10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2021

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

For the transition period from to

Commission File Number: 000-56117

Terra Property Trust, Inc.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

As of May 13, 2021, the registrant had 19,487,460 shares of common stock, $0.01 par value, outstanding. No market value has been computed based upon the fact that no active trading market had been established as of the date of this document.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements:
	Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020	2
	Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited)	3
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020 (unaudited)	4
	Consolidated Statements of Changes in Equity for the three months ended March 31, 2021 and 2020 (unaudited)	5
	Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)	6
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	55
PART II	OTHER INFORMATION	56
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	56
Signatures		58

1

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Terra Property Trust, Inc.

Consolidated Balance Sheets

	March 31, 2021		December 31, 2020
	(unaudited)
Assets
Cash and cash equivalents	$	18,464,161	$	18,607,952
Restricted cash	7,096,549		12,145,616
Cash held in escrow by lender	2,039,349		2,166,755
Marketable securities	6,251,980		1,287,500
Loans held for investment, net	401,776,723		417,986,462
Loans held for investment acquired through participation, net	4,292,148		4,294,053
Equity investment in a limited partnership, net	50,505,511		36,259,959
Real estate owned, net (Note 6)
Land, building and building improvements, net	62,969,129		63,385,339
Lease intangible assets, net	9,273,696		9,793,600
Operating lease right-of-use assets	16,104,041		16,105,888
Interest receivable	2,510,061		2,509,589
Other assets	4,514,677		3,934,468
Total assets	$	585,798,025	$	588,477,181
Liabilities and Equity
Liabilities:
Term loan payable, net of deferred financing fees	$	104,235,266	$	105,245,801
Obligations under participation agreements (Note 8 )	71,613,358		71,581,897
Mortgage loan payable, net of deferred financing fees and other	40,728,560		44,117,293
Revolving line of credit payable, net of deferred financing fees	7,407,536		—
Secured borrowing	21,983,096		18,187,663
Interest reserve and other deposits held on investments	7,096,549		12,145,616
Operating lease liabilities	16,104,041		16,105,888
Lease intangible liabilities, net (Note 6)	10,128,244		10,249,776
Due to Manager (Note 8)	1,746,682		1,257,098
Interest payable	1,213,218		1,185,502
Accounts payable and accrued expenses	1,822,493		3,968,603
Unearned income	389,257		677,856
Distributions payable	3,906		—
Other liabilities	422,159		429,123
Total liabilities	284,894,365		285,152,116
Commitments and contingencies (Note 10)
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized and    none issued	—		—
12.5% Series A Cumulative Non-Voting Preferred Stock at liquidation    preference, 125 shares authorized and 125 shares issued and outstanding at    both March 31, 2021 and December 31, 2020	125,000		125,000
Common stock, $0.01 par value, 450,000,000 shares authorized and   19,487,460 shares issued and outstanding at both March 31, 2021 and    December 31, 2020, respectively	194,875		194,875
Additional paid-in capital	373,443,672		373,443,672
Accumulated deficit	(72,859,887)		(70,438,482)
Total equity	300,903,660		303,325,065
Total liabilities and equity	$	585,798,025	$	588,477,181

See notes to unaudited consolidated financial statements.

2

Terra Property Trust, Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended March 31,
	2021		2020
Revenues
Interest income	$	8,120,949	$	9,651,865
Real estate operating revenue	2,011,641		2,313,051
Other operating income	156,662		112,655
	10,289,252		12,077,571
Operating expenses
Operating expenses reimbursed to Manager	1,342,758		1,367,189
Asset management fee	1,156,543		1,029,533
Asset servicing fee	273,207		234,208
Provision for loan losses	276,020		1,144,994
Real estate operating expenses	971,315		944,518
Depreciation and amortization	931,725		946,494
Professional fees	520,419		294,761
Directors fees	36,250		83,750
Other	71,488		64,949
	5,579,725		6,110,396
Operating income	4,709,527		5,967,175
Other income and expenses
Interest expense from obligations under participation agreements	(1,880,081)		(2,560,267)
Interest expense on repurchase agreement payable	—		(1,551,270)
Interest expense on mortgage loan payable	(686,150)		(750,636)
Interest expense on revolving line of credit	(17,846)		(174,989)
Interest expense on term loan payable	(1,672,768)		—
Interest expense on secured borrowing	(299,805)		(40,491)
Net loss on extinguishment of obligations under participation agreements	—		(319,453)
Net change in unrealized losses on marketable securities	(14,608)		—
Income from equity investment in a limited partnership	1,337,827		—
Realized gains on marketable securities	—		8,894
	(3,233,431)		(5,388,212)
Net income	$	1,476,096	$	578,963
Series A preferred stock dividend declared	(3,906)		(3,906)
Net income allocable to common stock	$	1,472,190	$	575,057
Earnings per share — basic and diluted	$	0.08	$	0.03
Weighted-average shares — basic and diluted	19,487,460		16,707,279
Distributions declared per common share	$	0.20	$	0.53

See notes to unaudited consolidated financial statements.

3

Terra Property Trust, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended March 31,
	2021		2020
Comprehensive income, net of tax
Net income	$	1,476,096	$	578,963
Other comprehensive income
Net unrealized gains on marketable securities	—		192,919
Reclassification of net realized gains on marketable securities into earnings	—		(8,894)
	—		184,025
Total comprehensive income	$	1,476,096	$	762,988
Series A preferred stock dividend declared	(3,906)		(3,906)
Comprehensive income attributable to common shares	$	1,472,190	$	759,082

See notes to unaudited consolidated financial statements.

4

Terra Property Trust, Inc.

Consolidated Statements of Changes in Equity

(Unaudited)

	Preferred 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, 2021	$	—	125	$	125,000	19,487,460	$	194,875	$	373,443,672	$	(70,438,482)	$	—	$	303,325,065
Distributions declared on common shares ($0.20 per share)	—		—	—		—	—		—		(3,893,595)		—		(3,893,595)
Distributions declared on preferred shares	—		—	—		—	—		—		(3,906)		—		(3,906)
Comprehensive income:
Net income	—		—	—		—	—		—		1,476,096		—		1,476,096
Net unrealized gains on marketable securities	—		—	—		—	—		—		—		—		—
Reclassification of net realized gains on marketable securities    into earnings	—		—	—		—	—		—		—		—		—
Balance at March 31, 2021	$	—	125	$	125,000	19,487,460	$	194,875	$	373,443,672	$	(72,859,887)	$	—	$	300,903,660

	Preferred 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
Distributions declared on common shares ($0.53 per share)	—		—	—		—	—		—		(8,832,071)		—		(8,832,071)
Distributions declared on preferred shares	—		—	—		—	—		—		(3,906)		—		(3,906)
Comprehensive income:
Net income	—		—	—		—	—		—		578,963		—		578,963
Net unrealized gains on marketable securities	—		—	—		—	—		—		—		192,919		192,919
Reclassification of net realized gains on marketable securities    into earnings	—		—	—		—	—		—		—		(8,894)		(8,894)
Balance at March 31, 2020	$	—	125	$	125,000	19,700,151	$	197,002	$	377,061,545	$	(62,716,835)	$	184,025	$	314,850,737

See notes to unaudited consolidated financial statements.

5

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net income	$	1,476,096	$	578,963
Adjustments to reconcile net income to net cash (used in) provided by operating    activities:
Paid-in-kind interest income, net	(224,197)		(80,116)
Depreciation and amortization	931,725		946,494
Provision for loan losses	276,020		1,144,994
Amortization of net purchase premiums on loans	15,348		11,112
Straight-line rent adjustments	(12,008)		(334,452)
Amortization of deferred financing costs	172,692		551,226
Net loss on extinguishment of obligations under participation agreements	—		319,453
Amortization of above- and below-market rent intangibles	(84,555)		(111,748)
Amortization and accretion of investment-related fees, net	—		(4,140)
Amortization of above-market rent ground lease	(32,588)		(32,587)
Unrealized gains on marketable securities	14,608		—
Income from equity investment in a limited partnership	(1,337,827)		—
Changes in operating assets and liabilities:
Interest receivable	(472)		(376,919)
Other assets	(528,133)		(9,093)
Due to Manager	93,228		22,520
Unearned income	(391,727)		(167,104)
Interest payable	27,716		(143,220)
Accounts payable and accrued expenses	(2,146,110)		839,938
Other liabilities	(6,964)		222,194
Net cash (used in) provided by operating activities	(1,757,148)		3,377,515
Cash flows from investing activities:
Origination and purchase of loans	(14,410,706)		(38,376,448)
Proceeds from repayments of loans	31,531,804		13,371,565
Purchase of partnership interest in a limited partnership	(12,907,725)		—
Purchase of marketable securities	(4,979,088)		(3,354,442)
Proceeds from sale of marketable securities	—		48,073
Net cash used in investing activities	(765,715)		(28,311,252)
Cash flows from financing activities:
Proceeds from borrowings under the term loan	1,469,656		—
Proceeds from borrowings under revolving line of credit	8,030,611		35,000,000
Repayments of obligations under participation agreements	(3,962,509)		—
Distributions paid	(3,893,595)		(8,832,071)
Proceeds from secured borrowing	3,751,680		8,257,583
Proceeds from obligations under participation agreements	3,520,514		6,034,316
Repayment of mortgage principal	(3,423,245)		(132,625)
Change in interest reserve and other deposits held on investments	(5,049,067)		(2,286,740)
Repayment of borrowings under the term loan	(2,600,000)		—
Payment of financing costs	(641,446)		(84,175)
Repayment of borrowings under repurchase agreement	—		(3,395,740)
Proceeds from borrowings under repurchase agreement	—		14,807,834
Proceeds from issuance of common stock in the Merger	—		16,897,074
Proceeds from issuance of common stock to Terra Offshore REIT	—		8,600,000
Net cash (used in) provided by financing activities	(2,797,401)		74,865,456
Net (decrease) increase in cash, cash equivalents and restricted cash	(5,320,264)		49,931,719
Cash, cash equivalents and restricted cash at beginning of period	32,920,323		50,549,700
Cash, cash equivalents and restricted cash at end of period (Note 2)	$	27,600,059	$	100,481,419

6

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)

(Unaudited)

	Three Months Ended March 31,
	2021		2020
Supplemental Disclosure of Cash Flows Information:
Cash paid for interest	$	4,094,327	$	4,459,761

Supplemental Non-Cash Financing Activities:

Merger

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

Total Consideration
Equity issued in the Merger	$	34,630,615
Proceeds from equity issued in the 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 (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

See notes to unaudited consolidated financial statements.

7

Terra Property Trust, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2021

Note 1. Business

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

    On January 1, 2016, Terra Secured Income Fund 5, LLC (“Terra Fund 5”), the Company’s then parent, contributed its consolidated portfolio of net assets to the Company pursuant to a contribution agreement in exchange for shares of the Company’s common stock. Upon receipt of the contribution of the consolidated portfolio of net assets from Terra Fund 5, the Company commenced its operations on January 1, 2016. On March 2, 2020, the Company engaged in a series of transactions pursuant to which the Company issued an aggregate of 4,574,470.35 shares of its common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by the Company, cash of $25.5 million and other working capital. As of March 31, 2021, Terra JV, LLC (“Terra JV”) held 87.4% of the issued and outstanding shares of the Company's common stock with the remainder held by Terra Offshore REIT (Note 3).

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

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

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

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

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

8

Notes to Unaudited Consolidated Financial Statements

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

VIE Model

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

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

Loans Held for Investment

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

Allowance for Loan Losses

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

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

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

9

Notes to Unaudited Consolidated Financial Statements

Risk 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. 

10

Notes to Unaudited Consolidated Financial Statements

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

Revenue Recognition

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

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

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

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

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

Cash, Cash Equivalents and Restricted Cash

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

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

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

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

11

Notes to Unaudited Consolidated Financial Statements

	March 31, 2021		March 31, 2020
Cash and cash equivalents	$	18,464,161	$	82,163,055
Restricted cash	7,096,549		16,255,423
Cash held in escrow by lender	2,039,349		2,062,941
Total cash, cash equivalents and restricted cash shown in the consolidated    statements of cash flows	$	27,600,059	$	100,481,419

 Participation Interests

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

Term Loan

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

Fair Value Measurements

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

Deferred Financing Costs

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

Income Taxes

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

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

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

12

Notes to Unaudited Consolidated Financial Statements

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

Earnings Per Share

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

Use of Estimates

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

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

Segment Information

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

Recent Accounting Pronouncements

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

13

Notes to Unaudited Consolidated Financial Statements

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

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

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

Merger

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

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

Total Consideration
Equity issued in the Merger	$	34,630,615
	$	34,630,615
Net Assets of TPT2 Received in the Merger
Loans held for investment acquired through participation	$	17,688,741
Cash and cash 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

14

Notes to Unaudited Consolidated Financial Statements

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

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

Issuance of Common Stock to Terra Offshore REIT

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

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

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

Total Consideration
Equity issued to Terra Offshore REIT	$	40,749,378
	$	40,749,378
Net Assets of Terra Offshore REIT Received
Investments through participation interest, at fair value	$	32,112,257
Cash and cash 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

15

Notes to Unaudited Consolidated Financial Statements

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

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

Net Loss on Extinguishment of Obligations Under Participation Agreements

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

Note 4. Loans Held for Investment

Portfolio Summary

The following table provides a summary of the Company’s loan portfolio as of March 31, 2021 and December 31, 2020:

	March 31, 2021									December 31, 2020
	Fixed Rate			Floating Rate (1)(2)(3)			Total			Fixed Rate			Floating Rate (1)(2)(3)			Total
Number of loans	6			13			19			6			14			20
Principal balance	$	57,040,923		$	350,689,385		$	407,730,308		$	56,335,792		$	367,838,966		$	424,174,758
Carrying value	$	57,157,301		$	348,911,570		$	406,068,871		$	56,464,310		$	365,816,205		$	422,280,515
Fair value	$	57,099,978		$	346,367,302		$	403,467,280		$	56,284,334		$	363,122,860		$	419,407,194
Weighted-average coupon rate	12.07		%	7.66		%	8.28		%	12.17		%	7.95		%	8.51		%
Weighted-average remaining  term (years)	1.57			1.41			1.43			1.78			1.44			1.48

_______________

(1)These loans pay a coupon rate of LIBOR plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.11% and 0.14% as of March 31, 2021 and December 31, 2020, respectively.

(2)As of March 31, 2021 and December 31, 2020, amounts included $183.7 million and $184.2 million of senior mortgages used as collateral for $106.5 million and $107.6 million of borrowings under a term loan, respectively (Note 9). As of March 31, 2021, amounts also included $11.9 million of senior mortgages used as collateral for $8.0 million of borrowings under a revolving line of credit. Borrowings under the term loan bear interest at an annual rate of LIBOR plus 4.25% with a LIBOR floor of 1.00%. Borrowings under the revolving line of credit bear interest at a minimum rate of 4.0%.

(3)As of March 31, 2021 and December 31, 2020, eleven and twelve of these loans, respectively, are subject to a LIBOR floor.

16

Notes to Unaudited Consolidated Financial Statements

Lending Activities

The following table presents the activities of the Company’s loan portfolio for the three months ended March 31, 2021 and 2020:

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2021	$	417,986,462	$	4,294,053	$	422,280,515
New loans made	14,410,706		—		14,410,706
Principal repayments received	(31,531,804)		—		(31,531,804)
PIK interest (1)	676,646		—		676,646
Net amortization of premiums on loans	(15,348)		—		(15,348)
Accrual, payment and accretion of investment-related fees and other,    net	526,081		(1,905)		524,176
Provision for loan losses	(276,020)		—		(276,020)
Balance, March 31, 2021	$	401,776,723	$	4,292,148	$	406,068,871

	Loans Held for 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	37,504,601		871,847		38,376,448
Principal repayments received	(13,371,565)		—		(13,371,565)
PIK interest (1)	294,237		—		294,237
Net amortization of premiums on loans	(15,348)		—		(15,348)
Accrual, payment and accretion of investment-related fees, net	202,793		15,174		217,967
Provision for loan losses	(1,144,994)		—		(1,144,994)
Balance, March 31, 2020	$	398,931,946	$	4,037,567	$	402,969,513

_______________

(1)Certain loans in the Company’s portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted to $0.5 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

Portfolio Information

    The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of March 31, 2021 and December 31, 2020:

	March 31, 2021						December 31, 2020
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	263,999,390	$	265,573,062	65.4	%	$	254,042,847	$	255,093,989	60.5	%
Preferred equity investments	114,921,610		115,331,442		28.4	%	141,590,632		142,002,144		33.6	%
Mezzanine loans	28,809,308		29,179,145		7.2	%	28,541,279		28,923,140		6.8	%
Allowance for loan losses	—		(4,014,778)		(1.0)	%	—		(3,738,758)		(0.9)	%
Total	$	407,730,308	$	406,068,871	100.0	%	$	424,174,758	$	422,280,515	100.0	%

17

Notes to Unaudited Consolidated Financial Statements

	March 31, 2021						December 31, 2020
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	191,527,932	$	192,017,466	47.3	%	$	182,698,225	$	183,053,751	43.3	%
Multifamily	127,657,844		128,599,015		31.6	%	150,873,173		151,768,347		35.9	%
Hotel - full/select service	47,112,522		47,704,223		11.7	%	49,142,809		49,393,251		11.7	%
Mixed use	16,512,842		16,512,842		4.1	%	16,767,984		16,767,984		4.0	%
Infill land	10,669,168		10,768,255		2.7	%	10,442,567		10,537,512		2.5	%
Industrial	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.7	%
Hotel - extended stay	4,250,000		4,292,148		1.1	%	4,250,000		4,294,053		1.0	%
Student housing	3,000,000		3,189,700		0.8	%	3,000,000		3,204,375		0.8	%
Allowance for loan losses	—		(4,014,778)		(1.0)	%	—		(3,738,758)		(0.9)	%
Total	$	407,730,308	$	406,068,871	100.0	%	$	424,174,758	$	422,280,515	100.0	%

During the first quarter of 2021, the Company reclassified the property types of collateral on certain loans to multifamily to better reflect the tenant mixed of each property. Additionally, the Company categorized hotel properties further to hotel - full/selected service and hotel - extended stay. The prior period amounts have been reclassified to conform to the current period presentation.

	March 31, 2021						December 31, 2020
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	181,091,907	$	182,312,275	44.9	%	$	200,279,688	$	200,990,328	47.6	%
New York	80,821,610		80,939,816		19.9	%	79,187,004		79,310,276		18.8	%
Georgia	74,957,483		75,352,520		18.6	%	74,116,787		74,505,752		17.6	%
North Carolina	33,469,168		33,672,152		8.3	%	33,242,567		33,438,806		7.9	%
Washington	23,500,000		23,688,144		5.8	%	23,500,000		23,682,536		5.6	%
Massachusetts	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.7	%
Texas	3,890,140		3,929,042		1.0	%	3,848,712		3,887,200		0.9	%
South Carolina	3,000,000		3,189,700		0.8	%	3,000,000		3,204,375		0.8	%
Allowance for loan losses	—		(4,014,778)		(1.0)	%	—		(3,738,758)		(0.9)	%
Total	$	407,730,308	$	406,068,871	100.0	%	$	424,174,758	$	422,280,515	100.0	%

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.

18

Notes to Unaudited 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 March 31, 2021 and December 31, 2020:

	March 31, 2021							December 31, 2020
Loan Risk Rating	Number of Loans	Principal Balance		Carrying Value		% of Total		Number of Loans	Principal Balance		Carrying Value		% of Total
1	—	$	—	$	—	—	%	—	$	—	$	—	—	%
2	2	25,000,000		25,039,903		6.1	%	1	7,000,000		7,000,000		1.6	%
3	12	287,349,390		289,406,633		70.6	%	14	323,696,475		325,284,285		76.4	%
4	3	74,977,936		75,195,229		18.3	%	3	72,861,587		73,079,804		17.2	%
5	1	3,890,140		3,929,042		1.0	%	1	3,848,712		3,887,200		0.9	%
Other (1)	1	16,512,842		16,512,842		4.0	%	1	16,767,984		16,767,984		3.9	%
	19	$	407,730,308	410,083,649		100.0	%	20	$	424,174,758	426,019,273		100.0	%
Allowance for loan losses				(4,014,778)							(3,738,758)
Total, net of allowance for loan losses				$	406,068,871						$	422,280,515

_______________

(1)This loan was deemed impaired and removed from the pool of loans on which a general allowance is calculated. As of March 31, 2021 and December 31, 2020, the specific allowance for loan losses on this loan was $2.7 million and $2.5 million, respectively, as a result of a decline in the fair value of the collateral.

     As of March 31, 2021, the Company had three loans with a loan risk rating of “4” and one loan with a loan risk rating of “5”, which were unchanged from those as December 31, 2020, and recorded an additional general allowance for loan losses of $0.04 million for the three months ended March 31, 2021. As of March 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 $1.1 million for the three months ended March 31, 2020.

The following table presents the activity in the Company’s allowance for loan losses for the three months ended March 31, 2021 and 2020:

	Three Months Ended March 31,
	2021		2020
Allowance for loan losses, beginning of period	$	3,738,758	$	—
Provision for loan losses	276,020		1,144,994
Charge-offs	—		—
Recoveries	—		—
Allowance for loan losses, end of period	$	4,014,778	$	1,144,994

    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 and Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion of COVID-19.

As of March 31, 2021 and December 31, 2020, the Company had two and one loans that were in maturity default, respectively. Additionally, for the three months ended March 31, 2021, the Company suspended interest income accrual of $0.7 million on two loans because recovery of such income was doubtful. There was no suspension of such interest income for the three months ended March 31, 2020.

Note 5. Equity Investment in a Limited Partnership

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

19

Notes to Unaudited Consolidated Financial Statements

which is a subsidiary of the Company’s sponsor, Terra Capital Partners. As of March 31, 2021 and December 31, 2020, the unfunded commitment was $1.3 million and $14.1 million, respectively.

The Company evaluated its equity interest in Mavik RESOF and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in Mavik RESOF is accounted for as an equity method investment. As of March 31, 2021 and December 31, 2020, the Company owned 83.5% and 90.3% of equity interest in Mavik RESOF, respectively. As of March 31, 2021 and December 31, 2020, the carrying value of the Company’s investment in MAVIK RESOF was $50.5 million and $36.3 million, respectively. For the three months ended March 31, 2021, the Company recorded equity income from Mavik RESOF of $1.3 million and did not receive any distributions from Mavik RESOF. There was no such equity income recorded or distributions received for the three months ended March 31, 2020.

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

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

	March 31, 2021		December 31, 2020
Investments at fair value (cost of $63,791,529 and $44,174,031)	$	64,371,103	$	44,715,979
Other assets	7,706,409		5,331,840
Total assets	72,077,512		50,047,819
Obligations under participation agreement (proceeds of $6,295,100 and $6,295,100)	6,349,884		6,347,478
Other liabilities	5,974,566		4,204,147
Total liabilities	$	12,324,450	$	10,551,625
Partners’ capital	$	59,753,062	$	39,496,194

	Three Months Ended March 31,
	2021		2020
Total investment income	$	2,042,100	$	—
Total expenses	471,212		—
Net investment income	1,570,888		—
Unrealized appreciation on investments	53,697		—
Net increase in partners' capital resulting from operations	$	1,624,585	$	—

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.

20

Notes to Unaudited Consolidated Financial Statements

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:

	March 31, 2021						December 31, 2020
	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		(3,448,433)		48,277,536		51,725,969		(3,125,143)		48,600,826
Tenant improvements	1,854,640		(739,410)		1,115,230		1,854,640		(670,090)		1,184,550
Furniture and fixtures	236,000		(55,067)		180,933		236,000		(31,467)		204,533
Total real estate	67,212,039		(4,242,910)		62,969,129		67,212,039		(3,826,700)		63,385,339
Lease intangible assets:
In-place lease	14,982,538		(5,818,568)		9,163,970		15,852,232		(6,172,747)		9,679,485
Above-market rent	156,542		(46,816)		109,726		156,542		(42,427)		114,115
Total intangible assets	15,139,080		(5,865,384)		9,273,696		16,008,774		(6,215,174)		9,793,600
Lease intangible liabilities:
Below-market rent	(2,754,922)		1,175,352		(1,579,570)		(3,371,314)		1,702,800		(1,668,514)
Above-market ground lease	(8,896,270)		347,596		(8,548,674)		(8,896,270)		315,008		(8,581,262)
Total intangible liabilities	(11,651,192)		1,522,948		(10,128,244)		(12,267,584)		2,017,808		(10,249,776)
Total real estate	$	70,699,927	$	(8,585,346)	$	62,114,581	$	70,953,229	$	(8,024,066)	$	62,929,163

Real Estate Operating Revenues and Expenses

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

	Three Months Ended March 31,
	2021		2020
Real estate operating revenues:
Lease revenue	$	1,805,874	$	1,922,128
Other operating income	205,767		390,923
Total	$	2,011,641	$	2,313,051
Real estate operating expenses:
Utilities	$	33,992	$	39,022
Real estate taxes	346,354		232,875
Repairs and maintenances	145,246		237,132
Management fees	61,325		56,701
Lease expense, including amortization of above-market ground lease	283,538		283,538
Other operating expenses	100,860		95,250
Total	$	971,315	$	944,518

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

21

Notes to Unaudited Consolidated Financial Statements

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.

    Scheduled Future Minimum Rent Income 

    Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at March 31, 2021 are as follows: 

Years Ending December 31,	Total
2021 (April 1 through December 31)	$	4,919,262
2022	7,132,812
2023	7,363,647
2024	7,600,861
2025	4,111,257
Thereafter	1,199,623
Total	$	32,327,462

Scheduled Annual Net Amortization of Intangibles 

    Based on the intangible assets and liabilities recorded at March 31, 2021, 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 (April 1 through December 31)	$	(253,665)	$	1,546,545	$	(97,761)	$	1,195,119
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)		—		(7,929,521)		(7,949,432)
Total	$	(1,469,844)	$	9,163,970	$	(8,548,674)	$	(854,548)

_______________

(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.

22

Notes to Unaudited Consolidated Financial Statements

Supplemental Ground Lease Disclosures

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

	March 31, 2021			December 31, 2020
Operating lease
Operating lease right-of-use assets	$	16,104,041		$	16,105,888
Operating lease liabilities	$	16,104,041		$	16,105,888
Weighted average remaining lease term — operating lease (years)	65.6			65.8
Weighted average discount rate — operating lease	7.9		%	7.9		%

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

	Three Months Ended March 31,
	2021		2020
Operating lease cost	$	316,125	$	316,125

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

	Three Months Ended March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	316,125	$	316,125
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	316,125	$	316,125

    Maturities of operating lease liabilities are as follows:

Years Ending December 31,	Operating Lease
2021 (April 1 through December 31)	$	948,375
2022	1,264,500
2023	1,264,500
2024	1,264,500
2025	1,264,500
Thereafter	76,871,063
Total lease payments	82,877,438
Less: Imputed interest	(66,773,397)
Total	$	16,104,041

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).

23

Notes to Unaudited Consolidated Financial Statements

Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:

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

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

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

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

As of March 31, 2021 and December 31, 2020, the Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, term loan payable, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities are financial instruments that are reported at fair value.

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 March 31, 2021 and December 31, 2020, according to the fair value hierarchy:

	March 31, 2021
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Equity securities	$	6,251,980	$	—	$	—	$	6,251,980
Debt securities	—		—		—		—
Total	$	6,251,980	$	—	$	—	$	6,251,980

	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

24

Notes to Unaudited Consolidated Financial Statements

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

	Three Months Ended March 31,
	2021		2020
Beginning balance	$	1,287,500	$	—
Purchases	4,979,088		3,354,442
Proceeds from sale	—		(48,073)
Reclassification of net realized gains on marketable securities into earnings	—		(8,894)
Unrealized (losses) gains on marketable securities	(14,608)		192,919
Ending balance	$	6,251,980	$	3,490,394

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:

		March 31, 2021						December 31, 2020
	Level	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Loans:
Loans held for investment, net	3	$	403,480,308	$	405,791,501	$	399,174,830	$	419,924,758	$	421,725,220	$	415,113,225
Loans held for investment    acquired through    participation, net	3	4,250,000		4,292,148		4,292,450		4,250,000		4,294,053		4,293,969
Allowance for loan losses		—		(4,014,778)		—		—		(3,738,758)		—
Total loans		$	407,730,308	$	406,068,871	$	403,467,280	$	424,174,758	$	422,280,515	$	419,407,194
Liabilities:
Term loan payable	3	$	106,454,107	$	104,235,266	$	106,117,359	$	107,584,451	$	105,245,801	$	107,248,555
Obligations under participation    agreements	3	71,276,756		71,613,358		70,798,545		71,266,303		71,581,897		70,693,207
Mortgage loan payable	3	40,596,980		40,728,560		40,899,901		44,020,225		44,117,293		44,348,689
Secured borrowing	3	22,033,529		21,983,096		20,800,526		18,281,848		18,187,663		17,037,032
Revolving line of credit    payable	3	8,030,611		7,407,536		8,030,611		—		—		—
Total liabilities		$	248,391,983	$	245,967,816	$	246,646,942	$	241,152,827	$	239,132,654	$	239,327,483

    The Company estimated that its other financial assets and liabilities, not included in the tables above, had fair values that approximated their carrying values at both March 31, 2021 and December 31, 2020 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

25

Notes to Unaudited Consolidated Financial Statements

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

The following table summarizes the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of March 31, 2021 and December 31, 2020. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.

	Fair Value at March 31, 2021		Primary Valuation Technique	Unobservable Inputs	March 31, 2021
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	399,174,830	Discounted cash flow	Discount rate	5.40	%	20.05	%	10.24	%
Loans held for investment acquired through    participation, net	4,292,450		Discounted cash flow	Discount rate	12.89	%	12.89	%	12.89	%
Total Level 3 Assets	$	403,467,280
Liabilities:
Term loan payable	$	106,117,359	Discounted cash flow	Discount rate	5.25	%	5.25	%	5.25	%
Obligations under Participation Agreements	70,798,545		Discounted cash flow	Discount rate	9.72	%	20.05	%	12.40	%
Mortgage loan payable	40,899,901		Discounted cash flow	Discount rate	6.08	%	6.08	%	6.08	%
Secured borrowing	20,800,526		Discounted cash flow	Discount rate	11.24	%	11.24	%	11.24	%
Revolving line of credit	8,030,611		Discounted cash flow	Discount rate	4.00	%	4.00	%	4.00	%
Total Level 3 Liabilities	$	246,646,942

	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

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

26

that are included on the consolidated statements of operations:

	Three Months Ended March 31,
	2021		2020
Origination and extension fee expense (1)	$	345,384	$	437,617
Asset management fee	1,156,543		1,029,533
Asset servicing fee	273,207		234,208
Operating expenses reimbursed to Manager	1,342,758		1,367,189
Disposition fee (2)	250,988		75,520
Total	$	3,368,880	$	3,144,067

_______________

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

Origination and Extension Fee Expense

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

Asset Management Fee

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

Asset Servicing Fee

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

Transaction Breakup Fee

    In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of March 31, 2021 and December 31, 2020, 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

27

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 three months ended March 31, 2021 and 2020, the Company made distributions to Terra 5, Terra JV and Terra Offshore REIT totaling $3.9 million and $8.8 million, respectively, of which $2.4 million and $8.3 million were returns of capital, respectively (Note 11).

Due to Manager

    As of March 31, 2021 and December 31, 2020, approximately $1.7 million and $1.3 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 March 31, 2021, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.

Mavik Real Estate Special Opportunities Fund, LP

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

Terra International Fund 3, L.P.

    On September 30, 2019, Terra International Fund 3, L.P. (“Terra International 3”), through Terra Offshore REIT, a wholly-owned subsidiary of Terra International 3, 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. 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.

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).

28

Participation Interests Purchased by the Company

The below table lists the loan interests participated in by the Company via PAs as of March 31, 2021 and December 31, 2020. 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.

	March 31, 2021					December 31, 2020
	Participating Interests	Principal Balance		Carrying Value		Participating Interests	Principal Balance		Carrying Value
LD Milpitas Mezz, LP (1)	25.00%	$	4,250,000	$	4,292,148	25.00%	$	4,250,000	$	4,294,053

________________

(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.

Transfers of Participation Interest by the Company

    The following tables summarize the loans that were subject to PAs with affiliated entities as of March 31, 2021 and December 31, 2020:

					Transfers Treated as Obligations Under Participation Agreements as of March 31, 2021
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
14th & Alice Street Owner, LLC (1)	$	36,558,763	$	36,837,952	80.00	%	$	29,247,010	$	29,372,894
370 Lex Part Deux, LLC (2)	55,327,153		55,355,545		35.00	%	19,364,504		19,364,504
Orange Grove Property Investors, LLC (2)	10,600,000		10,703,482		80.00	%	8,480,000		8,562,782
RS JZ Driggs, LLC (2)	8,981,615		9,071,429		50.00	%	4,490,808		4,535,716
Stonewall Station Mezz LLC (2)	10,669,168		10,768,255		44.00	%	4,694,434		4,737,431
The Bristol at Southport, LLC (1)	23,500,000		23,688,144		21.28	%	5,000,000		5,040,031
	$	145,636,699	$	146,424,807			$	71,276,756	$	71,613,358

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2020
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
14th & Alice Street Owner, LLC (1)	$	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 (1)	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

________________

(1)Participant is a third-party.

(2)Participant is Terra Fund 6, an affiliated fund advised by Terra Income Advisors, LLC, an affiliate of the Company’s sponsor and Manager.

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

29

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 March 31, 2021 and December 31, 2020:

					Transfers Treated as Secured Borrowing as of March 31, 2021
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
Windy Hill PV Five CM, LLC	$	31,883,812	$	31,936,652	69.11	%	$	22,033,529	$	21,983,096
	$	31,883,812	$	31,936,652			$	22,033,529	$	21,983,096

					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

Note 9. Debt

Revolving Line of Credit

On March 12, 2021, Terra Mortgage Portfolio II, LLC, an indirect wholly-owned subsidiary of the Company, entered into a Business Loan and Security Agreement (the “Revolving Line of Credit”) with Western Alliance Bank (“WAB”) to provide for advances up to the lesser of $75.0 million or the amount determined by the borrowing base, which is based on the eligible assets pledged to the lender. Borrowings under the Revolving Line of Credit bear interest at an annual rate of LIBOR + 3.25% with a combined floor of 4.0% per annum. The Revolving Line of Credit 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, as defined within the agreement; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00. As of March 31, 2021, the Company is in compliance with these covenants.

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

30

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 $11.9 million first mortgage to the borrowing base and drew down $8.0 million on the Revolving Line of Credit. The Company also incurred financing fees of $0.6 million in connection with the Revolving Line of Credit, to be amortized to interest expense over the life of the Revolving Line of Credit.

The following tables present detailed information with respect to each borrowing under the Revolving Line of Credit as of March 31, 2021:

	March 31, 2021
	Borrowing Base						Borrowings Under the Revolving Line of Credit
	Principal Amount		Carrying Value		Fair Value
870 Santa Cruz, LLC	$	11,867,818	$	11,863,875	$	11,979,443	$	8,030,611
	$	11,867,818	$	11,863,875	$	11,979,443	$	8,030,611

For the three months ended March 31, 2021, the Company received proceeds from the Revolving Line of Credit of $8.0 million and did not make any repayments.

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%.

31

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 March 31, 2021 and 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 March 31, 2021 and 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 March 31, 2021 and December 31, 2020:

	March 31, 2021
	Mortgage Assets						Borrowings Under the Term Loan (1)(2)
	Principal Amount		Carrying Value		Fair Value
330 Tryon DE LLC	$	22,800,000	$	22,903,897	$	22,892,124	$	13,680,000
1389 Peachtree St, LP; 1401 Peachtree St, LP; and    1409 Peachtree St, LP	51,649,149		51,917,594		51,814,815		30,934,424
AGRE DCP Palm Springs, LLC	43,222,382		43,775,181		43,864,855		22,728,019
MSC Fields Peachtree Retreat, LLC	23,308,334		23,434,926		23,421,439		13,985,001
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,039,903		18,030,565		10,800,000
University Park Berkeley, LLC	24,709,132		24,863,082		24,877,473		14,326,663
	$	183,688,997	$	184,934,583	$	184,901,271	$	106,454,107

32

	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 both March 31, 2021 and December 31, 2020, using LIBOR of 0.11% and 0.14%, respectively.

(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 three months ended March 31, 2021, the Company received proceeds from borrowings under the Term Loan of $1.5 million and made repayment of $2.6 million. As of March 31, 2021, the remaining amount for Committed Advances and discretionary advances was $0.8 million and $8.3 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.

For the three months ended March 31, 2020, the Company received proceeds from borrowings under the Master Repurchase Agreement of $14.8 million and made repayments of $3.4 million.

33

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. There were no amounts outstanding under the Revolving Credit Facility at December 31, 2020.

    For the three months ended March 31, 2020, the Company received proceeds $35.0 million from borrowings under the Revolving Credit Facility.

Mortgage Loan Payable

    As of March 31, 2021, the Company had a $40.6 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 March 31, 2021 and December 31, 2020:

					March 31, 2021				December 31, 2020
Lender	Current Interest Rate	Maturity Date )	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	$	40,596,980	$	40,728,560	$	48,719,151	$	44,117,293	$	49,533,733

Scheduled Debt Principal Payments

    Scheduled debt principal payments for each of the five calendar years following March 31, 2021 are as follows:

Years Ending December 31,	Total
2021 (April 1 through December 31)	$	596,580
2022	40,000,400
2023	8,030,611
2024	69,399,425
2025	37,054,682
Thereafter	—
	155,081,698
Unamortized deferred financing costs	(2,710,336)
Total	$	152,371,362

     At March 31, 2021 and December 31, 2020, the unamortized deferred financing costs were $2.7 million and $2.2 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 March 31, 2021 and December 31, 2020, obligations under participation agreements had a carrying value of approximately $71.6 million and $71.6 million, respectively, and the carrying value of the loans that are associated with these obligations under participation agreements was approximately $146.4 million and $168.6 million, respectively, (see “Participation Agreements” in Note 8). Additionally, as of March 31, 2021 and December 31, 2020, secured borrowing had a

34

carrying value of approximately $22.0 million and $18.2 million, and the carrying value of the loan that is associated with the secured borrowing was $31.9 million and $26.4 million, respectively. The weighted-average interest rate on the obligations under participation agreements and secured borrowing was approximately 10.0% and 10.2% as of March 31, 2021 and December 31, 2020, respectively.

Note 10. Commitments and Contingencies

Impact of COVID-19

    The full extent of the impact of the COVID-19 pandemic on the global economy generally, and the Company’s business in particular, will depend on future developments, which are highly uncertain and cannot be predicted with confidence. As of March 31, 2021, no contingencies have been recorded on the Company’s consolidated balance sheet as a result of the COVID-19 pandemic, however as the pandemic continues, 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 $55.5 million and $67.9 million as of March 31, 2021 and December 31, 2020, 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 7, On August 3, 2020, the Company entered into a subscription agreement with Mavik RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in Mavik RESOF. As of March 31, 2021 and December 31, 2020, the unfunded investment commitment was $1.3 million and $14.1 million, respectively.

Other

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

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.

35

Note 11. Equity

Earnings Per Share

The following table presents earnings per share for the three months ended March 31, 2021 and March 31, 2020:

	Three Months Ended March 31,
	2021		2020
Net income	$	1,476,096	$	578,963
Series A preferred stock dividend declared	(3,906)		(3,906)
Net income allocable to common stock	$	1,472,190	$	575,057
Weighted-average shares outstanding - basic and diluted	19,487,460		16,707,279
Earnings per share - basic and diluted	$	0.08	$	0.03

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 March 31, 2021 and December 31, 2020, 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 March 31, 2021, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.    

    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).

36

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 three months ended March 31, 2021 and 2020, the Company made distributions to Terra 5, Terra JV and Terra Offshore REIT totaling $3.9 million and $8.8 million, respectively, of which $2.4 million and $8.3 million were returns of capital, respectively. Additionally, for both the three months ended March 31, 2021 and 2020, the Company made distributions to preferred stockholders of $3,906.

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

37

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

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

FORWARD-LOOKING STATEMENTS

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

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

•the potential negative impacts of COVID-19 on the global economy and the impacts of COVID-19 on our 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 efficacy of the vaccines or other remedies and the speed of their distribution and administration;

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

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

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

•changes in our investment objectives and business strategy;

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

•the performance and financial condition of our borrowers;

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

•borrower defaults or decreased recovery rates from our borrowers;

•changes in prepayment rates on our loans;

•our use of financial leverage;

•actual and potential conflicts of interest with any of the following affiliated entities: Terra Fund Advisors, LLC, Terra REIT Advisors, LLC (“Terra REIT Advisors” or the “Manager”), Terra Income Advisors, LLC; Terra Capital Partners, LLC (“Terra Capital Partners”), our sponsor; Terra Secured Income Fund 5, LLC (“Terra Fund 5”); Terra JV, LLC (“Terra JV”); Terra Income Fund 6, Inc. (“Terra Fund 6”); Terra Secured Income Fund 5 International; Terra Income Fund International; Terra Secured Income Fund 7, LLC (“Terra Fund 7”); Terra International Fund 3, L.P. (“Terra International 3”); Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”); Mavik Real Estate Special Opportunities Fund, LP (“Mavik RESOF”) (formerly known as Terra Real Estate Credit Opportunities Fund, LP); or any of their affiliates;

38

•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 from registration under the Investment Company Act of 1940, as amended (the “1940 Act”), and to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes; and

•the degree and nature of our competition.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Part I — Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2020 and in “Part II — Item 1A. Risk Factors” in this quarterly report on Form 10-Q. Other factors that could cause actual results to differ materially include:

•changes in the economy;

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

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

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

Overview

    We are a real estate credit focused company that originates, structures, funds and manages 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 March 31, 2021, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of 19 loans in eight states with an aggregate net principal balance of $314.4 million, a weighted average coupon rate of 7.8%, a weighted average loan-to-value ratio of 77.0% and a weighted average remaining term to maturity of 1.6 years.

    Each of our loans was originated by Terra Capital Partners or its affiliates. Our portfolio is diversified geographically with underlying properties located in 19 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-

39

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 (the “REIT formation transaction”). 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, Inc. (“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. 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”). The shares of common stock were issued in private placements in reliance on Section 4(a)(2) under the U.S. Securities Act of 1933, as amended (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 March 31, 2021, 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

    The coronavirus (COVID-19) pandemic has had, and is expected to continue to have, a significant impact on local, national and global economies and has resulted in a world-wide economic slowdown. While certain economies have exhibited growth of late when compared to earlier months of 2020, the amount of economic recovery will continue to be impacted by reductions and restrictions in economic activity resulting from increased coronavirus cases. We continue to closely monitor the impact of the coronavirus pandemic on all aspects of our investments and operations. The extent to which the coronavirus pandemic may impact our investments and operations going forward will depend on future developments, which are highly uncertain and cannot be predicted with confidence. These developments include the duration of the outbreak, the impact of the global vaccination effort, any new strains of the virus that are resistant to available vaccines, the impact of government stimulus, new information that may emerge concerning the severity of the coronavirus, and actions taken by federal, state and local agencies as well as the general public to contain the coronavirus or treat its impact, among others.

    We believe, however, 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 because 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. 

40

Portfolio Summary

The following tables provide a summary of our net loan portfolio as of March 31, 2021 and December 31, 2020:

	March 31, 2021
	Fixed Rate			Floating Rate (1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements and Secured Borrowing			Total Net Loans
Number of loans	6			13			19			7			19
Principal balance	$	57,040,923		$	350,689,385		$	407,730,308		$	93,310,285		$	314,420,023
Amortized cost	57,157,301			348,911,570			406,068,871			93,596,454			312,472,417
Fair value	57,099,978			346,367,302			403,467,280			91,599,071			311,868,209
Weighted average coupon rate	12.07		%	7.66		%	8.28		%	9.97		%	7.78		%
Weighted-average remaining term (years)	1.57			1.41			1.43			0.90			1.59

	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

_______________

(1)These loans pay a coupon rate of London Interbank Offered Rate (“LIBOR”) plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.11% and 0.14% as of March 31, 2021 and December 31, 2020.

(2)As of March 31, 2021 and December 31, 2020, amounts included $183.7 million and $184.2 million of senior mortgages used as collateral for $106.5 million and $107.6 million of borrowings under a term loan, respectively. As of March 31, 2021, amounts also included $11.9 million of senior mortgages used as collateral for $8.0 million of borrowings under a revolving line of credit. Borrowings under the term loan bear interest at an annual rate of LIBOR plus 4.25% with a LIBOR floor of 1.00%. Borrowings under the revolving line of credit bear interest at a minimum rate of 4.0%.

(3)As of March 31, 2021 and December 31, 2020, eleven and twelve of these loans, respectively, are subject to a LIBOR floor.

    In addition to our net loan portfolio, as of March 31, 2021 and December 31, 2020, we owned 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 $62.1 million and $62.9 million as of March 31, 2021 and December 31, 2020, respectively. The mortgage loan payable encumbering the office building had an outstanding principal amount of $40.6 million and $44.0 million as of March 31, 2021 and December 31, 2020, respectively.

Additionally, as of March 31, 2021 and December 31, 2020, we owned 83.5% and 90.3%, respectively, of 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. As of March 31, 2021 and December 31, 2020, the equity interest had a carrying value of $50.5 million and $36.3 million, respectively.

Portfolio Investment Activity

    For the three months ended March 31, 2021 and 2020, we invested $15.5 million and $12.6 million in new investments and had $25.0 million and $10.0 million of repayments, resulting in net repayments of $9.4 million and net investments of $2.6 million, respectively. Amounts are net of obligations under participation agreements, secured borrowing, borrowings under the master repurchase agreement, the term loan and the revolving line of credit.

41

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 above.

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.

	March 31, 2021						December 31, 2020
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	212,718,851	$	214,217,072	68.6	%	$	209,660,270	$	210,694,778	63.3	%
Preferred equity investments	77,586,298		77,828,409		24.9	%	101,019,788		101,267,732		30.5	%
Mezzanine loans	24,114,874		24,441,714		7.8	%	23,946,549		24,287,203		7.3	%
Allowance for loan losses	—		(4,014,778)		(1.3)	%	—		(3,738,758)		(1.1)	%
Total	$	314,420,023	$	312,472,417	100.0	%	$	334,626,607	$	332,510,955	100.0	%

	March 31, 2021						December 31, 2020
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance			Carrying Value		% of Total
Office	$	150,129,899	$	150,669,866	48.3	%	$	145,560,299		$	146,010,011	43.9	%
Multifamily	80,440,026		81,087,592		26.0	%	103,057,678			103,678,464		31.1	%
Hotel - full/select service	47,112,522		47,704,223		15.3	%	49,142,809			49,393,251		14.9	%
Mixed use	16,333,304		16,333,304		5.2	%	16,767,984			16,767,984		5.0	%
Industrial	7,000,000		7,000,000		2.2	%	7,000,000			7,000,000		2.1	%
Infill land	5,974,734		6,030,824		1.9	%	5,847,837		5901575	5,901,575		1.8	%
Hotel - extended stay	4,250,000		4,292,148		1.4	%	4,250,000			4,294,053		1.3	%
Student housing	3,000,000		3,189,700		1.0	%	3,000,000			3,204,375		1.0	%
Allowance for loan losses	—		(4,014,778)		(1.3)	%	—			(3,738,758)		(1.1)	%
Total	$	314,240,485	$	312,292,879	100.0	%	$	334,626,607		$	332,510,955	100.0	%

	March 31, 2021						December 31, 2020
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	121,331,368	$	122,393,503	39.1	%	$	143,454,602	$	144,066,584	43.3	%
Georgia	74,957,483		75,352,520		24.1	%	74,116,787		74,505,752		22.4	%
New York	56,966,298		57,039,596		18.3	%	56,058,669		56,139,234		16.9	%
North Carolina	28,774,734		28,934,721		9.3	%	28,647,837		28,802,869		8.7	%
Washington	18,500,000		18,648,113		6.0	%	18,500,000		18,643,699		5.5	%
Massachusetts	7,000,000		7,000,000		2.2	%	7,000,000		7,000,000		2.1	%
Texas	3,890,140		3,929,042		1.3	%	3,848,712		3,887,200		1.2	%
South Carolina	3,000,000		3,189,700		1.0	%	3,000,000		3,204,375		1.0	%
Allowance for loan losses	—		(4,014,778)		(1.3)	%	—		(3,738,758)		(1.1)	%
Total	$	314,420,023	$	312,472,417	100.0	%	$	334,626,607	$	332,510,955	100.0	%

42

Factors Impacting Operating Results

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

Credit Risk

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

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

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

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

    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

43

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.

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.

44

Results of Operations

    The following table presents the comparative results of our operations for the three months ended March 31, 2021 and 2020:

	Three Months Ended March 31,
	2021		2020		Change
Revenues
Interest income	$	8,120,949	$	9,651,865	$	(1,530,916)
Real estate operating revenue	2,011,641		2,313,051		(301,410)
Other operating income	156,662		112,655		44,007
	10,289,252		12,077,571		(1,788,319)
Operating expenses
Operating expenses reimbursed to Manager	1,342,758		1,367,189		(24,431)
Asset management fee	1,156,543		1,029,533		127,010
Asset servicing fee	273,207		234,208		38,999
Provision for loan losses	276,020		1,144,994		(868,974)
Real estate operating expenses	971,315		944,518		26,797
Depreciation and amortization	931,725		946,494		(14,769)
Professional fees	520,419		294,761		225,658
Directors fees	36,250		83,750		(47,500)
Other	71,488		64,949		6,539
	5,579,725		6,110,396		(530,671)
Operating income	4,709,527		5,967,175		(1,257,648)
Other income and expenses
Interest expense from obligations under participation agreements	(1,880,081)		(2,560,267)		680,186
Interest expense on repurchase agreement payable	—		(1,551,270)		1,551,270
Interest expense on mortgage loan payable	(686,150)		(750,636)		64,486
Interest expense on revolving line of credit	(17,846)		(174,989)		157,143
Interest expense on term loan payable	(1,672,768)		—		(1,672,768)
Interest expense on secured borrowing	(299,805)		(40,491)		(259,314)
Net loss on extinguishment of obligations under participation    agreements	—		(319,453)		319,453
Unrealized losses on marketable securities	(14,608)		—		(14,608)
Income from equity investment in a limited partnership	1,337,827		—		1,337,827
Realized gains on marketable securities	—		8,894		(8,894)
	(3,233,431)		(5,388,212)		2,154,781
Net income	$	1,476,096	$	578,963	$	897,133

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.

45

    The following tables presents a reconciliation of our loan portfolio from a gross basis to net basis for the three months ended March 31, 2021 and 2020:

	Three Months Ended March 31, 2021				Three Months Ended March 31, 2020
	Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)		Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)
Total portfolio
Gross loans	$	408,985,092	8.4	%	$	388,164,960	9.5	%
Obligations under participation agreements    and secured borrowing	(88,594,532)		10.1	%	(88,056,951)		11.7	%
Repurchase agreement payable	—		—	%	(94,465,741)		4.0	%
Term loan payable	(107,776,898)		5.3	%	—		—	%
Revolving line of credit	(1,745,785)		4.0	%	—		—	%
Net loans (3)	$	210,867,877	9.3	%	$	205,642,268	11.1	%
Senior loans
Gross loans	255,124,634		6.4	%	189,925,027		6.9	%
Obligations under participation agreements    and secured borrowing	(45,478,823)		8.6	%	(17,680,599)		10.6	%
Repurchase agreement payable	—		—	%	(94,465,741)		4.0	%
Term loan payable	(107,776,898)		5.3	%	—		—	%
Revolving line of credit	(1,745,785)		4.0	%	—		—	%
Net loans (3)	$	100,123,128	6.6	%	$	77,778,687	9.7	%
Subordinated loans (4)
Gross loans	153,860,458		11.7	%	198,239,933		12.0	%
Obligations under participation agreements	(43,115,709)		11.6	%	(70,376,352)		12.0	%
Net loans (3)	$	110,744,749	11.7	%	$	127,863,581	12.0	%

_______________

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

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

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

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

    For the three months ended March 31, 2021 as compared to the same period in 2020, 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 three months ended March 31, 2021 as compared to the same period in 2020, interest income decreased by $1.5 million, primarily due to a decrease in contractual interest income 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 three months ended March 31, 2021 as compared to the same period in 2020, real estate operating revenue decreased by $0.3 million, primarily due to a lease terminated in the third quarter of 2020 and a decrease in parking income.

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.

46

    For the three months ended March 31, 2021 as compared to the same period in 2020, asset management fee increased by $0.1 million, primarily due to an increase in total funds under management.

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 three months ended March 31, 2021 as compared to the same period in 2020, asset servicing fee increased by $0.04 million, primarily due to an increase in total funds under management.

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 both March 31, 2021 and December 31, 2020, we had three loans with a loan risk rating of “4”, one loan with a loan risk rating of “5” and one loan that was deemed impaired. For the three months ended March 31, 2021, we recorded allowance of loan losses of $0.28 million, including $0.24 million of specific allowance for loan losses and $0.04 million of general allowance for loan losses, as a result of an increase in the principal balance of the loans we reserved for. As of March 31, 2020, we had three loans with a loan risk rating of “4” and recorded a general allowance for loan losses of $1.1 million for the three months ended March 31, 2020. There was no specific allowance for loan losses recorded for the three months ended March 31, 2020.

Professional Fees

    For the three months ended March 31, 2021 as compared to the same period in 2020, professional fees increased by $0.2 million, primarily due to legal fees incurred in connection with a financing transaction that was terminated.

Interest Expense from Obligations under Participation Agreements

    For the three months ended March 31, 2021 as compared to the same period in 2020, interest expense from obligations under participation agreements decreased by $0.7 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 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 three months ended March 31, 2021, there was no interest expense on repurchase agreement payable because the repurchase agreement was terminated on September 3, 2020. For the three months ended March 31, 2020, interest expense on repurchase agreement payable was $1.6 million.

Interest Expense on Mortgage Loan Payable

For the three months ended March 31, 2021 as compared to the same period in 2020, interest expense on mortgage loan payable decreased by $0.1 million as a result of a decrease in the weighted average amount outstanding.

47

Interest Expense on Revolving Line of Credit

    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. On March 12, 2021, we entered into a business loan and security agreement 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.

    For the three months ended March 31, 2021, interest expense on the new revolving line of credit was $0.02 million. For the three months ended March 31, 2020, interest expense on the old revolving line of credit was $0.2 million. The decrease in interest expense on revolving line of credit was due to a decrease in 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 three months ended March 31, 2021, interest expense on term loan payable was $1.7 million. There was no interest expense on term loan payable for the three months ended March 31, 2020 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 three months ended March 31, 2021, interest expense on secured borrowing increased by $0.3 million as a result of an increase in the weighted average amount outstanding.

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. There was no such loss recognized for the three months ended March 31, 2021.

Income from Equity Investment in a Limited Partnership

In August 2020, we entered into a subscription agreement whereby the Company committed to fund up to $50.0 million to purchase partnership interest in a limited partnership. As of March 31, 2021, we owned an 83.5% interest in limited partnership and our investment in the limited partnership had a carrying value of $50.5 million.

For the three months ended March 31, 2021, we recognized income from equity investment in a limited partnership of $1.3 million. There was no such income for the three months ended March 31, 2020 because the investment was entered into in August 2020.

Net Income

    For the three months ended March 31, 2021 as compared to the same period in 2020, the resulting net income increased by $0.9 million.

48

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 line of credit. We may use other sources to finance our target assets, including bank financing and arranged financing facilities with domestic or international financing providers. In addition, we may divide the loans we originate into senior and junior tranches and dispose of the more senior tranches as an additional means of providing financing to our business.

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

    Obligations under participation agreements totaling $66.3 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 $53.4 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 $40.6 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 March 31, 2021, the amount outstanding under the indenture and credit agreement was $106.5 million.

    On March 12, 2021, we entered into a Business Loan and Security Agreement (the “Revolving Line of Credit”) to provide for advances up to the lesser of $75.0 million or the amount determined by the borrowing base, which is based on the eligible assets pledged to the lender. 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. As of March 31, 2021, the Revolving Line of Credit had an outstanding balance of $8.0 million.

Cash Flows (Used in) From Operating Activities

    For the three months ended March 31, 2021 as compared to the same period in 2020, cash flows from operating activities decreased by $5.1 million, primarily due to a decrease in contractual interest income and payment for real estate tax on our operating real estate.

Cash Flows Used In Investing Activities

    For the three months ended March 31, 2021, cash flows used in investing activities were $0.8 million, primarily related to origination and purchase of loans of $14.4 million, purchase of partnership interest in a limited partnership of $12.9 million and purchase of marketable securities of $5.0 million, partially offset by proceeds from repayments of loans of $31.5 million.

    For the three months ended March 31, 2020, cash flows used in investing activities were $28.3 million, primarily related to

origination and purchase of loans of $38.4 million and the purchase of marketable securities of $3.4 million, partially offset by

proceeds from repayments of loans of $13.4 million.

49

Cash Flows (Used In) From Financing Activities

    For the three months ended March 31, 2021, cash flows used in financing activities were $2.8 million, primarily due to repayments on obligations under participation agreements of $4.0 million, distributions paid of $3.9 million, payment of mortgage principal of $3.4 million and a decrease in interest reserve and other deposits hold on investments of $5.0 million, partially offset by proceeds from borrowing under the revolving line of credit of $8.0 million, proceeds from obligations under participation agreements and secured borrowing of $7.3 million. Additionally, we received proceeds of borrowings under the term loan of $1.5 million and made repayment on borrowings under the term loan of $2.6 million. We also made payment for deferred financing costs of $0.6 million in connection with obtaining the revolving line of credit.

    For the three months ended March 31, 2020, cash flows from financing activities were $74.9 million, primarily due to proceeds from borrowings under revolving credit facility of $35.0 million, proceeds from borrowings under our repurchase agreement of $14.8 million, cash acquired from Terra Property Trust 2 of $16.9 million, cash contributed by Terra Offset REIT of $8.6 million and proceeds from obligations under participation agreements and secured borrowing of $14.3 million, partially offset by distributions paid of $8.8 million, repayment of borrowings under repurchase agreement of $3.4 million and a decrease in interest reserve and other deposits hold on investments of $2.3 million.

Critical Accounting Policies and Use of Estimates

    Our consolidated financial statements are prepared in conformity with United States generally accepted accounting principles (“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, 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

50

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 of 1986, as amended (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 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 three months ended March 31, 2021 and 2020, we did not incur any interest or penalties.

    Our 2017-2019 federal tax returns remain 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.

Contractual Obligations

    The following table provides a summary of our contractual obligations at March 31, 2021:

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Obligations under participation    agreements — principal (1)	$	71,276,756	$	66,276,756	$	5,000,000	$	—	$	—
Secured borrowing — principal (1)	22,033,529		—		22,033,529		—		—
Mortgage loan payable — principal (2)	40,596,980		801,547		39,795,433		—		—
Term loan payable — principal (3)	106,454,107		—		44,614,424		61,839,683		—
Revolving Line of Credit payable —    principal (4)	8,030,611		—		8,030,611		—		—
Interest on borrowings (5)	33,582,806		15,913,261		15,171,799		2,497,746		—
Unfunded lending commitments (6)	55,545,829		53,402,223		2,143,606		—		—
Ground lease commitment (7)	82,877,438		1,264,500		2,529,000		2,529,000		76,554,938
	$	420,398,056	$	137,658,287	$	139,318,402	$	66,866,429	$	76,554,938

___________________________

(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

51

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 $2.2 million.

(4)Amount excludes unamortized deferred financing costs of $0.6 million.

(5)Interest was calculated using the applicable annual variable interest rate and balance outstanding at March 31, 2021. Amount represents interest expense through maturity plus exit fee as applicable.

(6)Certain of our loans provide for a commitment to fund the borrower at a future date. As of March 31, 2021, we had seven of such loans with total funding commitments of $256.0 million, of which $200.5 million had been funded.

(7)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 Mavik RESOF to fund up to $50.0 million to purchase the limited partnership interests in Mavik RESOF as the subscription agreement does not have fixed or determinable payments. As of March 31, 2021, the unfunded commitment was $1.3 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 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.

52

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

	Three Months Ended March 31,
	2021		2020
Origination and extension fee expense (1)	$	345,384	$	437,617
Asset management fee	1,156,543		1,029,533
Asset servicing fee	273,207		234,208
Operating expenses reimbursed to Manager	1,342,758		1,367,189
Disposition fee (2)	250,988		75,520
Total	$	3,368,880	$	3,144,067

_______________

(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)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 March 31, 2021, the principal balance of our participation obligations totaled $71.3 million, consisting of $37.0 million in participation obligations to Terra Fund 6 and $34.3 million in participation obligations to third-parties. Additionally, as of March 31, 2021, the principal balance of our secured borrowing was $22.0 million.

    Terra Fund 6 is managed by Terra Income Advisors, LLC, 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 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.

53

    For the three months ended March 31, 2021, the weighted average outstanding principal balance on obligations under participation agreements was approximately $88.6 million, and the weighted average interest rate was approximately 10.1%, compared to weighted average outstanding principal balance of approximately $88.1 million, and weighted average interest rate of approximately 11.7% for the three months ended March 31, 2020.

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 3. Quantitative and Qualitative Disclosures About Market Risk.

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

    As of March 31, 2021, we had 13 investments with an aggregate principal balance of $271.4 million, net of obligations under participation agreements, that provide for interest income at an annual rate of LIBOR plus a spread, 11 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 $0.8 million.

    Additionally, we had $40.6 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 $106.5 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 $183.7 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 $0.1 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 Secured Overnight Financing Rate (“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.

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

    We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts, subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. For the three months ended March 31, 2021 and 2020, we did not engage in interest rate hedging activities.

54

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.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021. 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.

55

Changes in Internal Control Over Financial Reporting

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

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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.

Item 1A. Risk Factors.

    There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020.

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

None.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6.  Exhibits.

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

Exhibit No.	Description and Method of Filing
2.1	Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated January 1, 2016 (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019).
2.2	Amendment No. 1 to the Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated December 31, 2016 (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019).
2.3	Agreement and Plan of Merger, dated February 28, 2020, by and among Terra Property Trust, Inc., Terra Property Trust 2, Inc. and Terra Secured Income Fund 7, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 000-56117) filed with the SEC on March 5, 2020).
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).

56

Exhibit No.	Description and Method of Filing
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).
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.

57

SIGNATURES

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

Date: May 13, 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)

58

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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

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

I, Vikram S. Uppal, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	May 13, 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 Quarterly Report on Form 10-Q of Terra Property Trust, Inc.;

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

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

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

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

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

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

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

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

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

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

Date:	May 13, 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 Quarterly Report on Form 10-Q of Terra Property Trust, Inc. (the “Company”) for the quarterly period ended March 31, 2021, as filed with the Securities Exchange Commission on the date hereof (the “Report”), I, Vikram S. Uppal, Chief Executive Officer, and I, Gregory M. Pinkus, Chief Financial Officer, each certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

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

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

Date:	May 13, 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 - shares	3 Months Ended
	Mar. 31, 2021	May 13, 2021
Cover [Abstract]
Entity Registrant Name	Terra Property Trust, Inc.
Entity Central Index Key	0001674356
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2021
Entity File Number	000-56117
Entity Tax Identification Number	81-0963486
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Ex Transition Period	true
Entity Current Reporting Status	Yes
Entity Small Business	true
Entity Emerging Growth Company	true
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
Document Transition Report	false
Document Quarterly Report	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding		19,487,460

XML

Consolidated Balance Sheets - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Assets
Cash and cash equivalents	$ 18,464,161	$ 18,607,952
Restricted cash	7,096,549	12,145,616
Cash held in escrow by lender	2,039,349	2,166,755
Marketable securities	6,251,980	1,287,500
Loans held for investment	406,068,871	422,280,515
Equity investment in a limited partnership, net	50,505,511	36,259,959
Real estate owned, Net
Land, building and building improvements, net	62,969,129	63,385,339
Lease intangible assets, net	9,273,696	9,793,600
Operating lease right-of-use assets	16,104,041	16,105,888
Interest receivable	2,510,061	2,509,589
Other assets	4,514,677	3,934,468
Total assets	585,798,025	588,477,181
Liabilities
Term loan payable, net of deferred financing fees	104,235,266	105,245,801
Obligations under participation agreements (Note 8 )	71,613,358	71,581,897
Mortgage loan payable, net of deferred financing fees and other	40,728,560	44,117,293
Revolving line of credit payable, net of deferred financing fees	7,407,536	0
Secured borrowing	21,983,096	18,187,663
Interest reserve and other deposits held on investments	7,096,549	12,145,616
Operating lease liabilities	16,104,041	16,105,888
Lease intangible liabilities, net (Note 6)	10,128,244	10,249,776
Due to Manager (Note 8)	1,746,682	1,257,098
Interest payable	1,213,218	1,185,502
Accounts payable and accrued expenses	1,822,493	3,968,603
Unearned income	389,257	677,856
Distributions payable	3,906	0
Other liabilities	422,159	429,123
Total liabilities	284,894,365	285,152,116
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 shares issued and outstanding at both March 31, 2021 and December 31, 2020, respectively	194,875	194,875
Additional paid-in capital	373,443,672	373,443,672
Accumulated deficit	(72,859,887)	(70,438,482)
Total equity	300,903,660	303,325,065
Total liabilities and equity	585,798,025	588,477,181
Loans held for investment, net
Assets
Loans held for investment	401,776,723	417,986,462
Loans Held For Investment Acquired Through Participation
Assets
Loans held for investment	4,292,148	4,294,053
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	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
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	19,487,460
Common Stock, Shares, Outstanding	19,487,460	19,487,460
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 ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenues [Abstract]
Interest income	$ 8,120,949	$ 9,651,865
Real estate operating income	2,011,641	2,313,051
Other operating income	156,662	112,655
Total	10,289,252	12,077,571
Operating expenses
Operating expenses reimbursed to Manager	1,342,758	1,367,189
Asset management fee	1,156,543	1,029,533
Asset serving fee	273,207	234,208
Provision for loan losses	276,020	1,144,994
Real estate operating expenses	971,315	944,518
Depreciation and amortization	931,725	946,494
Professional Fees	520,419	294,761
Directors Fee	36,250	83,750
Other	71,488	64,949
Total Operating Expenses	5,579,725	6,110,396
Operating Income	4,709,527	5,967,175
Other Income and expense
Interest expense from obligations under participation agreements	(1,880,081)	(2,560,267)
Interest expense on repurchase agreement payable	0	(1,551,270)
Interest expense on mortgage loan payable	(686,150)	(750,636)
Interest expense on revolving line of credit	(17,846)	(174,989)
Interest expense on term loan payable	(1,672,768)	0
Interest expense on secured borrowing	(299,805)	(40,491)
Net loss on extinguishment of obligations under participation agreements	0	(319,453)
Unrealized losses on marketable securities	(14,608)	0
Income from equity investment in a limited partnership	1,337,827	0
Realized gains on marketable securities	0	8,894
Other Nonoperating Income (Expense)	(3,233,431)	(5,388,212)
Net income	1,476,096	578,963
Series A preferred stock dividend declared	(3,906)	(3,906)
Net income allocable to common stock	$ 1,472,190	$ 575,057
Earnings per share — basic and diluted	$ 0.08	$ 0.03
Weighted-average shares — basic and diluted	19,487,460	16,707,279
Dividends declared per common share	$ 0.20	$ 0.53

XML

Consolidated Statements of Comprehensive Income Statement - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Statement of Other Comprehensive Income [Abstract]
Net income	$ 1,476,096	$ 578,963
Other comprehensive income
Net unrealized gains on marketable securities	0	192,919
Reclassification of net realized gains on marketable securities into earnings	0	(8,894)
Other comprehensive income	0	184,025
Total comprehensive Income	1,476,096	762,988
Series A preferred stock dividend declared	(3,906)	(3,906)
Comprehensive income attributable to common shares	$ 1,472,190	$ 759,082

XML

Consolidated Statements of Changes in Equity - USD ($)	Total	Cumulative Preferred Stock	Preferred Stock	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income
Balance at beginning (Share) at Dec. 31, 2019		125		15,125,681
Balance beginning at Dec. 31, 2019	$ 247,543,733	$ 125,000	$ 0	$ 151,257	$ 301,727,297	$ (54,459,821)	$ 0
Issuance of common stock (Shares)				4,574,470
Issuance of common stock	75,379,993			$ 45,745	75,334,248
Distribution declared on common share	(8,832,071)					(8,832,071)
Distributions declared on preferred shares	(3,906)					(3,906)
Net income	578,963					578,963
Net unrealized gains on marketable securities	192,919						192,919
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Net of Tax	(8,894)						(8,894)
Balance at ending (Share) at Mar. 31, 2020		125		19,700,151
Balance ending at Mar. 31, 2020	314,850,737	$ 125,000	0	$ 197,002	377,061,545	(62,716,835)	184,025
Balance at beginning (Share) at Dec. 31, 2020		125		19,487,460
Balance beginning at Dec. 31, 2020	303,325,065	$ 125,000	0	$ 194,875	373,443,672	(70,438,482)	0
Distribution declared on common share	(3,893,595)					(3,893,595)
Distributions declared on preferred shares	(3,906)					(3,906)
Net income	1,476,096					1,476,096
Net unrealized gains on marketable securities	0						0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Net of Tax	0						0
Balance at ending (Share) at Mar. 31, 2021		125		19,487,460
Balance ending at Mar. 31, 2021	$ 300,903,660	$ 125,000	$ 0	$ 194,875	$ 373,443,672	$ (72,859,887)	$ 0

XML

Consolidated Statements of Shareholder Equity (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Dividends declared per common share	$ 0.20	$ 0.53

XML

Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Net income	$ 1,476,096	$ 578,963
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Paid-in-kind interest income, net	(224,197)	(80,116)
Depreciation and amortization	931,725	946,494
Provision for loan losses	276,020	1,144,994
Amortization of net purchase premiums on loans	15,348	11,112
Straight-line rent adjustments	(12,008)	(334,452)
Amortization of deferred financing costs	172,692	551,226
Net loss on extinguishment of obligations under participation agreements	0	319,453
Amortization of above- and below-market rent intangibles	(84,555)	(111,748)
Amortization and accretion of investment-related fees, net	0	(4,140)
Amortization of above-market rent ground lease	(32,588)	(32,587)
Unrealized gains on marketable securities	14,608	0
Income from equity investment in a limited partnership	(1,337,827)	0
Changes in operating assets and liabilities:
Interest receivable	(472)	(376,919)
Other assets	(528,133)	(9,093)
Due to Manager	93,228	22,520
Unearned income	(391,727)	(167,104)
Interest payable	27,716	(143,220)
Accounts payable and accrued expenses	(2,146,110)	839,938
Other liabilities	(6,964)	222,194
Net cash (used in) provided by operating activities	(1,757,148)	3,377,515
Cash flows from investing activities:
Origination and purchase of loans	(14,410,706)	(38,376,448)
Proceeds from repayments of loans	31,531,804	13,371,565
Purchase of partnership interest in a limited partnership	(12,907,725)	0
Purchase of marketable securities	(4,979,088)	(3,354,442)
Proceeds from sale of marketable securities	0	48,073
Net cash used in investing activities	(765,715)	(28,311,252)
Cash flows from financing activities:
Proceeds From Borrowings Under Term Loan	1,469,656	0
Proceeds from borrowings under revolving line of credit	8,030,611	35,000,000.0
Repayments of obligations under participation agreements	(3,962,509)	0
Distributions Paid	(3,893,595)	(8,832,071)
Proceeds from secured borrowing	3,751,680	8,257,583
Proceeds from obligations under participation agreements	3,520,514	6,034,316
Repayment of mortgage principal	(3,423,245)	(132,625)
Change in interest reserve and other deposits held on investments	(5,049,067)	(2,286,740)
Repayments of Lines of Credit	(2,600,000)	0
Payment of financing costs	(641,446)	(84,175)
Increase (Decrease) in Payables under Repurchase Agreements	0	(3,395,740)
Proceeds from borrowings under repurchase agreement	0	14,807,834
Net cash (used in) provided by financing activities	(2,797,401)	74,865,456
Net (decrease) increase in cash, cash equivalents and restricted cash	(5,320,264)	49,931,719
Cash, cash equivalents and restricted cash at beginning of period	32,920,323	50,549,700
Cash, cash equivalents and restricted cash at end of period (Note 2)	27,600,059	100,481,419
Terra Property Trust 2 Inc
Cash flows from financing activities:
Proceeds from Issuance of Common Stock	0	16,897,074
Terra Offshore REIT
Cash flows from financing activities:
Proceeds from Issuance of Common Stock	$ 0	$ 8,600,000

XML

Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows - Supplemental cash information - (Parenthetical) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Statement of Cash Flows [Abstract]
Cash paid for interest	$ 4,094,327	$ 4,459,761

XML

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
Common Stock, Par Value Per Share | $ / shares	$ 0.01

XML

Consolidated Statements of Cash Flows - Non-cash Proceeds from Issuance of Common Stock to TIF3 REIT (Parenthetical)	Mar. 02, 2020 USD ($)
Terra Offshore REIT
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

XML

Consolidated Statements of Cash Flows - Non-cash Proceeds from Issuance of Common Stock to TIF3 REIT - Narrative (Parenthetical) - Terra Offshore REIT	Mar. 02, 2020 USD ($) shares
Business Combination Common Stock Shares | shares	2,457,684.59
Loans held for investment acquired through participation	$ 32,112,257
Proceeds from issuance of common stock	$ 8,600,000

XML

Business

3 Months Ended

Mar. 31, 2021

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 March 31, 2021, Terra JV, LLC (“Terra JV”) held 87.4% of the issued and outstanding shares of the Company's common stock with the remainder held by Terra Offshore REIT (Note 3).

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

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

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

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

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

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

VIE Model

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

Under the VIE model, limited partnerships are considered 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:

	March 31, 2021		March 31, 2020
Cash and cash equivalents	$	18,464,161	$	82,163,055
Restricted cash	7,096,549		16,255,423
Cash held in escrow by lender	2,039,349		2,062,941
Total cash, cash equivalents and restricted cash shown in the consolidated    statements of cash flows	$	27,600,059	$	100,481,419

 Participation Interests

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

Term Loan

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

Fair Value Measurements

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

Deferred Financing Costs

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

Income Taxes

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

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

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

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

Earnings Per Share

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

Use of Estimates

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

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

Segment Information

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

Recent Accounting Pronouncements

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

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

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

XML

Merger and Issuance of Common Stock to Terra Offshore REIT

3 Months Ended

Mar. 31, 2021

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

Net Loss on Extinguishment of Obligations Under Participation Agreements

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

XML

Loans Held for Investment

3 Months Ended

Mar. 31, 2021

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 March 31, 2021 and December 31, 2020:

	March 31, 2021									December 31, 2020
	Fixed Rate			Floating Rate (1)(2)(3)			Total			Fixed Rate			Floating Rate (1)(2)(3)			Total
Number of loans	6			13			19			6			14			20
Principal balance	$	57,040,923		$	350,689,385		$	407,730,308		$	56,335,792		$	367,838,966		$	424,174,758
Carrying value	$	57,157,301		$	348,911,570		$	406,068,871		$	56,464,310		$	365,816,205		$	422,280,515
Fair value	$	57,099,978		$	346,367,302		$	403,467,280		$	56,284,334		$	363,122,860		$	419,407,194
Weighted-average coupon rate	12.07		%	7.66		%	8.28		%	12.17		%	7.95		%	8.51		%
Weighted-average remaining  term (years)	1.57			1.41			1.43			1.78			1.44			1.48

_______________

(1)These loans pay a coupon rate of LIBOR plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.11% and 0.14% as of March 31, 2021 and December 31, 2020, respectively.

(2)As of March 31, 2021 and December 31, 2020, amounts included $183.7 million and $184.2 million of senior mortgages used as collateral for $106.5 million and $107.6 million of borrowings under a term loan, respectively (Note 9). As of March 31, 2021, amounts also included $11.9 million of senior mortgages used as collateral for $8.0 million of borrowings under a revolving line of credit. Borrowings under the term loan bear interest at an annual rate of LIBOR plus 4.25% with a LIBOR floor of 1.00%. Borrowings under the revolving line of credit bear interest at a minimum rate of 4.0%.

(3)As of March 31, 2021 and December 31, 2020, eleven and twelve of these loans, respectively, are subject to a LIBOR floor.

Lending Activities

The following table presents the activities of the Company’s loan portfolio for the three months ended March 31, 2021 and 2020:

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2021	$	417,986,462	$	4,294,053	$	422,280,515
New loans made	14,410,706		—		14,410,706
Principal repayments received	(31,531,804)		—		(31,531,804)
PIK interest (1)	676,646		—		676,646
Net amortization of premiums on loans	(15,348)		—		(15,348)
Accrual, payment and accretion of investment-related fees and other,    net	526,081		(1,905)		524,176
Provision for loan losses	(276,020)		—		(276,020)
Balance, March 31, 2021	$	401,776,723	$	4,292,148	$	406,068,871

	Loans Held for 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	37,504,601		871,847		38,376,448
Principal repayments received	(13,371,565)		—		(13,371,565)
PIK interest (1)	294,237		—		294,237
Net amortization of premiums on loans	(15,348)		—		(15,348)
Accrual, payment and accretion of investment-related fees, net	202,793		15,174		217,967
Provision for loan losses	(1,144,994)		—		(1,144,994)
Balance, March 31, 2020	$	398,931,946	$	4,037,567	$	402,969,513

_______________

(1)Certain loans in the Company’s portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted to $0.5 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

Portfolio Information

    The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of March 31, 2021 and December 31, 2020:

	March 31, 2021						December 31, 2020
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	263,999,390	$	265,573,062	65.4	%	$	254,042,847	$	255,093,989	60.5	%
Preferred equity investments	114,921,610		115,331,442		28.4	%	141,590,632		142,002,144		33.6	%
Mezzanine loans	28,809,308		29,179,145		7.2	%	28,541,279		28,923,140		6.8	%
Allowance for loan losses	—		(4,014,778)		(1.0)	%	—		(3,738,758)		(0.9)	%
Total	$	407,730,308	$	406,068,871	100.0	%	$	424,174,758	$	422,280,515	100.0	%

	March 31, 2021						December 31, 2020
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	191,527,932	$	192,017,466	47.3	%	$	182,698,225	$	183,053,751	43.3	%
Multifamily	127,657,844		128,599,015		31.6	%	150,873,173		151,768,347		35.9	%
Hotel - full/select service	47,112,522		47,704,223		11.7	%	49,142,809		49,393,251		11.7	%
Mixed use	16,512,842		16,512,842		4.1	%	16,767,984		16,767,984		4.0	%
Infill land	10,669,168		10,768,255		2.7	%	10,442,567		10,537,512		2.5	%
Industrial	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.7	%
Hotel - extended stay	4,250,000		4,292,148		1.1	%	4,250,000		4,294,053		1.0	%
Student housing	3,000,000		3,189,700		0.8	%	3,000,000		3,204,375		0.8	%
Allowance for loan losses	—		(4,014,778)		(1.0)	%	—		(3,738,758)		(0.9)	%
Total	$	407,730,308	$	406,068,871	100.0	%	$	424,174,758	$	422,280,515	100.0	%

During the first quarter of 2021, the Company reclassified the property types of collateral on certain loans to multifamily to better reflect the tenant mixed of each property. Additionally, the Company categorized hotel properties further to hotel - full/selected service and hotel - extended stay. The prior period amounts have been reclassified to conform to the current period presentation.

	March 31, 2021						December 31, 2020
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	181,091,907	$	182,312,275	44.9	%	$	200,279,688	$	200,990,328	47.6	%
New York	80,821,610		80,939,816		19.9	%	79,187,004		79,310,276		18.8	%
Georgia	74,957,483		75,352,520		18.6	%	74,116,787		74,505,752		17.6	%
North Carolina	33,469,168		33,672,152		8.3	%	33,242,567		33,438,806		7.9	%
Washington	23,500,000		23,688,144		5.8	%	23,500,000		23,682,536		5.6	%
Massachusetts	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.7	%
Texas	3,890,140		3,929,042		1.0	%	3,848,712		3,887,200		0.9	%
South Carolina	3,000,000		3,189,700		0.8	%	3,000,000		3,204,375		0.8	%
Allowance for loan losses	—		(4,014,778)		(1.0)	%	—		(3,738,758)		(0.9)	%
Total	$	407,730,308	$	406,068,871	100.0	%	$	424,174,758	$	422,280,515	100.0	%

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 March 31, 2021 and December 31, 2020:

	March 31, 2021							December 31, 2020
Loan Risk Rating	Number of Loans	Principal Balance		Carrying Value		% of Total		Number of Loans	Principal Balance		Carrying Value		% of Total
1	—	$	—	$	—	—	%	—	$	—	$	—	—	%
2	2	25,000,000		25,039,903		6.1	%	1	7,000,000		7,000,000		1.6	%
3	12	287,349,390		289,406,633		70.6	%	14	323,696,475		325,284,285		76.4	%
4	3	74,977,936		75,195,229		18.3	%	3	72,861,587		73,079,804		17.2	%
5	1	3,890,140		3,929,042		1.0	%	1	3,848,712		3,887,200		0.9	%
Other (1)	1	16,512,842		16,512,842		4.0	%	1	16,767,984		16,767,984		3.9	%
	19	$	407,730,308	410,083,649		100.0	%	20	$	424,174,758	426,019,273		100.0	%
Allowance for loan losses				(4,014,778)							(3,738,758)
Total, net of allowance for loan losses				$	406,068,871						$	422,280,515

_______________

(1)This loan was deemed impaired and removed from the pool of loans on which a general allowance is calculated. As of March 31, 2021 and December 31, 2020, the specific allowance for loan losses on this loan was $2.7 million and $2.5 million, respectively, as a result of a decline in the fair value of the collateral.

     As of March 31, 2021, the Company had three loans with a loan risk rating of “4” and one loan with a loan risk rating of “5”, which were unchanged from those as December 31, 2020, and recorded an additional general allowance for loan losses of $0.04 million for the three months ended March 31, 2021. As of March 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 $1.1 million for the three months ended March 31, 2020.

The following table presents the activity in the Company’s allowance for loan losses for the three months ended March 31, 2021 and 2020:

	Three Months Ended March 31,
	2021		2020
Allowance for loan losses, beginning of period	$	3,738,758	$	—
Provision for loan losses	276,020		1,144,994
Charge-offs	—		—
Recoveries	—		—
Allowance for loan losses, end of period	$	4,014,778	$	1,144,994

    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 and Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion of COVID-19.

As of March 31, 2021 and December 31, 2020, the Company had two and one loans that were in maturity default, respectively. Additionally, for the three months ended March 31, 2021, the Company suspended interest income accrual of $0.7 million on two loans because recovery of such income was doubtful. There was no suspension of such interest income for the three months ended March 31, 2020.

XML

Equity Investment in a Limited Partnership

3 Months Ended

Mar. 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments Disclosure

Note 5. Equity Investment in a Limited Partnership

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

which is a subsidiary of the Company’s sponsor, Terra Capital Partners. As of March 31, 2021 and December 31, 2020, the unfunded commitment was $1.3 million and $14.1 million, respectively.

The Company evaluated its equity interest in Mavik RESOF and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in Mavik RESOF is accounted for as an equity method investment. As of March 31, 2021 and December 31, 2020, the Company owned 83.5% and 90.3% of equity interest in Mavik RESOF, respectively. As of March 31, 2021 and December 31, 2020, the carrying value of the Company’s investment in MAVIK RESOF was $50.5 million and $36.3 million, respectively. For the three months ended March 31, 2021, the Company recorded equity income from Mavik RESOF of $1.3 million and did not receive any distributions from Mavik RESOF. There was no such equity income recorded or distributions received for the three months ended March 31, 2020.

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

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

	March 31, 2021		December 31, 2020
Investments at fair value (cost of $63,791,529 and $44,174,031)	$	64,371,103	$	44,715,979
Other assets	7,706,409		5,331,840
Total assets	72,077,512		50,047,819
Obligations under participation agreement (proceeds of $6,295,100 and $6,295,100)	6,349,884		6,347,478
Other liabilities	5,974,566		4,204,147
Total liabilities	$	12,324,450	$	10,551,625
Partners’ capital	$	59,753,062	$	39,496,194

	Three Months Ended March 31,
	2021		2020
Total investment income	$	2,042,100	$	—
Total expenses	471,212		—
Net investment income	1,570,888		—
Unrealized appreciation on investments	53,697		—
Net increase in partners' capital resulting from operations	$	1,624,585	$	—

XML

Real Estate Owned, Net

3 Months Ended

Mar. 31, 2021

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.

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:

	March 31, 2021						December 31, 2020
	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		(3,448,433)		48,277,536		51,725,969		(3,125,143)		48,600,826
Tenant improvements	1,854,640		(739,410)		1,115,230		1,854,640		(670,090)		1,184,550
Furniture and fixtures	236,000		(55,067)		180,933		236,000		(31,467)		204,533
Total real estate	67,212,039		(4,242,910)		62,969,129		67,212,039		(3,826,700)		63,385,339
Lease intangible assets:
In-place lease	14,982,538		(5,818,568)		9,163,970		15,852,232		(6,172,747)		9,679,485
Above-market rent	156,542		(46,816)		109,726		156,542		(42,427)		114,115
Total intangible assets	15,139,080		(5,865,384)		9,273,696		16,008,774		(6,215,174)		9,793,600
Lease intangible liabilities:
Below-market rent	(2,754,922)		1,175,352		(1,579,570)		(3,371,314)		1,702,800		(1,668,514)
Above-market ground lease	(8,896,270)		347,596		(8,548,674)		(8,896,270)		315,008		(8,581,262)
Total intangible liabilities	(11,651,192)		1,522,948		(10,128,244)		(12,267,584)		2,017,808		(10,249,776)
Total real estate	$	70,699,927	$	(8,585,346)	$	62,114,581	$	70,953,229	$	(8,024,066)	$	62,929,163

Real Estate Operating Revenues and Expenses

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

	Three Months Ended March 31,
	2021		2020
Real estate operating revenues:
Lease revenue	$	1,805,874	$	1,922,128
Other operating income	205,767		390,923
Total	$	2,011,641	$	2,313,051
Real estate operating expenses:
Utilities	$	33,992	$	39,022
Real estate taxes	346,354		232,875
Repairs and maintenances	145,246		237,132
Management fees	61,325		56,701
Lease expense, including amortization of above-market ground lease	283,538		283,538
Other operating expenses	100,860		95,250
Total	$	971,315	$	944,518

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.

    Scheduled Future Minimum Rent Income 

    Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at March 31, 2021 are as follows: 

Years Ending December 31,	Total
2021 (April 1 through December 31)	$	4,919,262
2022	7,132,812
2023	7,363,647
2024	7,600,861
2025	4,111,257
Thereafter	1,199,623
Total	$	32,327,462

Scheduled Annual Net Amortization of Intangibles 

    Based on the intangible assets and liabilities recorded at March 31, 2021, 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 (April 1 through December 31)	$	(253,665)	$	1,546,545	$	(97,761)	$	1,195,119
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)		—		(7,929,521)		(7,949,432)
Total	$	(1,469,844)	$	9,163,970	$	(8,548,674)	$	(854,548)

_______________

(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:    

	March 31, 2021			December 31, 2020
Operating lease
Operating lease right-of-use assets	$	16,104,041		$	16,105,888
Operating lease liabilities	$	16,104,041		$	16,105,888
Weighted average remaining lease term — operating lease (years)	65.6			65.8
Weighted average discount rate — operating lease	7.9		%	7.9		%

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

	Three Months Ended March 31,
	2021		2020
Operating lease cost	$	316,125	$	316,125

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

	Three Months Ended March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	316,125	$	316,125
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	316,125	$	316,125

    Maturities of operating lease liabilities are as follows:

Years Ending December 31,	Operating Lease
2021 (April 1 through December 31)	$	948,375
2022	1,264,500
2023	1,264,500
2024	1,264,500
2025	1,264,500
Thereafter	76,871,063
Total lease payments	82,877,438
Less: Imputed interest	(66,773,397)
Total	$	16,104,041

XML

Fair Value Measurements

3 Months Ended

Mar. 31, 2021

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 March 31, 2021 and December 31, 2020, the Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, term loan payable, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities are financial instruments that are reported at fair value.

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 March 31, 2021 and December 31, 2020, according to the fair value hierarchy:

	March 31, 2021
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Equity securities	$	6,251,980	$	—	$	—	$	6,251,980
Debt securities	—		—		—		—
Total	$	6,251,980	$	—	$	—	$	6,251,980

	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.

	Three Months Ended March 31,
	2021		2020
Beginning balance	$	1,287,500	$	—
Purchases	4,979,088		3,354,442
Proceeds from sale	—		(48,073)
Reclassification of net realized gains on marketable securities into earnings	—		(8,894)
Unrealized (losses) gains on marketable securities	(14,608)		192,919
Ending balance	$	6,251,980	$	3,490,394

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:

		March 31, 2021						December 31, 2020
	Level	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Loans:
Loans held for investment, net	3	$	403,480,308	$	405,791,501	$	399,174,830	$	419,924,758	$	421,725,220	$	415,113,225
Loans held for investment    acquired through    participation, net	3	4,250,000		4,292,148		4,292,450		4,250,000		4,294,053		4,293,969
Allowance for loan losses		—		(4,014,778)		—		—		(3,738,758)		—
Total loans		$	407,730,308	$	406,068,871	$	403,467,280	$	424,174,758	$	422,280,515	$	419,407,194
Liabilities:
Term loan payable	3	$	106,454,107	$	104,235,266	$	106,117,359	$	107,584,451	$	105,245,801	$	107,248,555
Obligations under participation    agreements	3	71,276,756		71,613,358		70,798,545		71,266,303		71,581,897		70,693,207
Mortgage loan payable	3	40,596,980		40,728,560		40,899,901		44,020,225		44,117,293		44,348,689
Secured borrowing	3	22,033,529		21,983,096		20,800,526		18,281,848		18,187,663		17,037,032
Revolving line of credit    payable	3	8,030,611		7,407,536		8,030,611		—		—		—
Total liabilities		$	248,391,983	$	245,967,816	$	246,646,942	$	241,152,827	$	239,132,654	$	239,327,483

    The Company estimated that its other financial assets and liabilities, not included in the tables above, had fair values that approximated their carrying values at both March 31, 2021 and December 31, 2020 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, secured borrowing, term loan payable and revolving line of credit are determined by discounting the contractual cash flows at the interest rate the Company estimates such arrangements would bear if executed in the current market.

The following table summarizes the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of March 31, 2021 and December 31, 2020. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.

	Fair Value at March 31, 2021		Primary Valuation Technique	Unobservable Inputs	March 31, 2021
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	399,174,830	Discounted cash flow	Discount rate	5.40	%	20.05	%	10.24	%
Loans held for investment acquired through    participation, net	4,292,450		Discounted cash flow	Discount rate	12.89	%	12.89	%	12.89	%
Total Level 3 Assets	$	403,467,280
Liabilities:
Term loan payable	$	106,117,359	Discounted cash flow	Discount rate	5.25	%	5.25	%	5.25	%
Obligations under Participation Agreements	70,798,545		Discounted cash flow	Discount rate	9.72	%	20.05	%	12.40	%
Mortgage loan payable	40,899,901		Discounted cash flow	Discount rate	6.08	%	6.08	%	6.08	%
Secured borrowing	20,800,526		Discounted cash flow	Discount rate	11.24	%	11.24	%	11.24	%
Revolving line of credit	8,030,611		Discounted cash flow	Discount rate	4.00	%	4.00	%	4.00	%
Total Level 3 Liabilities	$	246,646,942

	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

XML

Related Party Transactions

Aug. 03, 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:

	Three Months Ended March 31,
	2021		2020
Origination and extension fee expense (1)	$	345,384	$	437,617
Asset management fee	1,156,543		1,029,533
Asset servicing fee	273,207		234,208
Operating expenses reimbursed to Manager	1,342,758		1,367,189
Disposition fee (2)	250,988		75,520
Total	$	3,368,880	$	3,144,067

_______________

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

Origination and Extension Fee Expense

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

Asset Management Fee

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

Asset Servicing Fee

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

Transaction Breakup Fee

    In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of March 31, 2021 and December 31, 2020, 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 three months ended March 31, 2021 and 2020, the Company made distributions to Terra 5, Terra JV and Terra Offshore REIT totaling $3.9 million and $8.8 million, respectively, of which $2.4 million and $8.3 million were returns of capital, respectively (Note 11).

Due to Manager

    As of March 31, 2021 and December 31, 2020, approximately $1.7 million and $1.3 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 March 31, 2021, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.

Mavik Real Estate Special Opportunities Fund, LP

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

Terra International Fund 3, L.P.

    On September 30, 2019, Terra International Fund 3, L.P. (“Terra International 3”), through Terra Offshore REIT, a wholly-owned subsidiary of Terra International 3, 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. 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.

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 March 31, 2021 and December 31, 2020. 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.

	March 31, 2021					December 31, 2020
	Participating Interests	Principal Balance		Carrying Value		Participating Interests	Principal Balance		Carrying Value
LD Milpitas Mezz, LP (1)	25.00%	$	4,250,000	$	4,292,148	25.00%	$	4,250,000	$	4,294,053

________________

(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.

Transfers of Participation Interest by the Company

    The following tables summarize the loans that were subject to PAs with affiliated entities as of March 31, 2021 and December 31, 2020:

					Transfers Treated as Obligations Under Participation Agreements as of March 31, 2021
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
14th & Alice Street Owner, LLC (1)	$	36,558,763	$	36,837,952	80.00	%	$	29,247,010	$	29,372,894
370 Lex Part Deux, LLC (2)	55,327,153		55,355,545		35.00	%	19,364,504		19,364,504
Orange Grove Property Investors, LLC (2)	10,600,000		10,703,482		80.00	%	8,480,000		8,562,782
RS JZ Driggs, LLC (2)	8,981,615		9,071,429		50.00	%	4,490,808		4,535,716
Stonewall Station Mezz LLC (2)	10,669,168		10,768,255		44.00	%	4,694,434		4,737,431
The Bristol at Southport, LLC (1)	23,500,000		23,688,144		21.28	%	5,000,000		5,040,031
	$	145,636,699	$	146,424,807			$	71,276,756	$	71,613,358

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2020
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
14th & Alice Street Owner, LLC (1)	$	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 (1)	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

________________

(1)Participant is a third-party.

(2)Participant is Terra Fund 6, an affiliated fund advised by Terra Income Advisors, LLC, an affiliate of the Company’s sponsor and Manager.

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 March 31, 2021 and December 31, 2020:

					Transfers Treated as Secured Borrowing as of March 31, 2021
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
Windy Hill PV Five CM, LLC	$	31,883,812	$	31,936,652	69.11	%	$	22,033,529	$	21,983,096
	$	31,883,812	$	31,936,652			$	22,033,529	$	21,983,096

					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

XML

Debt

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Debt Disclosure

Note 9. Debt

Revolving Line of Credit

On March 12, 2021, Terra Mortgage Portfolio II, LLC, an indirect wholly-owned subsidiary of the Company, entered into a Business Loan and Security Agreement (the “Revolving Line of Credit”) with Western Alliance Bank (“WAB”) to provide for advances up to the lesser of $75.0 million or the amount determined by the borrowing base, which is based on the eligible assets pledged to the lender. Borrowings under the Revolving Line of Credit bear interest at an annual rate of LIBOR + 3.25% with a combined floor of 4.0% per annum. The Revolving Line of Credit 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, as defined within the agreement; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00. As of March 31, 2021, the Company is in compliance with these covenants.

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

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

In connection with the closing of the Revolving Line of Credit, the Company pledged a $11.9 million first mortgage to the borrowing base and drew down $8.0 million on the Revolving Line of Credit. The Company also incurred financing fees of $0.6 million in connection with the Revolving Line of Credit, to be amortized to interest expense over the life of the Revolving Line of Credit.

The following tables present detailed information with respect to each borrowing under the Revolving Line of Credit as of March 31, 2021:

	March 31, 2021
	Borrowing Base						Borrowings Under the Revolving Line of Credit
	Principal Amount		Carrying Value		Fair Value
870 Santa Cruz, LLC	$	11,867,818	$	11,863,875	$	11,979,443	$	8,030,611
	$	11,867,818	$	11,863,875	$	11,979,443	$	8,030,611

For the three months ended March 31, 2021, the Company received proceeds from the Revolving Line of Credit of $8.0 million and did not make any repayments.

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 March 31, 2021 and 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 March 31, 2021 and 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 March 31, 2021 and December 31, 2020:

	March 31, 2021
	Mortgage Assets						Borrowings Under the Term Loan (1)(2)
	Principal Amount		Carrying Value		Fair Value
330 Tryon DE LLC	$	22,800,000	$	22,903,897	$	22,892,124	$	13,680,000
1389 Peachtree St, LP; 1401 Peachtree St, LP; and    1409 Peachtree St, LP	51,649,149		51,917,594		51,814,815		30,934,424
AGRE DCP Palm Springs, LLC	43,222,382		43,775,181		43,864,855		22,728,019
MSC Fields Peachtree Retreat, LLC	23,308,334		23,434,926		23,421,439		13,985,001
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,039,903		18,030,565		10,800,000
University Park Berkeley, LLC	24,709,132		24,863,082		24,877,473		14,326,663
	$	183,688,997	$	184,934,583	$	184,901,271	$	106,454,107

	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 both March 31, 2021 and December 31, 2020, using LIBOR of 0.11% and 0.14%, respectively.

(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 three months ended March 31, 2021, the Company received proceeds from borrowings under the Term Loan of $1.5 million and made repayment of $2.6 million. As of March 31, 2021, the remaining amount for Committed Advances and discretionary advances was $0.8 million and $8.3 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.

For the three months ended March 31, 2020, the Company received proceeds from borrowings under the Master Repurchase Agreement of $14.8 million and made repayments of $3.4 million.

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. There were no amounts outstanding under the Revolving Credit Facility at December 31, 2020.

    For the three months ended March 31, 2020, the Company received proceeds $35.0 million from borrowings under the Revolving Credit Facility.

Mortgage Loan Payable

    As of March 31, 2021, the Company had a $40.6 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 March 31, 2021 and December 31, 2020:

					March 31, 2021				December 31, 2020
Lender	Current Interest Rate	Maturity Date )	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	$	40,596,980	$	40,728,560	$	48,719,151	$	44,117,293	$	49,533,733

Scheduled Debt Principal Payments

    Scheduled debt principal payments for each of the five calendar years following March 31, 2021 are as follows:

Years Ending December 31,	Total
2021 (April 1 through December 31)	$	596,580
2022	40,000,400
2023	8,030,611
2024	69,399,425
2025	37,054,682
Thereafter	—
	155,081,698
Unamortized deferred financing costs	(2,710,336)
Total	$	152,371,362

     At March 31, 2021 and December 31, 2020, the unamortized deferred financing costs were $2.7 million and $2.2 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 March 31, 2021 and December 31, 2020, obligations under participation agreements had a carrying value of approximately $71.6 million and $71.6 million, respectively, and the carrying value of the loans that are associated with these obligations under participation agreements was approximately $146.4 million and $168.6 million, respectively, (see “Participation Agreements” in Note 8). Additionally, as of March 31, 2021 and December 31, 2020, secured borrowing had a

carrying value of approximately $22.0 million and $18.2 million, and the carrying value of the loan that is associated with the secured borrowing was $31.9 million and $26.4 million, respectively. The weighted-average interest rate on the obligations under participation agreements and secured borrowing was approximately 10.0% and 10.2% as of March 31, 2021 and December 31, 2020, respectively.

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure

Note 10. Commitments and Contingencies

Impact of COVID-19

    The full extent of the impact of the COVID-19 pandemic on the global economy generally, and the Company’s business in particular, will depend on future developments, which are highly uncertain and cannot be predicted with confidence. As of March 31, 2021, no contingencies have been recorded on the Company’s consolidated balance sheet as a result of the COVID-19 pandemic, however as the pandemic continues, 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 $55.5 million and $67.9 million as of March 31, 2021 and December 31, 2020, 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 7, On August 3, 2020, the Company entered into a subscription agreement with Mavik RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in Mavik RESOF. As of March 31, 2021 and December 31, 2020, the unfunded investment commitment was $1.3 million and $14.1 million, respectively.

Other

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

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.

XML

Equity

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 11. Equity

Earnings Per Share

The following table presents earnings per share for the three months ended March 31, 2021 and March 31, 2020:

	Three Months Ended March 31,
	2021		2020
Net income	$	1,476,096	$	578,963
Series A preferred stock dividend declared	(3,906)		(3,906)
Net income allocable to common stock	$	1,472,190	$	575,057
Weighted-average shares outstanding - basic and diluted	19,487,460		16,707,279
Earnings per share - basic and diluted	$	0.08	$	0.03

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 March 31, 2021 and December 31, 2020, 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 March 31, 2021, Terra JV owns 87.4% of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV.    

    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 three months ended March 31, 2021 and 2020, the Company made distributions to Terra 5, Terra JV and Terra Offshore REIT totaling $3.9 million and $8.8 million, respectively, of which $2.4 million and $8.3 million were returns of capital, respectively. Additionally, for both the three months ended March 31, 2021 and 2020, the Company made distributions to preferred stockholders of $3,906.

XML

Subsequent Events

3 Months Ended

Mar. 31, 2021

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

XML

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2021

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. Certain prior period amounts have been reclassified to conform to the current period presentation.

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

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

VIE Model

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

Under the VIE model, limited partnerships are considered 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

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

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

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:

	March 31, 2021		March 31, 2020
Cash and cash equivalents	$	18,464,161	$	82,163,055
Restricted cash	7,096,549		16,255,423
Cash held in escrow by lender	2,039,349		2,062,941
Total cash, cash equivalents and restricted cash shown in the consolidated    statements of cash flows	$	27,600,059	$	100,481,419

Participation Interests

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.

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, secured borrowing, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment, where applicable. Marketable securities are financial instruments that are reported at fair value.

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 March 31, 2021 and December 31, 2020, the Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, term loan payable, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities are financial instruments that are reported at fair value.

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 Taxes

Income Taxes

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

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

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

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

Earnings Per Share

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

Use of Estimates

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

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

Segment Reporting

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

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.

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

XML

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Cash, Cash Equivalents and Restricted Cash

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

	March 31, 2021		March 31, 2020
Cash and cash equivalents	$	18,464,161	$	82,163,055
Restricted cash	7,096,549		16,255,423
Cash held in escrow by lender	2,039,349		2,062,941
Total cash, cash equivalents and restricted cash shown in the consolidated    statements of cash flows	$	27,600,059	$	100,481,419

XML

Merger and Issuance of Common Stock to Terra Offshore REIT (Tables)

3 Months Ended

Mar. 31, 2021

Terra Property Trust 2 Inc

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

XML

Loans Held for Investment (Tables)

3 Months Ended

Mar. 31, 2021

Receivables [Abstract]

Summary Investment Holdings

The following table provides a summary of the Company’s loan portfolio as of March 31, 2021 and December 31, 2020:

	March 31, 2021									December 31, 2020
	Fixed Rate			Floating Rate (1)(2)(3)			Total			Fixed Rate			Floating Rate (1)(2)(3)			Total
Number of loans	6			13			19			6			14			20
Principal balance	$	57,040,923		$	350,689,385		$	407,730,308		$	56,335,792		$	367,838,966		$	424,174,758
Carrying value	$	57,157,301		$	348,911,570		$	406,068,871		$	56,464,310		$	365,816,205		$	422,280,515
Fair value	$	57,099,978		$	346,367,302		$	403,467,280		$	56,284,334		$	363,122,860		$	419,407,194
Weighted-average coupon rate	12.07		%	7.66		%	8.28		%	12.17		%	7.95		%	8.51		%
Weighted-average remaining  term (years)	1.57			1.41			1.43			1.78			1.44			1.48

_______________

(1)These loans pay a coupon rate of LIBOR plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.11% and 0.14% as of March 31, 2021 and December 31, 2020, respectively.

(2)As of March 31, 2021 and December 31, 2020, amounts included $183.7 million and $184.2 million of senior mortgages used as collateral for $106.5 million and $107.6 million of borrowings under a term loan, respectively (Note 9). As of March 31, 2021, amounts also included $11.9 million of senior mortgages used as collateral for $8.0 million of borrowings under a revolving line of credit. Borrowings under the term loan bear interest at an annual rate of LIBOR plus 4.25% with a LIBOR floor of 1.00%. Borrowings under the revolving line of credit bear interest at a minimum rate of 4.0%.

(3)As of March 31, 2021 and December 31, 2020, eleven and twelve of these loans, respectively, are subject to a LIBOR floor.

Investment Holdings, Schedule of Investments

The following table presents the activities of the Company’s loan portfolio for the three months ended March 31, 2021 and 2020:

	Loans Held for Investment		Loans Held for Investment through Participation Interests		Total
Balance, January 1, 2021	$	417,986,462	$	4,294,053	$	422,280,515
New loans made	14,410,706		—		14,410,706
Principal repayments received	(31,531,804)		—		(31,531,804)
PIK interest (1)	676,646		—		676,646
Net amortization of premiums on loans	(15,348)		—		(15,348)
Accrual, payment and accretion of investment-related fees and other,    net	526,081		(1,905)		524,176
Provision for loan losses	(276,020)		—		(276,020)
Balance, March 31, 2021	$	401,776,723	$	4,292,148	$	406,068,871

	Loans Held for 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	37,504,601		871,847		38,376,448
Principal repayments received	(13,371,565)		—		(13,371,565)
PIK interest (1)	294,237		—		294,237
Net amortization of premiums on loans	(15,348)		—		(15,348)
Accrual, payment and accretion of investment-related fees, net	202,793		15,174		217,967
Provision for loan losses	(1,144,994)		—		(1,144,994)
Balance, March 31, 2020	$	398,931,946	$	4,037,567	$	402,969,513

_______________

(1)Certain loans in the Company’s portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted to $0.5 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

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 March 31, 2021 and December 31, 2020:

	March 31, 2021						December 31, 2020
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	263,999,390	$	265,573,062	65.4	%	$	254,042,847	$	255,093,989	60.5	%
Preferred equity investments	114,921,610		115,331,442		28.4	%	141,590,632		142,002,144		33.6	%
Mezzanine loans	28,809,308		29,179,145		7.2	%	28,541,279		28,923,140		6.8	%
Allowance for loan losses	—		(4,014,778)		(1.0)	%	—		(3,738,758)		(0.9)	%
Total	$	407,730,308	$	406,068,871	100.0	%	$	424,174,758	$	422,280,515	100.0	%

	March 31, 2021						December 31, 2020
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Office	$	191,527,932	$	192,017,466	47.3	%	$	182,698,225	$	183,053,751	43.3	%
Multifamily	127,657,844		128,599,015		31.6	%	150,873,173		151,768,347		35.9	%
Hotel - full/select service	47,112,522		47,704,223		11.7	%	49,142,809		49,393,251		11.7	%
Mixed use	16,512,842		16,512,842		4.1	%	16,767,984		16,767,984		4.0	%
Infill land	10,669,168		10,768,255		2.7	%	10,442,567		10,537,512		2.5	%
Industrial	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.7	%
Hotel - extended stay	4,250,000		4,292,148		1.1	%	4,250,000		4,294,053		1.0	%
Student housing	3,000,000		3,189,700		0.8	%	3,000,000		3,204,375		0.8	%
Allowance for loan losses	—		(4,014,778)		(1.0)	%	—		(3,738,758)		(0.9)	%
Total	$	407,730,308	$	406,068,871	100.0	%	$	424,174,758	$	422,280,515	100.0	%

During the first quarter of 2021, the Company reclassified the property types of collateral on certain loans to multifamily to better reflect the tenant mixed of each property. Additionally, the Company categorized hotel properties further to hotel - full/selected service and hotel - extended stay. The prior period amounts have been reclassified to conform to the current period presentation.

	March 31, 2021						December 31, 2020
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	181,091,907	$	182,312,275	44.9	%	$	200,279,688	$	200,990,328	47.6	%
New York	80,821,610		80,939,816		19.9	%	79,187,004		79,310,276		18.8	%
Georgia	74,957,483		75,352,520		18.6	%	74,116,787		74,505,752		17.6	%
North Carolina	33,469,168		33,672,152		8.3	%	33,242,567		33,438,806		7.9	%
Washington	23,500,000		23,688,144		5.8	%	23,500,000		23,682,536		5.6	%
Massachusetts	7,000,000		7,000,000		1.7	%	7,000,000		7,000,000		1.7	%
Texas	3,890,140		3,929,042		1.0	%	3,848,712		3,887,200		0.9	%
South Carolina	3,000,000		3,189,700		0.8	%	3,000,000		3,204,375		0.8	%
Allowance for loan losses	—		(4,014,778)		(1.0)	%	—		(3,738,758)		(0.9)	%
Total	$	407,730,308	$	406,068,871	100.0	%	$	424,174,758	$	422,280,515	100.0	%

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 March 31, 2021 and December 31, 2020:

	March 31, 2021							December 31, 2020
Loan Risk Rating	Number of Loans	Principal Balance		Carrying Value		% of Total		Number of Loans	Principal Balance		Carrying Value		% of Total
1	—	$	—	$	—	—	%	—	$	—	$	—	—	%
2	2	25,000,000		25,039,903		6.1	%	1	7,000,000		7,000,000		1.6	%
3	12	287,349,390		289,406,633		70.6	%	14	323,696,475		325,284,285		76.4	%
4	3	74,977,936		75,195,229		18.3	%	3	72,861,587		73,079,804		17.2	%
5	1	3,890,140		3,929,042		1.0	%	1	3,848,712		3,887,200		0.9	%
Other (1)	1	16,512,842		16,512,842		4.0	%	1	16,767,984		16,767,984		3.9	%
	19	$	407,730,308	410,083,649		100.0	%	20	$	424,174,758	426,019,273		100.0	%
Allowance for loan losses				(4,014,778)							(3,738,758)
Total, net of allowance for loan losses				$	406,068,871						$	422,280,515

_______________

(1)This loan was deemed impaired and removed from the pool of loans on which a general allowance is calculated. As of March 31, 2021 and December 31, 2020, the specific allowance for loan losses on this loan was $2.7 million and $2.5 million, respectively, as a result of a decline in the fair value of the collateral.

Financing Receivable, Allowance for Credit Loss

The following table presents the activity in the Company’s allowance for loan losses for the three months ended March 31, 2021 and 2020:

	Three Months Ended March 31,
	2021		2020
Allowance for loan losses, beginning of period	$	3,738,758	$	—
Provision for loan losses	276,020		1,144,994
Charge-offs	—		—
Recoveries	—		—
Allowance for loan losses, end of period	$	4,014,778	$	1,144,994

XML

Equity Investment in a Limited Partnership (Tables)

3 Months Ended

Mar. 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

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

	March 31, 2021		December 31, 2020
Investments at fair value (cost of $63,791,529 and $44,174,031)	$	64,371,103	$	44,715,979
Other assets	7,706,409		5,331,840
Total assets	72,077,512		50,047,819
Obligations under participation agreement (proceeds of $6,295,100 and $6,295,100)	6,349,884		6,347,478
Other liabilities	5,974,566		4,204,147
Total liabilities	$	12,324,450	$	10,551,625
Partners’ capital	$	59,753,062	$	39,496,194

	Three Months Ended March 31,
	2021		2020
Total investment income	$	2,042,100	$	—
Total expenses	471,212		—
Net investment income	1,570,888		—
Unrealized appreciation on investments	53,697		—
Net increase in partners' capital resulting from operations	$	1,624,585	$	—

XML

Real Estate Owned, Net (Tables)

3 Months Ended

Mar. 31, 2021

Real Estate [Abstract]

Schedule of Real Estate Properties [Table Text Block]

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

	March 31, 2021						December 31, 2020
	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		(3,448,433)		48,277,536		51,725,969		(3,125,143)		48,600,826
Tenant improvements	1,854,640		(739,410)		1,115,230		1,854,640		(670,090)		1,184,550
Furniture and fixtures	236,000		(55,067)		180,933		236,000		(31,467)		204,533
Total real estate	67,212,039		(4,242,910)		62,969,129		67,212,039		(3,826,700)		63,385,339
Lease intangible assets:
In-place lease	14,982,538		(5,818,568)		9,163,970		15,852,232		(6,172,747)		9,679,485
Above-market rent	156,542		(46,816)		109,726		156,542		(42,427)		114,115
Total intangible assets	15,139,080		(5,865,384)		9,273,696		16,008,774		(6,215,174)		9,793,600
Lease intangible liabilities:
Below-market rent	(2,754,922)		1,175,352		(1,579,570)		(3,371,314)		1,702,800		(1,668,514)
Above-market ground lease	(8,896,270)		347,596		(8,548,674)		(8,896,270)		315,008		(8,581,262)
Total intangible liabilities	(11,651,192)		1,522,948		(10,128,244)		(12,267,584)		2,017,808		(10,249,776)
Total real estate	$	70,699,927	$	(8,585,346)	$	62,114,581	$	70,953,229	$	(8,024,066)	$	62,929,163

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

	Three Months Ended March 31,
	2021		2020
Real estate operating revenues:
Lease revenue	$	1,805,874	$	1,922,128
Other operating income	205,767		390,923
Total	$	2,011,641	$	2,313,051
Real estate operating expenses:
Utilities	$	33,992	$	39,022
Real estate taxes	346,354		232,875
Repairs and maintenances	145,246		237,132
Management fees	61,325		56,701
Lease expense, including amortization of above-market ground lease	283,538		283,538
Other operating expenses	100,860		95,250
Total	$	971,315	$	944,518

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at March 31, 2021 are as follows: 

Years Ending December 31,	Total
2021 (April 1 through December 31)	$	4,919,262
2022	7,132,812
2023	7,363,647
2024	7,600,861
2025	4,111,257
Thereafter	1,199,623
Total	$	32,327,462

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Based on the intangible assets and liabilities recorded at March 31, 2021, 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 (April 1 through December 31)	$	(253,665)	$	1,546,545	$	(97,761)	$	1,195,119
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)		—		(7,929,521)		(7,949,432)
Total	$	(1,469,844)	$	9,163,970	$	(8,548,674)	$	(854,548)

_______________

(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 [Table Text Block]

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

	March 31, 2021			December 31, 2020
Operating lease
Operating lease right-of-use assets	$	16,104,041		$	16,105,888
Operating lease liabilities	$	16,104,041		$	16,105,888
Weighted average remaining lease term — operating lease (years)	65.6			65.8
Weighted average discount rate — operating lease	7.9		%	7.9		%

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

	Three Months Ended March 31,
	2021		2020
Operating lease cost	$	316,125	$	316,125

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

	Three Months Ended March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	316,125	$	316,125
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	316,125	$	316,125

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Maturities of operating lease liabilities are as follows:

Years Ending December 31,	Operating Lease
2021 (April 1 through December 31)	$	948,375
2022	1,264,500
2023	1,264,500
2024	1,264,500
2025	1,264,500
Thereafter	76,871,063
Total lease payments	82,877,438
Less: Imputed interest	(66,773,397)
Total	$	16,104,041

XML

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Of Marketable Securities

The following tables present fair value measurements of marketable securities, by major class, as of March 31, 2021 and December 31, 2020, according to the fair value hierarchy:

	March 31, 2021
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Marketable Securities:
Equity securities	$	6,251,980	$	—	$	—	$	6,251,980
Debt securities	—		—		—		—
Total	$	6,251,980	$	—	$	—	$	6,251,980

	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.

	Three Months Ended March 31,
	2021		2020
Beginning balance	$	1,287,500	$	—
Purchases	4,979,088		3,354,442
Proceeds from sale	—		(48,073)
Reclassification of net realized gains on marketable securities into earnings	—		(8,894)
Unrealized (losses) gains on marketable securities	(14,608)		192,919
Ending balance	$	6,251,980	$	3,490,394

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:

		March 31, 2021						December 31, 2020
	Level	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Loans:
Loans held for investment, net	3	$	403,480,308	$	405,791,501	$	399,174,830	$	419,924,758	$	421,725,220	$	415,113,225
Loans held for investment    acquired through    participation, net	3	4,250,000		4,292,148		4,292,450		4,250,000		4,294,053		4,293,969
Allowance for loan losses		—		(4,014,778)		—		—		(3,738,758)		—
Total loans		$	407,730,308	$	406,068,871	$	403,467,280	$	424,174,758	$	422,280,515	$	419,407,194
Liabilities:
Term loan payable	3	$	106,454,107	$	104,235,266	$	106,117,359	$	107,584,451	$	105,245,801	$	107,248,555
Obligations under participation    agreements	3	71,276,756		71,613,358		70,798,545		71,266,303		71,581,897		70,693,207
Mortgage loan payable	3	40,596,980		40,728,560		40,899,901		44,020,225		44,117,293		44,348,689
Secured borrowing	3	22,033,529		21,983,096		20,800,526		18,281,848		18,187,663		17,037,032
Revolving line of credit    payable	3	8,030,611		7,407,536		8,030,611		—		—		—
Total liabilities		$	248,391,983	$	245,967,816	$	246,646,942	$	241,152,827	$	239,132,654	$	239,327,483

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 March 31, 2021 and December 31, 2020. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.

	Fair Value at March 31, 2021		Primary Valuation Technique	Unobservable Inputs	March 31, 2021
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	399,174,830	Discounted cash flow	Discount rate	5.40	%	20.05	%	10.24	%
Loans held for investment acquired through    participation, net	4,292,450		Discounted cash flow	Discount rate	12.89	%	12.89	%	12.89	%
Total Level 3 Assets	$	403,467,280
Liabilities:
Term loan payable	$	106,117,359	Discounted cash flow	Discount rate	5.25	%	5.25	%	5.25	%
Obligations under Participation Agreements	70,798,545		Discounted cash flow	Discount rate	9.72	%	20.05	%	12.40	%
Mortgage loan payable	40,899,901		Discounted cash flow	Discount rate	6.08	%	6.08	%	6.08	%
Secured borrowing	20,800,526		Discounted cash flow	Discount rate	11.24	%	11.24	%	11.24	%
Revolving line of credit	8,030,611		Discounted cash flow	Discount rate	4.00	%	4.00	%	4.00	%
Total Level 3 Liabilities	$	246,646,942

	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

XML

Related Party Transactions (Tables)

3 Months Ended

Mar. 31, 2021

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company

that are included on the consolidated statements of operations:

	Three Months Ended March 31,
	2021		2020
Origination and extension fee expense (1)	$	345,384	$	437,617
Asset management fee	1,156,543		1,029,533
Asset servicing fee	273,207		234,208
Operating expenses reimbursed to Manager	1,342,758		1,367,189
Disposition fee (2)	250,988		75,520
Total	$	3,368,880	$	3,144,067

_______________

(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)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 March 31, 2021 and December 31, 2020. 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.

	March 31, 2021					December 31, 2020
	Participating Interests	Principal Balance		Carrying Value		Participating Interests	Principal Balance		Carrying Value
LD Milpitas Mezz, LP (1)	25.00%	$	4,250,000	$	4,292,148	25.00%	$	4,250,000	$	4,294,053

________________

(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.

The following tables summarize the loans that were subject to PAs with affiliated entities as of March 31, 2021 and December 31, 2020:

					Transfers Treated as Obligations Under Participation Agreements as of March 31, 2021
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
14th & Alice Street Owner, LLC (1)	$	36,558,763	$	36,837,952	80.00	%	$	29,247,010	$	29,372,894
370 Lex Part Deux, LLC (2)	55,327,153		55,355,545		35.00	%	19,364,504		19,364,504
Orange Grove Property Investors, LLC (2)	10,600,000		10,703,482		80.00	%	8,480,000		8,562,782
RS JZ Driggs, LLC (2)	8,981,615		9,071,429		50.00	%	4,490,808		4,535,716
Stonewall Station Mezz LLC (2)	10,669,168		10,768,255		44.00	%	4,694,434		4,737,431
The Bristol at Southport, LLC (1)	23,500,000		23,688,144		21.28	%	5,000,000		5,040,031
	$	145,636,699	$	146,424,807			$	71,276,756	$	71,613,358

					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2020
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
14th & Alice Street Owner, LLC (1)	$	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 (1)	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

________________

(1)Participant is a third-party.

(2)Participant is Terra Fund 6, an affiliated fund advised by Terra Income Advisors, LLC, an affiliate of the Company’s sponsor and Manager.

The following table summarizes the loan that was transferred to a third-party that was accounted for as secured borrowing as of March 31, 2021 and December 31, 2020:

					Transfers Treated as Secured Borrowing as of March 31, 2021
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
Windy Hill PV Five CM, LLC	$	31,883,812	$	31,936,652	69.11	%	$	22,033,529	$	21,983,096
	$	31,883,812	$	31,936,652			$	22,033,529	$	21,983,096

					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

XML

Debt (Tables)

3 Months Ended

Mar. 31, 2021

Debt Instrument

Schedule of Line of Credit Facilities

The following tables present detailed information with respect to each borrowing under the Revolving Line of Credit as of March 31, 2021:

	March 31, 2021
	Borrowing Base						Borrowings Under the Revolving Line of Credit
	Principal Amount		Carrying Value		Fair Value
870 Santa Cruz, LLC	$	11,867,818	$	11,863,875	$	11,979,443	$	8,030,611
	$	11,867,818	$	11,863,875	$	11,979,443	$	8,030,611

Schedule of Debt

The following tables present detailed information with respect to each borrowing under the Term Loan as of March 31, 2021 and December 31, 2020:

	March 31, 2021
	Mortgage Assets						Borrowings Under the Term Loan (1)(2)
	Principal Amount		Carrying Value		Fair Value
330 Tryon DE LLC	$	22,800,000	$	22,903,897	$	22,892,124	$	13,680,000
1389 Peachtree St, LP; 1401 Peachtree St, LP; and    1409 Peachtree St, LP	51,649,149		51,917,594		51,814,815		30,934,424
AGRE DCP Palm Springs, LLC	43,222,382		43,775,181		43,864,855		22,728,019
MSC Fields Peachtree Retreat, LLC	23,308,334		23,434,926		23,421,439		13,985,001
Patrick Henry Recovery Acquisition, LLC	18,000,000		18,039,903		18,030,565		10,800,000
University Park Berkeley, LLC	24,709,132		24,863,082		24,877,473		14,326,663
	$	183,688,997	$	184,934,583	$	184,901,271	$	106,454,107

	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 both March 31, 2021 and December 31, 2020, using LIBOR of 0.11% and 0.14%, respectively.

(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.

Mortgage note payable

The following table presents certain information about the mortgage loan payable as of March 31, 2021 and December 31, 2020:

					March 31, 2021				December 31, 2020
Lender	Current Interest Rate	Maturity Date )	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	$	40,596,980	$	40,728,560	$	48,719,151	$	44,117,293	$	49,533,733

Schedule of Long-term Debt Instruments

Scheduled debt principal payments for each of the five calendar years following March 31, 2021 are as follows:

Years Ending December 31,	Total
2021 (April 1 through December 31)	$	596,580
2022	40,000,400
2023	8,030,611
2024	69,399,425
2025	37,054,682
Thereafter	—
	155,081,698
Unamortized deferred financing costs	(2,710,336)
Total	$	152,371,362

XML

Equity (Tables)

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table presents earnings per share for the three months ended March 31, 2021 and March 31, 2020:

	Three Months Ended March 31,
	2021		2020
Net income	$	1,476,096	$	578,963
Series A preferred stock dividend declared	(3,906)		(3,906)
Net income allocable to common stock	$	1,472,190	$	575,057
Weighted-average shares outstanding - basic and diluted	19,487,460		16,707,279
Earnings per share - basic and diluted	$	0.08	$	0.03

XML

Business (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020	Mar. 02, 2020
Investment Company, Financial Highlights [Line Items]
Loans held for investment	$ 406,068,871	$ 422,280,515
Cash			$ 25,500,000
Operations Commenced Date	Jan. 01, 2016
Common Stock, Shares, Issued	19,487,460	19,487,460	4,574,470.35
Participating Mortgage Loans, Participation Liabilities, Amount			$ 49,800,000
Minimum
Investment Company, Financial Highlights [Line Items]
Loans held for investment	$ 10,000,000
Maximum
Investment Company, Financial Highlights [Line Items]
Loans held for investment	$ 50,000,000
Partnership interest
Investment Company, Financial Highlights [Line Items]
Equity Method Investment, Ownership Percentage	87.40%

XML

Summary of Significant Accounting Policies (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
Cash and cash equivalents	$ 18,464,161	$ 18,607,952	$ 82,163,055
Restricted cash	7,096,549	12,145,616	16,255,423
Cash held in escrow by lender	2,039,349	2,166,755	2,062,941
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$ 27,600,059	$ 32,920,323	$ 100,481,419	$ 50,549,700

XML

Merger and Issuance of Common Stock to Terra Offshore REIT - Narratives - Mergers (Details) - $ / shares	Mar. 01, 2020	Mar. 31, 2021	Dec. 31, 2020
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
Business Acquisition
Common Stock, Par Value	0.01
Terra Property Trust 2 Inc | Common Stock
Business Acquisition
Business Acquisition Share Conversion Rate	$ 1.2031

XML

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

XML

Merger and Issuance of Common Stock to Terra Offshore REIT - Narratives - Issuance of Common Stock to Terra Offshore Funds (Details)			9 Months Ended
	Apr. 29, 2020 $ / shares shares	Mar. 02, 2020 USD ($) numberOfAgreements shares	Sep. 30, 2019 $ / shares shares	Mar. 31, 2021 shares	Dec. 31, 2020 shares
Business Acquisition
Number of contribution agreements | numberOfAgreements		2
Common Stock, Shares, Issued		4,574,470.35		19,487,460	19,487,460
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		212,691
Share Price | $ / shares	$ 17.02		$ 17.02

XML

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)	3 Months Ended
	Mar. 31, 2021	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 Liability Company or Limited Partnership, Members or Limited Partners, Ownership Interest	87.60%
Threshold For Nomination Rights		10.00%
Terra Fund 7 | Terra JV
Business Acquisition
Limited Liability Company or Limited Partnership, Members or 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

XML

Loans Held for Investment - Summary of the Companys loan portfolio (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2021 USD ($) Loans	Dec. 31, 2020 USD ($) Loans
Loans and Financing Receivable
Number Of Loans | Loans	19	20
Principal Balance	$ 407,730,308	$ 424,174,758
Carrying Value	406,068,871	422,280,515
Fair Value	$ 403,467,280	$ 419,407,194
Weighted-average coupon rate	8.28%	8.51%
Weighted-average remaining term (years)	1 year 5 months 4 days	1 year 5 months 23 days
Floating rate
Loans and Financing Receivable
Number Of Loans | Loans	13	14
Principal Balance	$ 350,689,385	$ 367,838,966
Carrying Value	348,911,570	365,816,205
Fair Value	$ 346,367,302	$ 363,122,860
Weighted-average coupon rate	7.66%	7.95%
Weighted-average remaining term (years)	1 year 4 months 28 days	1 year 5 months 8 days
Fixed Rate
Loans and Financing Receivable
Number Of Loans | Loans	6	6
Principal Balance	$ 57,040,923	$ 56,335,792
Carrying Value	57,157,301	56,464,310
Fair Value	$ 57,099,978	$ 56,284,334
Weighted-average coupon rate	12.07%	12.17%
Weighted-average remaining term (years)	1 year 6 months 25 days	1 year 9 months 10 days

XML

Loans Held for Investment - Summary of the Company's loan portfolio - subnote (Details)		3 Months Ended	12 Months Ended
	Mar. 12, 2021	Mar. 31, 2021 USD ($) Loans	Dec. 31, 2020 USD ($) Loans
Loans and Financing Receivable
Number Of Loans | Loans		19	20
Principal Balance		$ 407,730,308	$ 424,174,758
Floating rate
Loans and Financing Receivable
Principal Balance		$ 350,689,385	$ 367,838,966
Floating rate | LIBOR
Loans and Financing Receivable
Loans Receivable, Basis Spread on Variable Rate		0.11%	0.14%
Number Of Loans | Loans		11	12
Revolving line of credit
Loans and Financing Receivable
Principal Balance		$ 11,867,818
Debt Instrument, Face Amount		8,030,611
Revolving line of credit | LIBOR
Loans and Financing Receivable
Debt Instrument, Basis Spread on Variable Rate	3.25%
Revolving line of credit | Floor rate | LIBOR
Loans and Financing Receivable
Debt Instrument, Basis Spread on Variable Rate	4.00%
Term Loan
Loans and Financing Receivable
Principal Balance		183,688,997	$ 184,201,670
Debt Instrument, Face Amount		$ 106,454,107	$ 107,584,451
Debt Instrument, Interest Rate, Stated Percentage		5.25%	5.25%
Term Loan | LIBOR
Loans and Financing Receivable
Debt Instrument, Basis Spread on Variable Rate		4.25%	4.25%
Term Loan | Floating rate | LIBOR
Loans and Financing Receivable
Loans Receivable, Basis Spread on Variable Rate		4.25%
Debt Instrument, Basis Spread on Variable Rate			0.14%
Term Loan | Floating rate | Floor rate | LIBOR
Loans and Financing Receivable
Loans Receivable, Basis Spread on Variable Rate		1.00%
Collateral | Revolving line of credit
Loans and Financing Receivable
Principal Balance		$ 11,900,000
Collateral | Revolving line of credit | Floating rate | Minimum
Loans and Financing Receivable
Debt Instrument, Interest Rate, Stated Percentage		4.00%

XML

Loans Held for Investment - Activities of the Companys loan portfolio (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Loans and Financing Receivable
Beginning balance	$ 422,280,515
Paid-in-Kind Interest	224,197	$ 80,116
Provision for loan losses	(276,020)	(1,144,994)
Ending balance	406,068,871
Real Estate Loan
Loans and Financing Receivable
Beginning balance	422,280,515	378,612,768
New loans made	14,410,706	38,376,448
Proceeds from Principal Repayments on Loans and Leases Held-for-investment	(31,531,804)	(13,371,565)
Paid-in-Kind Interest	676,646	294,237
Net amortization of premiums on loans	(15,348)	(15,348)
Accrual, payment and accretion of investment related fees, net	524,176	217,967
Provision for loan losses	(276,020)	(1,144,994)
Ending balance	406,068,871	402,969,513
Loans held for investment, net | Real Estate Loan
Loans and Financing Receivable
Beginning balance	417,986,462	375,462,222
New loans made	14,410,706	37,504,601
Proceeds from Principal Repayments on Loans and Leases Held-for-investment	(31,531,804)	(13,371,565)
Paid-in-Kind Interest	676,646	294,237
Net amortization of premiums on loans	(15,348)	(15,348)
Accrual, payment and accretion of investment related fees, net	526,081	202,793
Provision for loan losses	(276,020)	(1,144,994)
Ending balance	401,776,723	398,931,946
Loans Held For Investment Acquired Through Participation | Real Estate Loan
Loans and Financing Receivable
Beginning balance	4,294,053	3,150,546
New loans made	0	871,847
Proceeds from Principal Repayments on Loans and Leases Held-for-investment	0	0
Paid-in-Kind Interest	0	0
Net amortization of premiums on loans	0	0
Accrual, payment and accretion of investment related fees, net	(1,905)	15,174
Provision for loan losses	0	0
Ending balance	$ 4,292,148	$ 4,037,567

XML

Loans Held for Investment - Activity of loan receivables - subnote (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Loans and Financing Receivable
Paid-in-Kind Interest	$ 224,197	$ 80,116
Real Estate Loan
Loans and Financing Receivable
Paid-in-Kind Interest	676,646	294,237
Loans held for investment, net | Real Estate Loan
Loans and Financing Receivable
Paid-in-Kind Interest	676,646	294,237
Obligations Under Participation Agreements | Loans held for investment, net | Real Estate Loan
Loans and Financing Receivable
Paid-in-Kind Interest	$ 500,000	$ 200,000

XML

Loans Held for Investment - Loan Structure (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Loans and Financing Receivable
Principal Balance	$ 407,730,308	$ 424,174,758
Carrying value	$ 406,068,871	$ 422,280,515
% of Total	100.00%	100.00%
Allowance for Loan and Lease Losses, Real Estate	$ (4,014,778)	$ (3,738,758)
Percent Of Allowance Of Loan Losses	(1.00%)	(0.90%)
First Mortgage
Loans and Financing Receivable
Principal Balance	$ 263,999,390	$ 254,042,847
Carrying value	$ 265,573,062	$ 255,093,989
% of Total	65.40%	60.50%
Equity Securities, Investment Summary
Loans and Financing Receivable
Principal Balance	$ 114,921,610	$ 141,590,632
Carrying value	$ 115,331,442	$ 142,002,144
% of Total	28.40%	33.60%
Mezzanine Loans
Loans and Financing Receivable
Principal Balance	$ 28,809,308	$ 28,541,279
Carrying value	$ 29,179,145	$ 28,923,140
% of Total	7.20%	6.80%

XML

Loans Held for Investment - Property Type (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Loans and Financing Receivable
Principal Balance	$ 407,730,308	$ 424,174,758
Carrying value	$ 406,068,871	$ 422,280,515
% of Total	100.00%	100.00%
Allowance for Loan and Lease Losses, Real Estate	$ (4,014,778)	$ (3,738,758)
Percent Of Allowance Of Loan Losses	(1.00%)	(0.90%)
Office
Loans and Financing Receivable
Principal Balance	$ 191,527,932	$ 182,698,225
Carrying value	$ 192,017,466	$ 183,053,751
% of Total	47.30%	43.30%
Multifamily
Loans and Financing Receivable
Principal Balance	$ 127,657,844	$ 150,873,173
Carrying value	$ 128,599,015	$ 151,768,347
% of Total	31.60%	35.90%
Hotel - full/select service
Loans and Financing Receivable
Principal Balance	$ 47,112,522	$ 49,142,809
Carrying value	$ 47,704,223	$ 49,393,251
% of Total	11.70%	11.70%
Mixed use
Loans and Financing Receivable
Principal Balance	$ 16,512,842	$ 16,767,984
Carrying value	$ 16,512,842	$ 16,767,984
% of Total	4.10%	4.00%
Infill land
Loans and Financing Receivable
Principal Balance	$ 10,669,168	$ 10,442,567
Carrying value	$ 10,768,255	$ 10,537,512
% of Total	2.70%	2.50%
Industrial
Loans and Financing Receivable
Principal Balance	$ 7,000,000	$ 7,000,000
Carrying value	$ 7,000,000	$ 7,000,000
% of Total	1.70%	1.70%
Hotel - extended stay
Loans and Financing Receivable
Principal Balance	$ 4,250,000	$ 4,250,000
Carrying value	$ 4,292,148	$ 4,294,053
% of Total	1.10%	1.00%
Student Housing
Loans and Financing Receivable
Principal Balance	$ 3,000,000	$ 3,000,000
Carrying value	$ 3,189,700	$ 3,204,375
% of Total	0.80%	0.80%

XML

Loans Held for Investment - Geographic Locations (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Loans and Financing Receivable
Principal Balance	$ 407,730,308	$ 424,174,758
Carrying value	$ 406,068,871	$ 422,280,515
% of Total	100.00%	100.00%
Allowance for Loan and Lease Losses, Real Estate	$ (4,014,778)	$ (3,738,758)
Percent Of Allowance Of Loan Losses	(1.00%)	(0.90%)
California
Loans and Financing Receivable
Principal Balance	$ 181,091,907	$ 200,279,688
Carrying value	$ 182,312,275	$ 200,990,328
% of Total	44.90%	47.60%
New York
Loans and Financing Receivable
Principal Balance	$ 80,821,610	$ 79,187,004
Carrying value	$ 80,939,816	$ 79,310,276
% of Total	19.90%	18.80%
Georgia
Loans and Financing Receivable
Principal Balance	$ 74,957,483	$ 74,116,787
Carrying value	$ 75,352,520	$ 74,505,752
% of Total	18.60%	17.60%
North Carolina
Loans and Financing Receivable
Principal Balance	$ 33,469,168	$ 33,242,567
Carrying value	$ 33,672,152	$ 33,438,806
% of Total	8.30%	7.90%
Washington
Loans and Financing Receivable
Principal Balance	$ 23,500,000	$ 23,500,000
Carrying value	$ 23,688,144	$ 23,682,536
% of Total	5.80%	5.60%
Massachusetts
Loans and Financing Receivable
Principal Balance	$ 7,000,000	$ 7,000,000
Carrying value	$ 7,000,000	$ 7,000,000
% of Total	1.70%	1.70%
Texas
Loans and Financing Receivable
Principal Balance	$ 3,890,140	$ 3,848,712
Carrying value	$ 3,929,042	$ 3,887,200
% of Total	1.00%	0.90%
South Carolina
Loans and Financing Receivable
Principal Balance	$ 3,000,000	$ 3,000,000
Carrying value	$ 3,189,700	$ 3,204,375
% of Total	0.80%	0.80%

XML

Loans Held for Investment - Loan risk rating (Details)	Mar. 31, 2021 USD ($) Loans	Dec. 31, 2020 USD ($) Loans	Mar. 31, 2020 Loans
Loans and Financing Receivable
Number Of Loans | Loans	19	20
Principal Balance	$ 407,730,308	$ 424,174,758
Carrying Value	$ 410,083,649	$ 426,019,273
% of Total	100.00%	100.00%
Allowance for Loan and Lease Losses, Real Estate	$ (4,014,778)	$ (3,738,758)
Total, net of allowance for loan losses	$ 406,068,871	$ 422,280,515
1
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
Loans and Financing Receivable
Number Of Loans | Loans	2	1
Principal Balance	$ 25,000,000	$ 7,000,000
Carrying Value	$ 25,039,903	$ 7,000,000
% of Total	6.10%	1.60%
3
Loans and Financing Receivable
Number Of Loans | Loans	12	14
Principal Balance	$ 287,349,390	$ 323,696,475
Carrying Value	$ 289,406,633	$ 325,284,285
% of Total	70.60%	76.40%
4
Loans and Financing Receivable
Number Of Loans | Loans	3	3	3
Principal Balance	$ 74,977,936	$ 72,861,587
Carrying Value	$ 75,195,229	$ 73,079,804
% of Total	18.30%	17.20%
5
Loans and Financing Receivable
Number Of Loans | Loans	1	1	1
Principal Balance	$ 3,890,140	$ 3,848,712
Carrying Value	$ 3,929,042	$ 3,887,200
% of Total	1.00%	0.90%
Other
Loans and Financing Receivable
Number Of Loans | Loans	1	1
Principal Balance	$ 16,512,842	$ 16,767,984
Carrying Value	$ 16,512,842	$ 16,767,984
% of Total	4.00%	3.90%
Allowance for Loan and Lease Losses, Real Estate	$ (2,700,000)	$ (2,500,000)

XML

Loans Held for Investment - Loan risk rating - subnote (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Loans and Financing Receivable
Allowance for Loan and Lease Losses, Real Estate	$ 4,014,778	$ 3,738,758
Other
Loans and Financing Receivable
Allowance for Loan and Lease Losses, Real Estate	$ 2,700,000	$ 2,500,000

XML

Loans Held for Investment - Allowance for loan losses (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Receivables [Abstract]
Allowance for loan losses, beginning of period	$ 3,738,758	$ 0
Provision for loan losses	276,020	1,144,994
Charge-offs	0	0
Recoveries	0	0
Allowance for loan losses, end of period	$ 4,014,778	$ 1,144,994

XML

Loans Held for Investment - Narratives - Allowance for loan losses (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2021 USD ($) Loans	Mar. 31, 2020 USD ($) Loans	Dec. 31, 2020 Loans
Loans and Financing Receivable
Number Of Loans	19		20
Allowance for Loan and Lease Losses, Period Increase (Decrease) | $	$ 40,000.00
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	2		1
Impaired Financing Receivable, Interest Income, Accrual Method | $	$ 700,000	$ 0
4
Loans and Financing Receivable
Number Of Loans	3	3	3
Allowance for Loan and Lease Losses, Period Increase (Decrease) | $		$ 1,100,000
5
Loans and Financing Receivable
Number Of Loans	1	1	1

XML

Equity Investment in a Limited Partnership - Summarized financial information of the Companys equity investment (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Schedule of Equity Method Investments
Other assets	$ 4,514,677		$ 3,934,468
Total assets	585,798,025		588,477,181
Obligations under participation agreement (proceeds of $6,295,100 and $6,295,100)	71,613,358		71,581,897
Other liabilities	422,159		429,123
Total liabilities	284,894,365		285,152,116
Mavik RESOF
Schedule of Equity Method Investments
Investments at fair value (cost of $63,791,529 and $44,174,031)	64,371,103		44,715,979
Other assets	7,706,409		5,331,840
Total assets	72,077,512		50,047,819
Obligations under participation agreement (proceeds of $6,295,100 and $6,295,100)	6,349,884		6,347,478
Other liabilities	5,974,566		4,204,147
Total liabilities	12,324,450		10,551,625
Partners' Capital	59,753,062		$ 39,496,194
Total investment income	2,042,100	$ 0
Total expenses	471,212	0
Net investment income	1,570,888	0
Unrealized appreciation on investments	53,697	0
Net increase in partners' capital resulting from operations	$ 1,624,585	$ 0

XML

Equity Investment in a Limited Partnership - Summarized financial information of the Companys equity investment - subnote (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Schedule of Equity Method Investments
Carrying Value	$ 406,068,871		$ 422,280,515
Proceeds from obligations under participation agreements	3,520,514	$ 6,034,316
Mavik RESOF
Schedule of Equity Method Investments
Carrying Value	63,791,529		44,174,031
Proceeds from obligations under participation agreements	$ 6,295,100		$ 6,295,100

XML

Equity Investment in a Limited Partnership - Narratives (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Aug. 03, 2020
Schedule of Equity Method Investments
Unfunded invesetment commitment			$ 14,100,000
Unfunded Commitment Outstanding	$ 55,500,000		67,900,000
Equity investment in a limited partnership, net	50,505,511		36,259,959
Income from equity investment in a limited partnership	1,337,827	$ 0
Mavik RESOF
Schedule of Equity Method Investments
Unfunded invesetment commitment				$ 50,000,000.0
Fund commitment				$ 50,000,000.0
Unfunded Commitment Outstanding	1,300,000		14,100,000
Equity investment in a limited partnership, net	50,500,000		$ 36,300,000
Income from equity investment in a limited partnership	1,300,000
Proceeds from Equity Method Investment, Distribution, Return of Capital		$ 0
Payments for Origination of Mortgage Loans Held-for-sale	$ 500,000
Equity Method Investment, Ownership Percentage	83.50%		90.30%

XML

Real Estate Owned, Net - Lease Activities (Details) - USD ($)		3 Months Ended
	Sep. 04, 2020	Mar. 31, 2021	Dec. 31, 2020	Mar. 02, 2020
Real Estate
Cash				$ 25,500,000
Total assets		$ 585,798,025	$ 588,477,181
Below Market Lease, Net		$ 10,128,244	$ 10,249,776
Gain (Loss) on Termination of Lease	$ 0
Contract Termination
Real Estate
Cash	200,000
Furniture and Fixtures	200,000
Total assets	400,000
In-place lease intangible assets	900,000
Below Market Lease, Net	600,000
Rent receivable	$ 100,000
Property, Plant and Equipment, Remaining Useful Life		2 years 6 months

XML

Real Estate Owned, Net - Real Estate Owned Net (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Real Estate
Real Estate Investment Property, Net	$ 62,969,129	$ 63,385,339
Finite-Lived Intangible Assets, Net	(854,548)
Below Market Lease, Net	10,128,244	10,249,776
Real Estate Investment
Real Estate
Real Estate Investment Property, at Cost	70,699,927	70,953,229
Real Estate Investment Property, Accumulated Depreciation	(8,585,346)	(8,024,066)
Real Estate Investment Property, Net	62,114,581	62,929,163
Finite-Lived Intangible Assets, Gross	15,139,080	16,008,774
Finite-Lived Intangible Assets, Accumulated Amortization	(5,865,384)	(6,215,174)
Finite-Lived Intangible Assets, Net	9,273,696	9,793,600
Finite Lived Intangible Liabilities Gross	(11,651,192)	(12,267,584)
Finite Lived Intangible Liabilities Accumulated Amortization	1,522,948	2,017,808
Finite Lived Intangible Liability Net	(10,128,244)	(10,249,776)
Real Estate Investment | Real Estate
Real Estate
Real Estate Investment Property, at Cost	67,212,039	67,212,039
Real Estate Investment Property, Accumulated Depreciation	(4,242,910)	(3,826,700)
Real Estate Investment Property, Net	62,969,129	63,385,339
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	(3,448,433)	(3,125,143)
Real Estate Investment Property, Net	48,277,536	48,600,826
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	(739,410)	(670,090)
Real Estate Investment Property, Net	1,115,230	1,184,550
Real Estate Investment | Furniture and fixtures
Real Estate
Real Estate Investment Property, at Cost	236,000	236,000
Real Estate Investment Property, Accumulated Depreciation	(55,067)	(31,467)
Real Estate Investment Property, Net	180,933	204,533
Real Estate Investment | In-place lease
Real Estate
Finite-Lived Intangible Assets, Gross	14,982,538	15,852,232
Finite-Lived Intangible Assets, Accumulated Amortization	(5,818,568)	(6,172,747)
Finite-Lived Intangible Assets, Net	9,163,970	9,679,485
Real Estate Investment | Above Market Leases
Real Estate
Finite-Lived Intangible Assets, Gross	156,542	156,542
Finite-Lived Intangible Assets, Accumulated Amortization	(46,816)	(42,427)
Finite-Lived Intangible Assets, Net	109,726	114,115
Real Estate Investment | Below Market Rent
Real Estate
Finite Lived Intangible Liabilities Gross	(2,754,922)	(3,371,314)
Finite Lived Intangible Liabilities Accumulated Amortization	1,175,352	1,702,800
Finite Lived Intangible Liability Net	(1,579,570)	(1,668,514)
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	347,596	315,008
Finite Lived Intangible Liability Net	$ (8,548,674)	$ (8,581,262)

XML

Real Estate Owned, Net - Components of real estate operating revenues and expenses (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Real Estate
Real estate operating income	$ 2,011,641	$ 2,313,051
Total	10,289,252	12,077,571
Real estate operating expenses
Asset management fee	1,156,543	1,029,533
Real Estate Operating Expenses	971,315	944,518
Real Estate Investment
Real Estate
Lease revenue	1,805,874	1,922,128
Other operating income	205,767	390,923
Real estate operating income	2,011,641	2,313,051
Real estate operating expenses
Utilities	33,992	39,022
Real estate taxes	346,354	232,875
Repairs and maintenances	145,246	237,132
Asset management fee	61,325	56,701
Lease expense, including amortization of above-market ground lease	283,538	283,538
Other operating expenses	100,860	95,250
Real Estate Operating Expenses	$ 971,315	$ 944,518

XML

Real Estate Owned, Net - Future Minimum Rent Income (Details)	Mar. 31, 2021 USD ($)
Real Estate [Abstract]
2021 (April 1 through December 31)	$ 4,919,262
2022	7,132,812
2023	7,363,647
2024	7,600,861
2025	4,111,257
Thereafter	1,199,623
Total	$ 32,327,462

XML

Real Estate Owned, Net - Annual Net Amortization of Intangibles (Details)	Mar. 31, 2021 USD ($)
Real Estate
2021 (April 1 through December 31)	$ 1,195,119
2022	1,593,492
2023	1,593,492
2024	1,593,492
2025	1,119,289
Thereafter	(7,949,432)
Total	(854,548)
Net Decrease in Real Estate Operating Revenue
Real Estate
2021 (April 1 through December 31)	(253,665)
2022	(338,220)
2023	(338,220)
2024	(338,220)
2025	(181,608)
Thereafter	(19,911)
Total	(1,469,844)
In-place lease
Real Estate
2021 (April 1 through December 31)	1,546,545
2022	2,062,060
2023	2,062,060
2024	2,062,060
2025	1,431,245
Thereafter	0
Total	9,163,970
Decrease in rent expense
Real Estate
2021 (April 1 through December 31)	(97,761)
2022	(130,348)
2023	(130,348)
2024	(130,348)
2025	(130,348)
Thereafter	(7,929,521)
Total	$ (8,548,674)

XML

Real Estate Owned, Net - Supplemental ground lease balance sheet information (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Real Estate
Operating lease right-of-use assets	$ 16,104,041	$ 16,105,888
Operating lease liabilities	16,104,041	16,105,888
Ground Lease
Real Estate
Operating lease right-of-use assets	16,104,041	16,105,888
Operating lease liabilities	$ 16,104,041	$ 16,105,888
Weighted average remaining lease term — operating lease (years)	65 years 7 months 6 days	65 years 9 months 18 days
Weighted average discount rate — operating lease	7.90%	7.90%

XML

Real Estate Owned, Net - Component of lease expense (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Ground Lease
Real Estate
Operating lease cost	$ 316,125	$ 316,125

XML

Real Estate Owned, Net - Cash information related to the ground lease (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Real Estate [Abstract]
Operating cash flows from operating leases	$ 316,125	$ 316,125
Right-of-use assets obtained in exchange for lease obligations, Operating leases	$ 316,125	$ 316,125

XML

Real Estate Owned, Net - Maturities of operating lease liabilities (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Real Estate [Abstract]
2021 (April 1 through December 31)	$ 948,375
2022	1,264,500
2023	1,264,500
2024	1,264,500
2025	1,264,500
Thereafter	76,871,063
Total lease payment	82,877,438
Less: Imputed interest	(66,773,397)
Operating lease liabilities	$ 16,104,041	$ 16,105,888

XML

Real Estate Owned, Net - Narratives - Leases (Details)	3 Months Ended
	Mar. 31, 2021 USD ($) a	Dec. 31, 2020 USD ($)	Jul. 30, 2018 lease
Real Estate
Number Of Lease Remaining | lease			4
BaseRentRenewalTerm	5 years
Operating lease right-of-use assets	$ 16,104,041	$ 16,105,888
Real Estate Investment
Real Estate
Area of Land | a	4.9
Ground Lease
Real Estate
Weighted average remaining lease term — operating lease (years)			68 years 3 months 18 days
Percent of Fair Market Value of Land	9.00%
Operating lease right-of-use assets	$ 16,104,041	$ 16,105,888
Multi Tenant Office Building | Minimum
Real Estate
Weighted average remaining lease term — operating lease (years)			6 years 3 months 18 days
Multi Tenant Office Building | Maximum
Real Estate
Weighted average remaining lease term — operating lease (years)			8 years 9 months 18 days

XML

Fair Value Measurements - Fair value measurements of marketable securities (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	$ 6,251,980	$ 1,287,500	$ 3,490,394	$ 0
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	6,251,980	1,287,500
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	6,251,980	1,287,500
Equity securities | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	6,251,980	1,287,500
Equity securities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Equity securities | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Debt securities | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Debt securities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Debt securities | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	$ 0	$ 0

XML

Fair Value Measurements - Activities of the marketable securities (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Fair value measurement [Abstract]
Beginning balance	$ 1,287,500	$ 0
Purchases	4,979,088	3,354,442
Proceeds from sale	0	(48,073)
Reclassification of net realized gains on marketable securities into earnings	0	(8,894)
Unrealized losses on marketable securities	(14,608)	0
Unrealized gains on marketable securities		192,919
Ending balance	$ 6,251,980	$ 3,490,394

XML

Fair value measurement - Not carried at Fair Value (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Loans:
Principal Balance	$ 407,730,308	$ 424,174,758
Fair Value	403,467,280	419,407,194
Liabilities:
Carrying Value	104,235,266	105,245,801
Revolving line of credit
Loans:
Principal Balance	11,867,818
Fair Value	11,979,443
Liabilities:
Principal Balance	8,030,611
Level 3
Loans:
Principal Balance	407,730,308	424,174,758
Carrying Value	406,068,871	422,280,515
Fair Value	403,467,280	419,407,194
Allowance for loan losses	(4,014,778)	(3,738,758)
Liabilities:
Principal Balance	248,391,983	241,152,827
Carrying Value	245,967,816	239,132,654
Fair Value	246,646,942	239,327,483
Level 3 | Revolving line of credit
Liabilities:
Principal Balance	8,030,611	0
Carrying Value	7,407,536	0
Fair Value	8,030,611	0
Level 3 | Loans held for investment, net
Loans:
Principal Balance	403,480,308	419,924,758
Carrying Value	405,791,501	421,725,220
Fair Value	399,174,830	415,113,225
Level 3 | Loans Held For Investment Acquired Through Participation
Loans:
Principal Balance	4,250,000	4,250,000
Carrying Value	4,292,148	4,294,053
Fair Value	4,292,450	4,293,969
Level 3 | Term loans payable
Liabilities:
Principal Balance	106,454,107	107,584,451
Carrying Value	104,235,266	105,245,801
Fair Value	106,117,359	107,248,555
Level 3 | Obligations Under Participation Agreements
Liabilities:
Principal Balance	71,276,756	71,266,303
Carrying Value	71,613,358	71,581,897
Fair Value	70,798,545	70,693,207
Level 3 | Mortgage loan payable
Liabilities:
Principal Balance	40,596,980	44,020,225
Carrying Value	40,728,560	44,117,293
Fair Value	40,899,901	44,348,689
Level 3 | Secured borrowing
Liabilities:
Principal Balance	22,033,529	18,281,848
Carrying Value	21,983,096	18,187,663
Fair Value	$ 20,800,526	$ 17,037,032

XML

Fair Value Measurements - Valuation techniques (Details)	Mar. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Fair Value Measurement Inputs and Valuation Techniques
Fair Value	$ 403,467,280	$ 419,407,194
Revolving line of credit
Fair Value Measurement Inputs and Valuation Techniques
Fair Value	11,979,443
Level 3
Fair Value Measurement Inputs and Valuation Techniques
Fair Value	403,467,280	419,407,194
Long-term Debt, Fair Value	246,646,942	239,327,483
Level 3 | Revolving line of credit
Fair Value Measurement Inputs and Valuation Techniques
Long-term Debt, Fair Value	8,030,611	0
Level 3 | Loans held for investment, net
Fair Value Measurement Inputs and Valuation Techniques
Fair Value	399,174,830	415,113,225
Level 3 | Loans Held For Investment Acquired Through Participation
Fair Value Measurement Inputs and Valuation Techniques
Fair Value	4,292,450	4,293,969
Level 3 | Term loans payable
Fair Value Measurement Inputs and Valuation Techniques
Long-term Debt, Fair Value	106,117,359	107,248,555
Level 3 | Obligations Under Participation Agreements
Fair Value Measurement Inputs and Valuation Techniques
Long-term Debt, Fair Value	70,798,545	70,693,207
Level 3 | Mortgage loan payable
Fair Value Measurement Inputs and Valuation Techniques
Long-term Debt, Fair Value	40,899,901	44,348,689
Level 3 | Secured borrowing
Fair Value Measurement Inputs and Valuation Techniques
Long-term Debt, Fair Value	$ 20,800,526	$ 17,037,032
Level 3 | Discounted Cash Flow | Discount Rate | Revolving line of credit | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.0400
Level 3 | Discounted Cash Flow | Discount Rate | Revolving line of credit | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.0400
Level 3 | Discounted Cash Flow | Discount Rate | Revolving line of credit | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.0400
Level 3 | Discounted Cash Flow | Discount Rate | Loans held for investment, net | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.0540	0.0529
Level 3 | Discounted Cash Flow | Discount Rate | Loans held for investment, net | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.2005	0.2005
Level 3 | Discounted Cash Flow | Discount Rate | Loans held for investment, net | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.1024	0.1038
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	0.1289
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	0.1289
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	0.1289
Level 3 | Discounted Cash Flow | Discount Rate | Term loans payable | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.0525	0.0525
Level 3 | Discounted Cash Flow | Discount Rate | Term loans payable | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.0525	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	0.0525
Level 3 | Discounted Cash Flow | Discount Rate | Obligations Under Participation Agreements | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.0972	0.0975
Level 3 | Discounted Cash Flow | Discount Rate | Obligations Under Participation Agreements | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.2005	0.2005
Level 3 | Discounted Cash Flow | Discount Rate | Obligations Under Participation Agreements | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.1240	0.1258
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage loan payable | Minimum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.0608	0.0608
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage loan payable | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.0608	0.0608
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage loan 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	0.1124	0.1125
Level 3 | Discounted Cash Flow | Discount Rate | Secured borrowing | Maximum
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.1124	0.1125
Level 3 | Discounted Cash Flow | Discount Rate | Secured borrowing | Weighted average
Fair Value Measurement Inputs and Valuation Techniques
Measurement Input	0.1124	0.1125

XML

Related Party Transactions - Summary of fees paid and costs reimbursed to the Manager (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Related Party Transaction
Origination And Extension Fee Expense	$ 345,384	$ 437,617
Asset management fee	1,156,543	1,029,533
Asset servicing fee	273,207	234,208
Operating expenses reimbursed to Manager	1,342,758	1,367,189
Disposition Fee	250,988	75,520
Total expenses	$ 3,368,880	$ 3,144,067

XML

Related Party Transactions - Participation Interests Purchased (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Related Party Transaction
Principal Balance	$ 407,730,308	$ 424,174,758
Carrying Value	$ 406,068,871	$ 422,280,515
LD Milpitas Mezz, LP
Related Party Transaction
Participating Interests	25.00%	25.00%
Principal Balance	$ 4,250,000	$ 4,250,000
Carrying Value	$ 4,292,148	$ 4,294,053

XML

Related Party Transactions - Participation Interests Purchased - Subnote (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020	Jun. 27, 2018
Related Party Transaction
Principal Balance	$ 407,730,308	$ 424,174,758
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 ($)	Mar. 31, 2021	Dec. 31, 2020
Related Party Transaction
Principal Balance	$ 407,730,308	$ 424,174,758
Carrying Value	406,068,871	422,280,515
Carrying Value	104,235,266	105,245,801
Secured borrowing
Related Party Transaction
Principal Balance	31,883,812	26,454,910
Carrying Value	31,936,652	26,407,494
Principal Balance	22,033,529	18,281,848
Carrying Value	21,983,096	18,187,663
Secured borrowing | Windy Hill PV Five CM, LLC
Related Party Transaction
Principal Balance	31,883,812	26,454,910
Carrying Value	$ 31,936,652	$ 26,407,494
% Transferred	69.11%	69.11%
Principal Balance	$ 22,033,529	$ 18,281,848
Carrying Value	21,983,096	18,187,663
Participating Mortgage Loan
Related Party Transaction
Principal Balance	145,636,699	167,891,127
Carrying Value	146,424,807	168,649,216
Principal Balance	71,276,756	71,266,303
Carrying Value	71,613,358	71,581,897
Participating Mortgage Loan | 14th & Alice Street Owner, LLC
Related Party Transaction
Principal Balance	36,558,763	32,625,912
Carrying Value	$ 36,837,952	$ 32,877,544
% Transferred	80.00%	80.00%
Principal Balance	$ 29,247,010	$ 26,100,729
Carrying Value	29,372,894	26,211,548
Participating Mortgage Loan | 370 Lex Part Deux, LLC
Related Party Transaction
Principal Balance	55,327,153	53,874,507
Carrying Value	$ 55,355,545	$ 53,912,363
% Transferred	35.00%	35.00%
Principal Balance	$ 19,364,504	$ 18,856,078
Carrying Value	19,364,504	18,856,077
Participating Mortgage Loan | City Gardens 333 LLC
Related Party Transaction
Principal Balance		28,303,628
Carrying Value		$ 28,307,408
% Transferred		14.00%
Principal Balance		$ 3,962,509
Carrying Value		3,963,010
Participating Mortgage Loan | Orange Grove Property Investors, LLC
Related Party Transaction
Principal Balance	10,600,000	10,600,000
Carrying Value	$ 10,703,482	$ 10,701,924
% Transferred	80.00%	80.00%
Principal Balance	$ 8,480,000	$ 8,480,000
Carrying Value	8,562,782	8,561,523
Participating Mortgage Loan | RS JZ Driggs, LLC
Related Party Transaction
Principal Balance	8,981,615	8,544,513
Carrying Value	$ 9,071,429	$ 8,629,929
% Transferred	50.00%	50.00%
Principal Balance	$ 4,490,808	$ 4,272,257
Carrying Value	4,535,716	4,314,965
Participating Mortgage Loan | Stonewall Station Mezz LLC
Related Party Transaction
Principal Balance	10,669,168	10,442,567
Carrying Value	$ 10,768,255	$ 10,537,512
% Transferred	44.00%	44.00%
Principal Balance	$ 4,694,434	$ 4,594,730
Carrying Value	4,737,431	4,635,937
Participating Mortgage Loan | The Bristol at Southport, LLC
Related Party Transaction
Principal Balance	23,500,000	23,500,000
Carrying Value	$ 23,688,144	$ 23,682,536
% Transferred	21.28%	21.28%
Principal Balance	$ 5,000,000	$ 5,000,000
Carrying Value	$ 5,040,031	$ 5,038,837

XML

Related Party Transactions - Narratives (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
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	3,893,595	$ 8,832,071
Investment Company, Return of Capital Distribution	2,400,000	$ 8,300,000
Due to Manager (Note 8)	$ 1,746,682		$ 1,257,098
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	Mar. 31, 2021	Dec. 31, 2020
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 Offshore REIT
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 Transactions - Narratives - Mavik Real Estate Special Opportunities Fund, LP (Details) $ in Millions	Aug. 03, 2020 USD ($)
Mavik Real Estate Special Opportunities Fund, LP
Related Party Transaction
Fund commitment	$ 50.0

XML

Related Party Transactions - Narratives - Terra International 3 (Details) - Terra Offshore Funds - USD ($) $ / shares in Units, $ in Millions		9 Months Ended
	Apr. 29, 2020	Sep. 30, 2019
Related Party Transaction
Proceeds from Contributed Capital		$ 3.6
Stock Repurchased During Period, Shares	212,691	212,691
Share Price	$ 17.02	$ 17.02

XML

Debt - Narratives - Revolving Line of Credit (Details) - USD ($)		3 Months Ended
	Mar. 12, 2021	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Debt Instrument
Payment of financing costs		$ 641,446	$ 84,175
Principal Balance		407,730,308		$ 424,174,758
Revolving line of credit payable, net of deferred financing fees		7,407,536		$ 0
Proceeds from borrowings under revolving line of credit		$ 8,030,611	$ 35,000,000.0
Revolving line of credit
Debt Instrument
Maximum Borrowing Capacity	$ 75,000,000.0
Debt Instrument, Covenant Compliance		As of March 31, 2021, the Company is in compliance with these covenants.
Debt Instrument, Face Amount		$ 8,030,611
Payment of financing costs		$ 600,000
Maturity Date	Mar. 12, 2023
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, as defined within the agreement; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00.
Minimum Net Worth Required for Compliance		$ 250,000,000.0
Quarterly Operating Profit for Compliance		2,000,000.0
Principal Balance		11,867,818
Revolving line of credit payable, net of deferred financing fees		8,000,000.0
Proceeds from borrowings under revolving line of credit		$ 8,000,000.0
Maximum payment amount outstanding guaranty percent		25.00%
Revolving line of credit | Maximum
Debt Instrument
Ratio of Indebtedness to Net Capital		2.50
Revolving line of credit | LIBOR
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate	3.25%
Revolving line of credit | LIBOR | Floor rate
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate	4.00%

XML

Debt - Each borrowing under the Revolving Line of Credit (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument
Principal Balance	$ 407,730,308	$ 424,174,758
Carrying Value	406,068,871	422,280,515
Fair Value	403,467,280	$ 419,407,194
Revolving line of credit
Debt Instrument
Principal Balance	11,867,818
Carrying Value	11,863,875
Fair Value	11,979,443
Debt Instrument, Face Amount	8,030,611
Revolving line of credit | 870 Santa Cruz LLC
Debt Instrument
Principal Balance	11,867,818
Carrying Value	11,863,875
Fair Value	11,979,443
Debt Instrument, Face Amount	$ 8,030,611

XML

Debt - Narratives - Term Loan (Details)		3 Months Ended		12 Months Ended
	Sep. 03, 2020 USD ($)	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)
Debt Instrument
Proceeds From Borrowings Under Term Loan		$ 1,469,656	$ 0
Repayments of Lines of Credit		2,600,000	0
Proceeds from borrowings under revolving line of credit		8,030,611	35,000,000.0
Payment of financing costs		641,446	$ 84,175
Term Loan
Debt Instrument
Debt Instrument Covenant Requirement On Consolidated Tangible Net Worth Minimum Percent	75.00%
Line of Credit Facility, Remaining Borrowing Capacity		800,000		$ 8,300,000
Proceeds From Borrowings Under Term Loan		1,500,000
Debt Instrument, Face Amount		$ 106,454,107		$ 107,584,451
Maturity Date		Mar. 14, 2025
Debt Instrument, Description of Variable Rate Basis		LIBOR
Term Loan | Minimum
Debt Instrument
Debt Instrument Covenant Liquidity	$ 10,000,000
Term Loan | Maximum
Debt Instrument
EBITDA To Interest Expense Ratio	1.5
Term Loan | LIBOR
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate		4.25%		4.25%
Debt Instrument Additional Variable Rate in Year Three		0.25%
Debt Instrument Additional Variable Rate in Year Two		0.50%
Term Loan | LIBOR | Floor rate
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate		1.00%		1.00%
Indenture and credit Agreement
Debt Instrument
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 March 31, 2021 and December 31, 2020, the Company is in compliance with these covenants.
Indenture and credit Agreement | Class B Loan
Debt Instrument
Debt Instrument, Face Amount	$ 76,700,000
Indenture and credit Agreement | Term Loan
Debt Instrument
additional future discretionary advances	11,600,000
Additional Future Advance		$ 1,300,000
Debt Instrument, Face Amount	103,000,000.0
Additional Future Advance	$ 3,600,000
Payment of financing costs		$ 2,400,000

XML

Debt - Details of each borrowing under the Term Loan (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument
Principal Balance	$ 407,730,308	$ 424,174,758
Carrying Value	406,068,871	422,280,515
Fair Value	403,467,280	419,407,194
Term Loan
Debt Instrument
Principal Balance	183,688,997	184,201,670
Carrying Value	184,934,583	185,084,361
Fair Value	184,901,271	184,957,221
Debt Instrument, Face Amount	$ 106,454,107	$ 107,584,451
Term Loan | Floor rate | LIBOR
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate	1.00%	1.00%
330 Tryon DE LLC | Term Loan
Debt Instrument
Principal Balance	$ 22,800,000	$ 22,800,000
Carrying Value	22,903,897	22,901,294
Fair Value	22,892,124	22,869,879
Debt Instrument, Face Amount	13,680,000	13,680,000
1389 Peachtree St, L.P. and Others | Term Loan
Debt Instrument
Principal Balance	51,649,149	50,808,453
Carrying Value	51,917,594	51,068,554
Fair Value	51,814,815	50,982,247
Debt Instrument, Face Amount	30,934,424	29,897,848
AGRE DCP Palm Springs LLC | Term Loan
Debt Instrument
Principal Balance	43,222,382	45,294,097
Carrying Value	43,775,181	45,506,051
Fair Value	43,864,855	45,519,030
Debt Instrument, Face Amount	22,728,019	24,894,939
MSC Fields Peachtree Retreat LLC | Term Loan
Debt Instrument
Principal Balance	23,308,334	23,308,334
Carrying Value	23,434,926	23,437,198
Fair Value	23,421,439	23,428,860
Debt Instrument, Face Amount	13,985,001	13,985,001
Patrick Henry Recovery Acquisition LLC | Term Loan
Debt Instrument
Principal Balance	18,000,000	18,000,000
Carrying Value	18,039,903	18,039,456
Fair Value	18,030,565	17,994,495
Debt Instrument, Face Amount	10,800,000	10,800,000
University Park Berkeley, LLC | Term Loan
Debt Instrument
Principal Balance	24,709,132	23,990,786
Carrying Value	24,863,082	24,131,808
Fair Value	24,877,473	24,162,710
Debt Instrument, Face Amount	$ 14,326,663	$ 14,326,663

XML

Debt - Details of each borrowing under the Repurchase Agreement - Subnote (Details) - Term Loan	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument
Debt Instrument, Interest Rate, Stated Percentage	5.25%	5.25%
Maturity Date	Mar. 14, 2025
LIBOR
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate	4.25%	4.25%
LIBOR | Floating rate
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate		0.14%
Floor rate | LIBOR
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate	1.00%	1.00%

XML

Debt - Narratives - Purchase agreement, Revolving credit facility (Details) - USD ($)		3 Months Ended		12 Months Ended
	Oct. 02, 2020	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Jun. 20, 2019	Dec. 12, 2018
Repurchase Agreements
Repayment of borrowings under repurchase agreement		$ 0	$ 3,395,740
Proceeds from (Payments for) in Securities Sold under Agreements to Repurchase		0	14,807,834
Unarmortized Finance Cost		2,710,336		$ 2,200,000
Revolving Credit Facility
Obligation under participation agreement		71,613,358		71,581,897
Proceeds from borrowings under revolving line of credit		8,030,611	$ 35,000,000.0
Term loan payable, net of deferred financing fees		$ 104,235,266		105,245,801
Revolving Credit Facility
Revolving Credit Facility
Maximum Borrowing Capacity	$ 15,000,000.0				$ 35,000,000.0
Line of Credit Facility, Fair Value of Amount Outstanding				0
Line of Credit Facility, Expiration Date	Sep. 02, 2021
Revolving Credit Facility | Floor rate
Revolving Credit Facility
Debt Instrument, Basis Spread on Variable Rate	4.50%	6.00%
Revolving Credit Facility | LIBOR
Revolving Credit Facility
Debt Instrument, Basis Spread on Variable Rate	4.00%	4.00%
Revolving Credit Facility | Prime Rate
Revolving Credit Facility
Debt Instrument, Basis Spread on Variable Rate	1.00%	1.00%
Master Repurchase Agreement
Repurchase Agreements
Repayment of borrowings under repurchase agreement				$ 3,400,000
Maximum Liability Under Repurchase Agreement Percent				50.00%
Revolving Credit Facility
Maturity Date				Dec. 12, 2020
Master Repurchase Agreement | Terra Mortgage Capital LLC
Revolving Credit Facility
Maximum Borrowing Capacity						$ 150,000,000.0

XML

Debt - Mortgage Loan Payable (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument
Unarmortized Finance Cost	$ 2,710,336	$ 2,200,000
Centennial Bank
Debt Instrument
Maturity Date	Sep. 27, 2022
Principal amount	$ 40,596,980
Carrying value	40,728,560	44,117,293
Carrying Value of Collateral	$ 48,719,151	$ 49,533,733
Debt Instrument, Description of Variable Rate Basis	LIBOR
Centennial Bank | LIBOR
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate	3.85%
Centennial Bank | Floor rate | LIBOR
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate	2.23%

XML

Debt - Scheduled Debt Principal Payments (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument
2021 (April 1 through December 31)	$ 596,580
2022	40,000,400
2023	8,030,611
2024	69,399,425
2025	37,054,682
Thereafter	0
Long term debt	155,081,698
Unarmortized deferred financing costs	(2,710,336)	$ (2,200,000)
Long Term Debt Net	$ 152,371,362

XML

Debt - Narratives - Obligations Under Participation Agreements and Secured Borrowing (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument
Participation mortgage loan	$ 104,235,266	$ 105,245,801
Carrying Value	406,068,871	422,280,515
Unarmortized Finance Cost	2,710,336	2,200,000
Secured borrowing
Debt Instrument
Participation mortgage loan	21,983,096	18,187,663
Carrying Value	31,936,652	26,407,494
Participating Mortgage Loan
Debt Instrument
Participation mortgage loan	71,613,358	71,581,897
Carrying Value	$ 146,424,807	$ 168,649,216
Participating Mortgage Loan | Weighted average
Debt Instrument
Participating Mortgage Loans, Mortgage Interest Rate	10.00%	10.20%

XML

Commitments and Contingencies (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Aug. 03, 2020
Other Commitments
Unfunded Commitment Outstanding	$ 55,500	$ 67,900
Unfunded invesetment commitment		14,100
Mavik RESOF
Other Commitments
Unfunded Commitment Outstanding	$ 1,300	$ 14,100
Fund commitment			$ 50,000
Unfunded invesetment commitment			$ 50,000

XML

Equity - Earnings Per Share (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Equity [Abstract]
Net income	$ 1,476,096	$ 578,963
Series A preferred stock dividend declared	(3,906)	(3,906)
Net income allocable to common stock	$ 1,472,190	$ 575,057
Weighted-average shares — basic and diluted	19,487,460	16,707,279
Earnings per share — basic and diluted	$ 0.08	$ 0.03

XML

Equity - Preferred Stock Classes (Details) - USD ($)		3 Months Ended		12 Months Ended
	Nov. 30, 2016	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Dec. 31, 2016
Class of Stock
Preferred stock dividend declared		$ 3,906	$ 3,906
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
Series A Preferred Stock
Class of Stock
Preferred Stock, Dividend Rate, Percentage	12.50%				12.50%
Preferred Stock, Liquidation Preference Per Share	$ 1,000
Preferred Stock Shares Sold					125
Preferred Stock Value Sold					$ 125,000
Preferred Stock, Shares Authorized	125
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
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

XML

Equity - Common Stock (Details) - USD ($)				9 Months Ended
	Apr. 29, 2020	Mar. 02, 2020	Mar. 01, 2020	Sep. 30, 2019	Mar. 31, 2021	Dec. 31, 2020
Schedule of Equity Method Investments
Common Stock, Shares, Issued		4,574,470.35			19,487,460	19,487,460
Common Stock, Par Value Per Share					$ 0.01	$ 0.01
Common Stock, Value, Issued					$ 194,875	$ 194,875
Terra Offshore Funds
Schedule of Equity Method Investments
Business Combination Common Stock Shares		2,457,684.59
Stock Repurchased During Period, Shares	212,691			212,691
Share Price	$ 17.02			$ 17.02
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

XML

Equity - Distributions (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Schedule of Equity Method Investments
Investment Company, Return of Capital Distribution	$ 2,400,000	$ 8,300,000
Dividends, Preferred Stock, Stock	3,906	3,906
Dividends, Common Stock	$ 3,893,595	$ 8,832,071