacity			11,600,000
Indenture and credit Agreement | Maximum
Debt Instrument
EBITDA To Interest Expense Ratio	1.5
Indenture and credit Agreement | Minimum
Debt Instrument
Debt Instrument Covenant Liquidity	$ 10,000,000
Indenture and credit Agreement | LIBOR
Debt Instrument
Basis Spread on Variable Rate	4.25%
Debt Instrument Additional Variable Rate in Year Two	0.50%
Debt Instrument Additional Variable Rate in Year Three	0.25%
Indenture and credit Agreement | LIBOR | Floor rate
Debt Instrument
Basis Spread on Variable Rate	1.00%
Indenture and credit Agreement | Class B Loan
Debt Instrument
Debt Instrument, Face Amount			76,700,000
Indenture and credit Agreement | Term Loan
Debt Instrument
Debt Instrument, Face Amount	$ 107,584,451		$ 103,000,000.0
Payment of financing costs	$ 2,400,000
Maturity Date	Mar. 14, 2025
Debt Instrument, Covenant Description	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 guarantees 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 guarantees the payment of the aggregate outstanding amount of the Term Loan upon the occurrence of certain bankruptcy events. Under the Guaranty, the Company is 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.
Debt Instrument, Covenant Compliance	As of December 31, 2020, the Company is in compliance with these covenants.
Debt Instrument Covenant Requirement On Consolidated Tangible Net Worth Minimum Percent	75.00%
Indenture and credit Agreement | Repurchase Agreements | Term Loan
Debt Instrument
Payment of financing costs	$ 1,300,000

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Debt - Outstanding borrowing under the Master Repurchase Agreement (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2020
Debt Instrument
Amount Outstanding	$ 79,608,437	$ 0
Master Repurchase Agreement
Debt Instrument
Weighted Average Rate	4.30%
Amount Outstanding	$ 81,134,436
Amount Remaining Available	$ 68,865,564
Debt Instrument Weighted Average Term	1 year 6 months 18 days

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Debt - Outstanding Borrowing under Master purchase agreement - Subnote (Details)	Dec. 31, 2019
Master Repurchase Agreement | LIBOR
Debt Instrument
Long-term Debt, Percentage Bearing Variable Interest, Percentage Rate	1.76%

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Debt - Details of each borrowing under Indenture and credit agreement, the Repurchase Agreement (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Sep. 03, 2020
Debt Instrument
Principal Balance	$ 424,174,758	$ 377,388,317
Carrying Value	422,280,515	378,612,768
Fair value - Assets	419,407,194	379,160,415
Collateral
Debt Instrument
Principal Balance	184,201,670	114,757,121
Carrying Value	185,084,361	115,023,047
Fair value - Assets	184,957,221	115,306,279
Collateral | 330 Tryon DE LLC
Debt Instrument
Principal Balance	22,800,000	22,800,000
Carrying Value	22,901,294	22,891,149
Fair value - Assets	22,869,879	22,906,207
Collateral | 1389 Peachtree St, L.P. and Others
Debt Instrument
Principal Balance	50,808,453	38,464,429
Carrying Value	51,068,554	38,510,650
Fair value - Assets	50,982,247	38,655,000
Collateral | AGRE DCP Palm Springs LLC
Debt Instrument
Principal Balance	45,294,097	30,184,357
Carrying Value	45,506,051	30,174,455
Fair value - Assets	45,519,030	30,326,076
Collateral | MSC Fields Peachtree Retreat LLC
Debt Instrument
Principal Balance	23,308,334	23,308,335
Carrying Value	23,437,198	23,446,793
Fair value - Assets	23,428,860	23,418,996
Collateral | Patrick Henry Recovery Acquisition LLC
Debt Instrument
Principal Balance	18,000,000
Carrying Value	18,039,456
Fair value - Assets	17,994,495
Collateral | University Park Berkeley, LLC
Debt Instrument
Principal Balance	23,990,786
Carrying Value	24,131,808
Fair value - Assets	$ 24,162,710
Master Repurchase Agreement
Debt Instrument
Debt Instrument, Face Amount		$ 81,134,436
Master Repurchase Agreement | 330 Tryon DE LLC
Debt Instrument
Debt Instrument, Issuance Date		Feb. 15, 2019
Debt Instrument, Face Amount		$ 17,100,000
Description of Variable Rate Basis		LIBOR
Master Repurchase Agreement | 330 Tryon DE LLC | LIBOR
Debt Instrument
Basis Spread on Variable Rate		2.25%
Master Repurchase Agreement | 330 Tryon DE LLC | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate		2.49%
Master Repurchase Agreement | 1389 Peachtree St, L.P. and Others
Debt Instrument
Debt Instrument, Issuance Date		Mar. 07, 2019
Debt Instrument, Face Amount		$ 24,040,268
Description of Variable Rate Basis		LIBOR
Master Repurchase Agreement | 1389 Peachtree St, L.P. and Others | LIBOR
Debt Instrument
Basis Spread on Variable Rate		2.35%
Master Repurchase Agreement | AGRE DCP Palm Springs LLC
Debt Instrument
Debt Instrument, Issuance Date		Dec. 23, 2019
Debt Instrument, Face Amount		$ 22,638,268
Description of Variable Rate Basis		LIBOR
Master Repurchase Agreement | AGRE DCP Palm Springs LLC | LIBOR
Debt Instrument
Basis Spread on Variable Rate		2.50%
Master Repurchase Agreement | AGRE DCP Palm Springs LLC | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate		1.80%
Master Repurchase Agreement | MSC Fields Peachtree Retreat LLC
Debt Instrument
Debt Instrument, Issuance Date		Mar. 25, 2019
Debt Instrument, Face Amount		$ 17,355,900
Description of Variable Rate Basis		LIBOR
Master Repurchase Agreement | MSC Fields Peachtree Retreat LLC | LIBOR
Debt Instrument
Basis Spread on Variable Rate		2.25%
Master Repurchase Agreement | MSC Fields Peachtree Retreat LLC | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate		2.00%
Indenture and credit Agreement
Debt Instrument
Description of Variable Rate Basis	LIBOR
Indenture and credit Agreement | LIBOR
Debt Instrument
Basis Spread on Variable Rate	4.25%
Indenture and credit Agreement | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate	1.00%
Indenture and credit Agreement | Term Loan
Debt Instrument
Debt Instrument, Face Amount	$ 107,584,451		$ 103,000,000.0
Indenture and credit Agreement | 330 Tryon DE LLC
Debt Instrument
Description of Variable Rate Basis	LIBOR
Indenture and credit Agreement | 330 Tryon DE LLC | LIBOR
Debt Instrument
Basis Spread on Variable Rate	4.25%
Indenture and credit Agreement | 330 Tryon DE LLC | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate	1.00%
Indenture and credit Agreement | 330 Tryon DE LLC | Term Loan
Debt Instrument
Debt Instrument, Face Amount	$ 13,680,000
Indenture and credit Agreement | 1389 Peachtree St, L.P. and Others
Debt Instrument
Description of Variable Rate Basis	LIBOR
Indenture and credit Agreement | 1389 Peachtree St, L.P. and Others | LIBOR
Debt Instrument
Basis Spread on Variable Rate	4.25%
Indenture and credit Agreement | 1389 Peachtree St, L.P. and Others | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate	1.00%
Indenture and credit Agreement | 1389 Peachtree St, L.P. and Others | Term Loan
Debt Instrument
Debt Instrument, Face Amount	$ 29,897,848
Indenture and credit Agreement | AGRE DCP Palm Springs LLC
Debt Instrument
Description of Variable Rate Basis	LIBOR
Indenture and credit Agreement | AGRE DCP Palm Springs LLC | LIBOR
Debt Instrument
Basis Spread on Variable Rate	4.25%
Indenture and credit Agreement | AGRE DCP Palm Springs LLC | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate	1.00%
Indenture and credit Agreement | AGRE DCP Palm Springs LLC | Term Loan
Debt Instrument
Debt Instrument, Face Amount	$ 24,894,939
Indenture and credit Agreement | MSC Fields Peachtree Retreat LLC
Debt Instrument
Description of Variable Rate Basis	LIBOR
Indenture and credit Agreement | MSC Fields Peachtree Retreat LLC | LIBOR
Debt Instrument
Basis Spread on Variable Rate	4.25%
Indenture and credit Agreement | MSC Fields Peachtree Retreat LLC | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate	1.00%
Indenture and credit Agreement | MSC Fields Peachtree Retreat LLC | Term Loan
Debt Instrument
Debt Instrument, Face Amount	$ 13,985,001
Indenture and credit Agreement | Patrick Henry Recovery Acquisition LLC
Debt Instrument
Description of Variable Rate Basis	LIBOR
Indenture and credit Agreement | Patrick Henry Recovery Acquisition LLC | LIBOR
Debt Instrument
Basis Spread on Variable Rate	4.25%
Indenture and credit Agreement | Patrick Henry Recovery Acquisition LLC | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate	1.00%
Indenture and credit Agreement | Patrick Henry Recovery Acquisition LLC | Term Loan
Debt Instrument
Debt Instrument, Face Amount	$ 10,800,000
Indenture and credit Agreement | University Park Berkeley, LLC
Debt Instrument
Description of Variable Rate Basis	LIBOR
Indenture and credit Agreement | University Park Berkeley, LLC | LIBOR
Debt Instrument
Basis Spread on Variable Rate	4.25%
Indenture and credit Agreement | University Park Berkeley, LLC | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate	1.00%
Indenture and credit Agreement | University Park Berkeley, LLC | Term Loan
Debt Instrument
Debt Instrument, Face Amount	$ 14,326,663

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Debt - Details of each borrowing under the Repurchase Agreement - Subnote (Details)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
LIBOR | Floating rate
Debt Instrument
Basis Spread	0.14%	1.76%
Indenture and credit Agreement
Debt Instrument
Debt Instrument, Interest Rate, Stated Percentage	5.25%
Indenture and credit Agreement | Term Loan
Debt Instrument
Maturity Date	Mar. 14, 2025
Indenture and credit Agreement | LIBOR
Debt Instrument
Basis Spread on Variable Rate	4.25%
Indenture and credit Agreement | Floor rate | LIBOR
Debt Instrument
Basis Spread on Variable Rate	1.00%

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Debt - Mortgage Loan Payable (Details) - USD ($)		12 Months Ended
		Dec. 31, 2020	Dec. 31, 2019
Debt Instrument
Obligation under participation agreement		$ 71,581,897	$ 103,186,327
Carrying value, net	[1]	422,280,515
Term loan payable, net of deferred financing fees		105,245,801	0
Principal amount	[1]	$ 424,174,758
Centennial Bank
Debt Instrument
Description of Variable Rate Basis		LIBOR
Maturity Date		Sep. 27, 2022
Carrying value, net		$ 44,117,293	44,753,633
Loans Pledged as Collateral		49,533,733	$ 52,776,236
Principal amount		$ 44,020,225
Centennial Bank | LIBOR
Debt Instrument
Basis Spread on Variable Rate		3.85%
Floor rate | Centennial Bank | LIBOR
Debt Instrument
Basis Spread on Variable Rate		2.23%

[1] All of the Company’s loans have a prepayment penalty provision.

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Debt - Scheduled Debt Principal Payments (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Debt Instrument
2021	$ 0
2022	44,020,225
2023	0
2024	0
2025	107,584,451
Thereafter	0
Long term debt	151,604,676
Unarmortized deferred financing costs	(2,241,582)	$ (1,400,000)
Long Term Debt Net	$ 149,363,094

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Debt - Narratives - Purchase agreement, Revolving credit facility (Details)		1 Months Ended	12 Months Ended
	Oct. 02, 2020 USD ($)	Jun. 20, 2019 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 12, 2018 USD ($)
Debt Instrument
Proceeds from borrowings under revolving credit facility			$ 35,000,000.0	$ 16,000,000
Proceeds from borrowings under the term loan			107,584,451	0
Remaining borrowing capacity				0
Proceeds from secured borrowing			18,281,848	0
Term loan payable, net of deferred financing fees			105,245,801	0
Repurchase Agreements
Payment of financing costs			2,361,369	405,673
Repayment of borrowings under repurchase agreements			103,994,570	34,200,000
Proceeds from borrowings under repurchase agreement			22,860,134	81,134,436
Unarmortized Finance Cost			2,241,582	1,400,000
Revolving Credit Facility
Obligation under participation agreement			71,581,897	$ 103,186,327
Committed advance
Debt Instrument
Proceeds from borrowings under the term loan			2,400,000
Remaining borrowing capacity			1,200,000
Discretionary advance
Debt Instrument
Proceeds from borrowings under the term loan			2,200,000
Remaining borrowing capacity			9,400,000
Master Repurchase Agreement
Debt Instrument
Debt Instrument, Covenant Description				The Master Repurchase Agreement and the Guarantee Agreement contained 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 contained financial covenants, which required the Company to maintain: (i) liquidity of at least 10% of the then-current outstanding amount under the Master Repurchase Agreement; (ii) cash liquidity of at least the greater of $5 million or 5% of the then-current outstanding amount under the Master Repurchase Agreement; (iii) tangible net worth at an amount equal to or greater than 75% of the Company’s tangible net worth as of December 12, 2018, 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 3.00 to 1.00.
Debt Instrument, Covenant Compliance				the Company was in compliance with these covenants.
Maturity Date				Dec. 12, 2020
Repurchase Agreements
Payment of financing costs					$ 2,800,000
Deferred finance cost				$ 1,500,000	$ 500,000
Repayment of borrowings under repurchase agreements			$ 3,400,000
Maximum Liability Under Repurchase Agreement Percent			50.00%
Debt Instrument Covenant Minimum Percentage Of Liquidity				10.00%
Debt Instrument Covenant Minimum Percentage Of Cash Liquidity				5.00%
Debt Instrument Covenant Requirement On Consolidated Tangible Net Worth Minimum Percent				75.00%
Debt Instrument Covenant New Capital Contribution Percent				75.00%
Master Repurchase Agreement | Minimum
Debt Instrument
EBITDA To Interest Expense Ratio				1.50
Repurchase Agreements
Debt Instrument Covenant Liquidity						$ 5,000,000
Master Repurchase Agreement | Maximum
Repurchase Agreements
Banking Regulation, Tangible Capital Ratio, Actual				3.00
Revolving Credit Facility
Debt Instrument
Debt Instrument, Covenant Description			The Revolving Credit Facility required the Company to maintain: (i) an EBITDA to interest expense ratio of not less than 1.00; (ii) cash liquidity of at least $7.0 million; (iii) tangible net worth of at least $200.0 million; and (iii) a total indebtedness to tangible net worth ratio of not more than 1.75 to 1.00. Additionally, the Revolving Credit Facility required Terra LOC Portfolio I, LLC to maintain a tangible net worth of at least $100.0 million.
Debt Instrument, Covenant Compliance			both the Company and Terra LOC Portfolio I, LLC were in compliance with these covenants.	both the Company and Terra LOC Portfolio I, LLC are in compliance with these covenants.
Ratio of Indebtedness to Net Capital			1.75
Minimum net worth required for compliance			$ 200,000,000.0
Repurchase Agreements
Payment of financing costs	$ 300,000
Revolving Credit Facility
Line of Credit Facility, Fair Value of Amount Outstanding			0
Line of Credit Facility, Expiration Date	Sep. 02, 2021	Jun. 20, 2020
cash liquidity			$ 7,000,000.0
Revolving Credit Facility | Floor rate
Revolving Credit Facility
Basis Spread on Variable Rate	4.50%	6.00%
Revolving Credit Facility | Minimum
Debt Instrument
EBITDA To Interest Expense Ratio			1.00
Revolving Credit Facility | LIBOR
Revolving Credit Facility
Basis Spread on Variable Rate	4.00%	4.00%
Revolving Credit Facility | Prime Rate
Revolving Credit Facility
Basis Spread on Variable Rate	1.00%	1.00%
Terra Mortgage Capital LLC | Revolving Credit Facility
Debt Instrument
Minimum net worth required for compliance			$ 100,000,000.0
Israel Discount Bank of New York | Terra LOC Portfolio I, LLC | Revolving Credit Facility
Revolving Credit Facility
Borrowing Capacity	$ 15,000,000.0	$ 35,000,000.0
Goldman Sachs Bank USA | Terra Mortgage Capital LLC | Master Repurchase Agreement
Revolving Credit Facility
Borrowing Capacity						$ 150,000,000.0

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Debt - Narratives - Loan Participation Agreement (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Mar. 02, 2020
Debt Instrument
Participating Mortgage Loans, Participation Liabilities, Amount			$ 49,800,000
Unarmortized Finance Cost	$ 2,241,582	$ 1,400,000
Carrying Value	$ 422,280,515	$ 378,612,768
Weighted-average coupon rate	8.51%	9.65%
Participation mortgage loan	$ 105,245,801	$ 0
Participating Mortgage Loan
Debt Instrument
Carrying Value	168,600,000	203,000,000.0
Participation mortgage loan	$ 71,600,000	$ 103,200,000
Participating Mortgage Loan | Weighted average
Debt Instrument
Participating Mortgage Loans, Mortgage Interest Rate	10.20%	11.80%
Secured borrowing
Debt Instrument
Carrying Value	$ 26,407,494
Participation mortgage loan	$ 18,187,663

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Commitments and Contingencies (Details) - USD ($) $ in Millions	Dec. 31, 2020	Aug. 03, 2020	Dec. 31, 2019
Other Commitments
Unfunded Commitment Outstanding	$ 67.9		$ 116.7
Commitments and Contingencies
Terra Real Estate Credit Opportunities Fund
Other Commitments
Other Commitment	50.0	$ 50.0
Terra Real Estate Credit Opportunities Fund
Other Commitments
Unfunded Commitment Outstanding	$ 14.1

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Equity - Earnings Per Share (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Equity [Abstract]
Net income	$ 5,255,730	$ 9,042,775
Preferred stock dividend declared	(15,624)	(15,624)
Net income allocable to common stock	$ 5,240,106	$ 9,027,151
Weighted-average shares — basic and diluted	18,813,066	14,967,183
Earnings per share — basic and diluted	$ 0.28	$ 0.60

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Equity - Preferred Stock Classes (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Class of Stock
Preferred stock dividend declared	$ 15,624	$ 15,624
Preferred Stock, Shares Authorized	50,000,000	50,000,000
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Issued	0	0
Preferred Stock, Value, Issued	$ 0	$ 0
Preferred Stock, Value, Outstanding	0	0
Common Stock, Value, Issued	$ 194,875	$ 151,257
Redeemable Cumulative Preferred Stock
Class of Stock
Preferred Stock, Dividend Rate, Percentage	12.50%
Preferred Stock, Liquidation Preference Per Share	$ 1,000
Preferred Stock Shares Sold	125
Preferred Stock Value Sold	$ 125,000
Preferred Stock, Dividend Payment Terms	These dividends are cumulative and payable semi-annually in arrears on June 30 and December 31 of each year
Preferred Stock, Redemption Price Per Share	$ 1,000
Preferred Stock Redemption Premium Per Share	$ 50
12.5% Series A Cumulative Preferred Stock
Class of Stock
Preferred Stock, Dividend Rate, Percentage	12.50%	12.50%
Preferred Stock, Shares Authorized	125	125
Preferred Stock, Shares Issued	125	125
Preferred Stock, Value, Issued	$ 125,000	$ 125,000
Preferred Stock, Shares Outstanding	125	125

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Equity - Common Stock (Details) - USD ($)	Apr. 29, 2020	Mar. 02, 2020	Mar. 01, 2020	Dec. 31, 2020	Dec. 31, 2019	Sep. 30, 2019
Schedule of Equity Method Investments
Common Stock, Shares, Issued		4,574,470.35		19,487,460	15,125,681
Common Stock, Par Value Per Share				$ 0.01	$ 0.01
Common Stock, Value, Issued				$ 194,875	$ 151,257
Terra JV
Schedule of Equity Method Investments
Equity Method Investment, Ownership Percentage				87.40%
Terra Fund 5 | Terra JV
Schedule of Equity Method Investments
Equity Method Investment, Ownership Percentage				87.60%
Terra Fund 7
Schedule of Equity Method Investments
Business Combination Common Stock Shares			2,116,785.76
Common Stock, Par Value Per Share			$ 0.01
Terra Fund 7 | Terra JV
Schedule of Equity Method Investments
Equity Method Investment, Ownership Percentage				12.40%
TIF 3 REIT
Schedule of Equity Method Investments
Business Combination Common Stock Shares		2,457,684.59
Common Stock, Shares, Issued						212,691
Common Stock, Value, Issued						$ 3,600,000
Stock Repurchased During Period, Shares	212,691
Share Price	$ 17.02					$ 17.02

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Equity - Distributions (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Schedule of Equity Method Investments
Dividends, Preferred Stock, Stock	$ 15,624	$ 15,624
Dividends, Common Stock	21,218,767	30,395,777
Terra Fund 5, Terra JV and TIF3
Schedule of Equity Method Investments
Investment Company, Return of Capital Distribution	16,000,000.0
Dividends, Common Stock	$ 21,200,000
Terra Fund 5
Schedule of Equity Method Investments
Investment Company, Return of Capital Distribution		21,400,000
Dividends, Common Stock		$ 30,400,000

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Equity - Distributions per share (Details) - $ / shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Investment Company, Financial Highlights [Line Items]
Investment Company, Distribution to Shareholders, Per Share	$ 0.48	$ 0.78
Investment Company, Tax Return of Capital Distribution, Per Share	0.68	1.25
Investment Company, Net Asset Value Per Share, Period Increase (Decrease)	$ 1.16	$ 2.03

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Subsequent Events (Details)			1 Months Ended	12 Months Ended
	Mar. 12, 2021 USD ($)	Oct. 02, 2020	Jun. 20, 2019	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jan. 09, 2019 USD ($)
Subsequent Event
Loans and lease receivables net				$ 422,280,515	$ 378,612,768
First Mortgage
Subsequent Event
Loans and lease receivables net						$ 14,325,000
Revolving Credit Facility
Subsequent Event
Debt Instrument, Covenant Description				The Revolving Credit Facility required the Company to maintain: (i) an EBITDA to interest expense ratio of not less than 1.00; (ii) cash liquidity of at least $7.0 million; (iii) tangible net worth of at least $200.0 million; and (iii) a total indebtedness to tangible net worth ratio of not more than 1.75 to 1.00. Additionally, the Revolving Credit Facility required Terra LOC Portfolio I, LLC to maintain a tangible net worth of at least $100.0 million.
Minimum net worth required for compliance				$ 200,000,000.0
Ratio of Indebtedness to Net Capital				1.75
Revolving Credit Facility | Floor rate
Subsequent Event
Basis Spread on Variable Rate		4.50%	6.00%
Subsequent Event | Revolving Credit Facility | Guarantee of Indebtedness of Others | First Mortgage
Subsequent Event
Line of credit	$ 8,000,000.0
Subsequent Event | Revolving Credit Facility | Guarantee of Indebtedness of Others | First Mortgage | Collateral Pledged
Subsequent Event
Loans and lease receivables net	$ 11,500,000
Subsequent Event | Revolving Credit Facility | WAB
Subsequent Event
Basis Spread on Variable Rate	3.25%
Maturity Date	Mar. 12, 2023
Borrowing Capacity	$ 75,000,000.0
Ratio of Indebtedness to Net Capital	2.50
Subsequent Event | Revolving Credit Facility | WAB | Floor rate
Subsequent Event
Basis Spread on Variable Rate	4.00%
Subsequent Event | Revolving Credit Facility | WAB | Guarantee of Indebtedness of Others
Subsequent Event
Debt Instrument, Covenant Description	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 will guarantee 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 will be required to maintain (i) a minimum total net worth of $250.0 million; (ii) a $2.0 million quarterly operating profit; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00.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.
Maximum percent of outstanding payment	25.00%
Minimum net worth required for compliance	$ 250,000,000.0
Quarterly operating profit required for compliance	$ 2,000,000.0

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Schedule III - Real Estate and Accumulated Depreciation (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Investment in Real Estate and Accumulated Depreciation
Encumbrances	$ 44,020,225
Initial Cost
Land	14,703,359
Building and Improvements	51,308,076
Cost Capitalized Subsequent to Acquisition	2,750,604
Decrease in Net Investment	(1,550,000)
Gross Amount at Period End
Land	13,395,430
Building and Improvements	53,816,609
Total	67,212,039	$ 66,976,039
Accumulated Depreciation	3,826,700	$ 2,224,792
Santa Monica | CA | Office
Investment in Real Estate and Accumulated Depreciation
Encumbrances	44,020,225
Initial Cost
Land	0
Building and Improvements	51,308,076
Cost Capitalized Subsequent to Acquisition	2,508,533
Decrease in Net Investment	0
Gross Amount at Period End
Land	0
Building and Improvements	53,816,609
Total	53,816,609
Accumulated Depreciation	$ 3,826,700
Date of Construction	2002-2004
Date Acquired	Jul. 30, 2018
Life Used for Depreciation	40 years
Conshohocken | PA | Land
Investment in Real Estate and Accumulated Depreciation
Encumbrances	$ 0
Initial Cost
Land	14,703,359
Building and Improvements	0
Cost Capitalized Subsequent to Acquisition	242,071
Decrease in Net Investment	(1,550,000)
Gross Amount at Period End
Land	13,395,430
Building and Improvements	0
Total	13,395,430
Accumulated Depreciation	$ 0
Date Acquired	Jan. 09, 2019

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Schedule III - Real Estate and Accumulated Depreciation - Subnote (Details)	Dec. 31, 2020 USD ($)
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract]
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate, Investment Property, Net	$ 1,550,000
Tax Basis of Investments, Cost for Income Tax Purposes	$ 57,600,000

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Schedule III - Changes in total real estate assets and accumulated depreciation (Details)	12 Months Ended
	Dec. 31, 2020 USD ($)
Investment in Real Estate [Roll Forward]
Balance, beginning of year	$ 66,976,039
Acquisition through foreclosure	0
Improvements	236,000
Impairment charge	0
Balance, end of year	67,212,039
Investment in Real Estate, Accumulated Depreciation [Roll Forward]
Balance, beginning of year	2,224,792
Depreciation for the year	1,601,908
Balance, end of year	$ 3,826,700

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Schedule IV – Mortgage Loans on Real Estate (Details) - USD ($)		7 Months Ended	12 Months Ended
		Jan. 31, 2021	Dec. 31, 2020		Dec. 31, 2019
Investment in Mortgage Loans on Real Estate
Interest payment rate			8.51%		9.65%
Prior Lien	[1]		$ 0
Face Amount	[1]		424,174,758
Allowance for Loan and Lease Losses, Real Estate			3,738,758	[1]	$ 0
Carrying value, net	[1]		422,280,515
Preferred equity investment
Investment in Mortgage Loans on Real Estate
Prior Lien	[1]		0
Face Amount	[1]		141,590,632
Carrying Value	[1]		$ 142,002,144
Preferred equity investment | 370 Lex Part Deux, LLC | NY | Office
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[2],[3]		country:US
Description of Variable Rate Basis	[1],[2],[3]		LIBOR
Floor interest rate	[1],[2],[3]		2.44%
Maximum Maturity Date	[1],[2],[3],[4]		Jan. 09, 2025
Periodic Payment Terms	[1],[2],[3]		Interest Only
Prior Lien	[1],[2],[3]		$ 0
Face Amount	[1],[2],[3]		53,874,507
Carrying Value	[1],[2],[3]		$ 53,912,363
Preferred equity investment | 370 Lex Part Deux, LLC | NY | Office | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[2],[3]		8.25%
Preferred equity investment | City Gardens 333 LLC | CA | Student Housing
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[2],[3]		country:US
Description of Variable Rate Basis	[1],[2],[3]		LIBOR
Floor interest rate	[1],[2],[3]		2.00%
Maximum Maturity Date	[1],[2],[3],[4]		Apr. 01, 2023
Periodic Payment Terms	[1],[2],[3]		Interest Only
Prior Lien	[1],[2],[3]		$ 0
Face Amount	[1],[2],[3]		28,303,628
Carrying Value	[1],[2],[3]		$ 28,307,408
Preferred equity investment | City Gardens 333 LLC | CA | Student Housing | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[2],[3]		9.95%
Preferred equity investment | Orange Grove Property Investors, LLC | CA | Condominium
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[2],[3]		country:US
Description of Variable Rate Basis	[1],[2],[3]		LIBOR
Floor interest rate	[1],[2],[3]		4.00%
Maximum Maturity Date	[1],[2],[3],[4]		Jun. 01, 2022
Periodic Payment Terms	[1],[2],[3]		Interest Only
Prior Lien	[1],[2],[3]		$ 0
Face Amount	[1],[2],[3]		10,600,000
Carrying Value	[1],[2],[3]		$ 10,701,924
Preferred equity investment | Orange Grove Property Investors, LLC | CA | Condominium | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[2],[3]		8.00%
Preferred equity investment | REEC Harlem Holdings Company LLC | NY | Land
Investment in Mortgage Loans on Real Estate
Location of Property	[1]		country:US
Description of Variable Rate Basis	[1]		LIBOR
Basis Spread	[1]		12.50%
Maximum Maturity Date	[1],[4]		Mar. 09, 2025
Periodic Payment Terms	[1]		Interest Only
Prior Lien	[1]		$ 0
Face Amount	[1]		16,767,984
Carrying Value	[1]		$ 16,767,984
Preferred equity investment | RS JZ Driggs, LLC | NY | Multifamily
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[2],[3],[5]		country:US
Interest payment rate	[1],[2],[3],[5]		12.30%
Maximum Maturity Date	[1],[2],[3],[4],[5]		Aug. 01, 2021
Periodic Payment Terms	[1],[2],[3],[5]		Interest Only
Prior Lien	[1],[2],[3],[5]		$ 0
Face Amount	[1],[2],[3],[5]		8,544,513
Carrying Value	[1],[2],[3],[5]		$ 8,629,929
Preferred equity investment | The Bristol at Southport, LLC | WA | Multifamily
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[3],[6]		country:US
Interest payment rate	[1],[3],[6]		12.00%
Maximum Maturity Date	[1],[3],[4],[6]		Sep. 22, 2022
Periodic Payment Terms	[1],[3],[6]		Interest Only
Prior Lien	[1],[3],[6]		$ 0
Face Amount	[1],[3],[6]		23,500,000
Carrying Value	[1],[3],[6]		23,682,536
Mezzanine Loans
Investment in Mortgage Loans on Real Estate
Prior Lien	[1]		0
Face Amount	[1]		28,541,279
Carrying Value	[1]		$ 28,923,140
Mezzanine Loans | 150 Blackstone River Road, LLC | MA | Industrial
Investment in Mortgage Loans on Real Estate
Location of Property	[1]		country:US
Interest payment rate	[1]		8.50%
Maximum Maturity Date	[1],[4]		Sep. 06, 2027
Periodic Payment Terms	[1]		Interest Only
Prior Lien	[1]		$ 0
Face Amount	[1]		7,000,000
Carrying Value	[1]		$ 7,000,000
Mezzanine Loans | Austin H. I. Owner LLC | TX | Hotel
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[7]		country:US
Interest payment rate	[1],[7]		12.50%
Maximum Maturity Date	[1],[4],[7]		Oct. 06, 2020
Periodic Payment Terms	[1],[7]		Interest Only
Prior Lien	[1],[7]		$ 0
Face Amount	[1],[7]		3,848,712
Carrying Value	[1],[7]		$ 3,887,200
Mezzanine Loans | High Pointe Mezzanine Investments, LLC | SC | Student Housing
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[8]		country:US
Interest payment rate	[1],[8]		15.00%
Maximum Maturity Date	[1],[4],[8]		Jan. 06, 2024
Periodic Payment Terms	[1],[8]		Interest Only
Prior Lien	[1],[8]		$ 0
Face Amount	[1],[8]		3,000,000
Carrying Value	[1],[8]		$ 3,204,375
Mezzanine Loans | LD Milipitas Mezz, LLC | CA | Hotel
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[9]		country:US
Description of Variable Rate Basis	[1],[9]		LIBOR
Floor interest rate	[1],[9]		2.75%
Maximum Maturity Date	[1],[4],[9]		Jun. 27, 2023
Periodic Payment Terms	[1],[9]		Interest Only
Prior Lien	[1],[9]		$ 0
Face Amount	[1],[9]		4,250,000
Carrying Value	[1],[9]		$ 4,294,053
Mezzanine Loans | LD Milipitas Mezz, LLC | CA | Hotel | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[9]		10.25%
Mezzanine Loans | Stonewall Station Mezz LLC | NC | Land
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[2],[3],[8]		country:US
Maximum Maturity Date	[1],[2],[3],[4],[8]		May 31, 2023
Periodic Payment Terms	[1],[2],[3],[8]		Interest Only
Prior Lien	[1],[2],[3],[8]		$ 0
Face Amount	[1],[2],[3],[8]		10,442,567
Carrying Value	[1],[2],[3],[8]		$ 10,537,512
Mezzanine Loans | Stonewall Station Mezz LLC | NC | Land | Current rate
Investment in Mortgage Loans on Real Estate
Interest payment rate	[1],[2],[3],[8]		12.00%
Mezzanine Loans | Stonewall Station Mezz LLC | NC | Land | PIK rate
Investment in Mortgage Loans on Real Estate
Interest payment rate	[1],[2],[3],[8]		2.00%
First Mortgage
Investment in Mortgage Loans on Real Estate
Prior Lien	[1]		$ 0
Face Amount	[1]		254,042,847
Carrying Value	[1]		$ 255,093,989
First Mortgage | 14th & Alice Street Owner, LLC | CA | Multifamily
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[3],[6]		country:US
Description of Variable Rate Basis	[1],[3],[6]		LIBOR
Floor interest rate	[1],[3],[6]		3.25%
Maximum Maturity Date	[1],[3],[4],[6]		Mar. 05, 2022
Periodic Payment Terms	[1],[3],[6]		Interest Only
Prior Lien	[1],[3],[6]		$ 0
Face Amount	[1],[3],[6]		32,625,912
Carrying Value	[1],[3],[6]		$ 32,877,544
First Mortgage | 14th & Alice Street Owner, LLC | CA | Multifamily | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[3],[6]		5.75%
First Mortgage | 1389 Peachtree St, LP, 1401 Peachtree St, LP and 1409 Peachtree St, L.P. | GA | Office
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[10]		country:US
Description of Variable Rate Basis	[1],[10]		LIBOR
Maximum Maturity Date	[1],[4],[10]		Mar. 10, 2024
Periodic Payment Terms	[1],[10]		Interest Only
Prior Lien	[1],[10]		$ 0
Face Amount	[1],[10]		50,808,453
Carrying Value	[1],[10]		$ 51,068,554
First Mortgage | 1389 Peachtree St, LP, 1401 Peachtree St, LP and 1409 Peachtree St, L.P. | GA | Office | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[10]		4.50%
First Mortgage | 330 Tryon DE LLC | NC | Office
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[10]		country:US
Description of Variable Rate Basis	[1],[10]		LIBOR
Floor interest rate	[1],[10]		2.51%
Maximum Maturity Date	[1],[4],[10]		Mar. 01, 2024
Periodic Payment Terms	[1],[10]		Interest Only
Prior Lien	[1],[10]		$ 0
Face Amount	[1],[10]		22,800,000
Carrying Value	[1],[10]		$ 22,901,294
First Mortgage | 330 Tryon DE LLC | NC | Office | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[10]		3.85%
First Mortgage | 870 Santa Cruz, LLC | CA | Office
Investment in Mortgage Loans on Real Estate
Location of Property	[1]		country:US
Description of Variable Rate Basis	[1]		LIBOR
Floor interest rate	[1]		0.50%
Maximum Maturity Date	[1],[4]		Dec. 15, 2025
Periodic Payment Terms	[1]		Interest Only
Prior Lien	[1]		$ 0
Face Amount	[1]		10,760,355
Carrying Value	[1]		$ 10,724,590
First Mortgage | 870 Santa Cruz, LLC | CA | Office | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1]		6.75%
First Mortgage | AGRE DCP Palm Springs LLC | CA | Hotel
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[10],[11]		country:US
Description of Variable Rate Basis	[1],[10],[11]		LIBOR
Floor interest rate	[1],[10],[11]		1.80%
Maximum Maturity Date	[1],[4],[10],[11]		Jan. 01, 2025
Periodic Payment Terms	[1],[10],[11]		Interest Only
Prior Lien	[1],[10],[11]		$ 0
Face Amount	[1],[10],[11]		45,294,097
Carrying Value	[1],[10],[11]		$ 45,506,051
First Mortgage | AGRE DCP Palm Springs LLC | CA | Hotel | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[10],[11]		4.75%
First Mortgage | AGRE DCP Palm Springs LLC | CA | Hotel | PIK rate
Investment in Mortgage Loans on Real Estate
Interest payment rate		15.00%
First Mortgage | MSC Fields Peachtree Retreat LLC | GA | Multifamily
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[10]		country:US
Description of Variable Rate Basis	[1],[10]		LIBOR
Floor interest rate	[1],[10]		2.00%
Maximum Maturity Date	[1],[4],[10]		Apr. 01, 2024
Periodic Payment Terms	[1],[10]		Interest Only
Prior Lien	[1],[10]		$ 0
Face Amount	[1],[10]		23,308,334
Carrying Value	[1],[10]		$ 23,437,198
First Mortgage | MSC Fields Peachtree Retreat LLC | GA | Multifamily | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[10]		3.85%
First Mortgage | Patrick Henry Recovery Acquisition LLC | CA | Office
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[10]		country:US
Description of Variable Rate Basis	[1],[10]		LIBOR
Floor interest rate	[1],[10]		1.50%
Maximum Maturity Date	[1],[4],[10]		Dec. 01, 2024
Periodic Payment Terms	[1],[10]		Interest Only
Prior Lien	[1],[10]		$ 0
Face Amount	[1],[10]		18,000,000
Carrying Value	[1],[10]		$ 18,039,456
First Mortgage | Patrick Henry Recovery Acquisition LLC | CA | Office | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[10]		2.95%
First Mortgage | University Park Berkeley, LLC | CA | Student Housing
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[10],[12]		country:US
Description of Variable Rate Basis	[1],[10],[12]		LIBOR
Floor interest rate	[1],[10],[12]		1.50%
Maximum Maturity Date	[1],[4],[10],[12]		Mar. 05, 2025
Periodic Payment Terms	[1],[10],[12]		Interest Only
Prior Lien	[1],[10],[12]		$ 0
Face Amount	[1],[10],[12]		23,990,786
Carrying Value	[1],[10],[12]		$ 24,131,808
First Mortgage | University Park Berkeley, LLC | CA | Student Housing | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[10],[12]		4.20%
First Mortgage | Windy Hill PV Five CM, LLC | CA | Office
Investment in Mortgage Loans on Real Estate
Location of Property	[1],[13]		country:US
Description of Variable Rate Basis	[1],[13]		LIBOR
Floor interest rate	[1],[13]		2.05%
Maximum Maturity Date	[1],[4],[13]		Sep. 20, 2023
Periodic Payment Terms	[1],[13]		Interest Only
Prior Lien	[1],[13]		$ 0
Face Amount	[1],[13]		26,454,910
Carrying Value	[1],[13]		$ 26,407,494
First Mortgage | Windy Hill PV Five CM, LLC | CA | Office | LIBOR
Investment in Mortgage Loans on Real Estate
Basis Spread	[1],[13]		6.00%

[1] All of the Company’s loans have a prepayment penalty provision.

[2] The Company sold a portion of its interest in this loan through a participation agreement to Terra Income Fund 6, Inc., an affiliated fund advised by the Terra Income Advisors, an affiliate of the Company’s sponsor and Manager (Note 8).

[3] 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 Agreements” in Note 9 and “Transfers of Participation Interest by the Company” in Note 8 in the accompanying notes to the consolidated financial statements.

[4] Maximum maturity date assumes all extension options are exercised.

[5] This loan is currently past due. Given the loan is in default, the Company issued a demand notice and is currently in control of the sale process. The Company expects the sales proceeds to repay the principal in full.

[6] The Company sold a portion of its interest in this loan to a third-party through a participation agreement (Note 8).

[7] This loan is currently past due. The Company is currently evaluating the options of recovering the principal amount, including foreclosing on the collateral. The latest appraisal the Company received in August 2020 indicates that the value of the collateral is sufficient to recover the principal amount.

[8] The Company entered into a forbearance agreement with the borrower to allow for more time to make the interest payment.

[9] On June 27, 2018, the Company entered into a participation agreement with Terra Income Fund 6, Inc. to purchase a 25% interest, or $4.3 million, in a mezzanine loan.

[10] These loans were used as collateral for $107.6 million borrowing under a term loan (Note 9).

[11] In July 2020, the Company amended the loan agreement to change the interest rate to PIK 15% for the period from July 2020 through January 2021.

[12] In December 2020, the Company entered into a forbearance agreement with the borrower pursuant to which interest is accrued on the loan during the 90-day forbearance period from November 2020 to January 2021. In connection with entering into the forbearance agreement, the spread on the interest rate was increased to 4.2% and the exit fee was increased to 0.75%.

[13] In March 2020, the Company entered into a financing transaction where a third-party purchased an A-note position. However, the sale did not qualify for sale accounting and therefore, the gross amount of the loan remains in the consolidated balance sheets. The liability is reflected as secured borrowing in the consolidated balance sheets.

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Schedule IV – Mortgage Loans on Real Estate - Subnote (Details) - USD ($)	1 Months Ended	7 Months Ended	12 Months Ended
	Jun. 27, 2018	Jan. 31, 2021	Dec. 31, 2020	Dec. 31, 2019	Sep. 03, 2020
Investment in Mortgage Loans on Real Estate
Interest payment rate			8.51%	9.65%
CA | Mezzanine Loans | Hotel | LD Milipitas Mezz, LLC
Investment in Mortgage Loans on Real Estate
Limited Partners, Ownership Interest	25.00%
Other Commitment	$ 4,300,000
Forbearance agreement | CA | First Mortgage | Student Housing | University Park Berkeley, LLC
Investment in Mortgage Loans on Real Estate
Basis Spread			4.20%
increase decrease exit fee percent			0.75%
PIK rate | CA | First Mortgage | Hotel | AGRE DCP Palm Springs LLC
Investment in Mortgage Loans on Real Estate
Interest payment rate		15.00%
Indenture and credit Agreement | Term Loan
Investment in Mortgage Loans on Real Estate
Debt Instrument, Face Amount			$ 107,584,451		$ 103,000,000.0

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Schedule IV - Mortgage Loans on Real Estate - Reconciliation of Mortgage Loans on Real Estate (Details) - USD ($)		12 Months Ended
		Dec. 31, 2020	Dec. 31, 2019
Investment in Movement in Mortgage Loans on Real Estate [Roll Forward]
PIK interest		$ 2,937,909	$ 1,682,721
Provision for loan losses		3,738,758	0
Balance, end of year	[1]	422,280,515
Real Estate Loan
Investment in Movement in Mortgage Loans on Real Estate [Roll Forward]
Balance, beginning of year		378,612,768
New mortgage loans		108,488,411
PIK interest		4,442,759
Accrual, payment and accretion of exit fees, net		681,455
Collections of principals		(66,144,729)
Amortization of premium		(61,391)
Provision for loan losses		3,738,758
Balance, end of year		$ 422,280,515	$ 378,612,768

[1] All of the Company’s loans have a prepayment penalty provision.