Terra Property Trust, Inc.
For the period ended Jun 30, 2026. Filed Aug 7, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 7, 2026
TPTS$13.00+0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-14.
0001674356-26-000014
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsNoteCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-07.
0001674356-26-000020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsNoteThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 178 previous paragraphs and 179 current paragraphs.
126 unchanged; 40 reworded; 11 added; 11 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 10 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
Additionally, during the second quarter of 2026, in connection with a restructuring transaction, we derecognized a non-performing loan and wrote off the related amortized cost of $70.0 million against the allowance for credit losses.
Current report
For the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, real estate operating revenue decreased by $2.0 million, primarily due to the sale of four and three industrial buildings in 2025 and 2026, respectively, partially offset by the acquisition of one multifamily property in 2026.
Current report
For the three and six months ended June 30, 2026, provision for credit losses was $4.9 million and $11.8 million, respectively, primarily due to a decline in our estimated recoverable amount on a non-performing subordinated loan. During the second quarter of 2026, the Company completed the restructuring of the non-performing subordinated loan. Prior to the restructuring, management reassessed the expected recovery associated with the loan and recorded additional credit reserves as appropriate. Upon closing of the transaction, the amortized cost of the loan was written off against the related allowance for credit losses.
Current report
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, real estate operating expense decreased by $1.2 million and $1.4 million, respectively, primarily due to the sale of four and three industrial buildings in 2025 and 2026, respectively, partially offset by the acquisition of one multifamily property in 2026.
Current report
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, interest expense on unsecured notes payable decreased by $1.5 million and $1.5 million, respectively, as a result of a decrease in the weighted average principal amount outstanding.
Current report
Interest Expense on Obligations Under Participation Agreements
Current report
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, interest expense on obligations under participation agreements increased by $0.8 million and $0.8 million, respectively, primarily due to the participant’s share of the default interest recognized in connection with the repayment of the underlying defaulted loan investment.
Current report
Gain on Extinguishment of Debt
Current report
For both the three and six months ended June 30, 2026, in connection with the repurchase and retirement of 6.00% Senior Notes due 2026, werecognized a gain on extinguishment of debt of $0.1 million. There was no such gain or loss for the three and six months ended June 30, 2025.
Current report
For both the three and six months ended June 30, 2025, we sold one industrial building and recognized a net loss on sale of $2.1 million.
Current report
We have approximately $7.2 million of unfunded commitments to borrowers. We expect to maintain sufficient liquidity to fund such commitments through matching these commitments with principal repayments on outstanding loans. Additionally, a property mortgage with a total outstanding principal balance of $13.3 million that is collateralized by one multifamily property will mature on January 22, 2027. We expect to use proceeds from the sale of the underlying real estate to repay the property mortgage. We also have secured borrowings with an outstanding principal balance of $17.5 million that is collateralized by a senior loan investment and scheduled to mature on June 30, 2027. We expect to repay the secured borrowings using proceeds from repayment of the senior loan. Finally, our 11.00% Senior Secured Notes due 2027 are scheduled to mature on July 1, 2027. See Note 8 for a description of the terms of this instrument. We expect to repay our 11.00% Senior Secured Notes Due 2027 through asset realizations such as loan repayments (including mandatory redemptions required under the Second Indenture upon certain asset sales and other events described in Note 8), the sale of real estate property, refinancings, debt or equity capital raises and other available capital sources or financing facilities.
Removed paragraphs (11)
Previous report
On May 7, 2026, we filed a registration statement on Form S-4 (as may be amended from time to time, the “Form S-4”) with the Securities and Exchange Commission in connection with a registered exchange offer (the “Exchange Offer”) to exchange any and all of our outstanding 6.00% unsecured senior notes due 2026 (the “6.00% Senior Notes Due 2026”) for newly issued Senior Secured Notes due 2029 by the Company. The Exchange Offer is scheduled to expire on June 7, 2026, unless extended. For additional information regarding the Exchange Offer, including the terms and conditions thereof, please refer to the Form S-4, including the prospectus contained therein.
Previous report
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, real estate operating expenses decreased by $0.2 million, primarily due the sale of four and two industrial buildings in 2025 and 2026, respectively, partially offset by the acquisition of one multifamily property in 2026.
Previous report
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, interest expense on unsecured notes payable was substantially the same. Interest expense increased due to an increase in the amortization of financing costs using the effective interest rate method was substantially offset by a decrease in interest expense driven by the retirement of 189,465 units of the 6.00% Senior Notes Due 2026 in 2025.
Previous report
We expect to fund approximately $8.0 million of the unfunded commitments to borrowers during the next twelve months. We expect to maintain sufficient liquidity to fund such commitments through matching these commitments with principal repayments on outstanding loans. Obligations under participation agreements of $18.0 million will mature in the next twelve months. We will use the proceeds from the repayment of the corresponding investment to repay the participation obligations. Additionally, a property mortgage with a total outstanding principal balance of $13.3 million that is collateralized by one multifamily property will mature within the next twelve months. We expect to use proceeds from the sale of the underlying real estate to repay the property mortgage. Finally, the 6.00% Senior Notes Due 2026 with an outstanding principal balance of $56.4 million are scheduled to mature on June 30, 2026. We intend to repay the 6.00% Senior Notes Due 2026 that are not exchanged in the Exchange Offer through ordinary course loan repayments, real estate owned and loan sales, receipt of distributions from equity interests in unconsolidated investments, the deferral of asset management fee payments and operating expenses reimbursed to our Manager and may also use debt or equity capital sources or facilities. As previously disclosed, we may repurchase certain of our 6.00% Senior Notes Due 2026. The repurchases may be made directly by us or made indirectly through an affiliated purchaser entity managed by our Manager and co-owned by us and other vehicles managed by our Manager or its affiliates. Such affiliate purchaser entity may also purchase third-party marketable securities. The timing and amount of any transactions will be determined by our Manager based on its evaluation of market conditions, prices, legal requirements and other factors, and may be made from time to time on the open market, in privately negotiated transactions or otherwise, in each case subject to compliance with all SEC rules and other legal requirements.
Previous report
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.
Previous report
As of March 31, 2026, the principal balance of our participation obligation was $18.0 million, which was a participation obligation to a related-party managed by the Manager.
Previous report
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).
Previous report
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.
Previous report
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.
Previous report
For the three months ended March 31, 2026 and 2025, the weighted average outstanding principal balance on obligations under participation agreements was approximately $18.0 million and $18.3 million, respectively, and the weighted average interest rate was approximately 18.8% and 19.3%, respectively.
Reworded paragraphs (40)
Previous wording
•actual and potential conflicts of interest with any of the following affiliated entities: Terra Fund Advisors, LLC, Terra REIT Advisors, LLC (our “Manager”); Terra Capital Partners, LLC (“Terra Capital Partners”), our sponsor; Terra Secured Income Fund 5 International; Terra Income Fund International; Terra Secured Income Fund 7, LLC (“Terra Fund 7”); Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”); Mavik Real Estate Special Opportunities Fund, LP (“RESOF”); Mavik Real Estate Special Opportunities VS2, LP (“VS2”); or any of their affiliates;
Current wording
•actual and potential conflicts of interest with any of the following affiliated entities: Terra Fund Advisors, LLC, Terra REIT Advisors, LLC (our “Manager”); Terra Capital Partners, LLC (“Terra Capital Partners”), our sponsor; Terra Secured Income Fund 5 International; Terra Income Fund International; Terra Secured Income Fund 7, LLC (“Terra Fund 7”); Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”); Mavik Real Estate Special Opportunities Fund, LP (“VS1”); Mavik Real Estate Special Opportunities VS2, LP (“VS2”); or any of their affiliates;
Previous wording
•limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our exemption exclusion or from registration under the Investment Company Act of 1940, as amended (the “1940 Act”), and to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes; and
Current wording
•limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our exemption or 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
Previous wording
As of March 31, 2026, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of seven loans in six states with an aggregate net principal balance of $160.8 million, a weighted average coupon rate of 12.3% and a weighted average remaining term to maturity of 0.7 years.
Current wording
As of June 30, 2026, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of five loans in five states with an aggregate net principal balance of $87.9 million, a weighted average coupon rate of 11.9% and a weighted average remaining term to maturity of 0.5 years.
Previous wording
Each of our loans was originated by Terra Capital Partners or its affiliates. Our portfolio is diversified based on location of the underlying properties, loan structure and property type. As of March 31, 2026, our portfolio included underlying properties located in seven markets, across six states and includes property types such as multifamily housing, commercial offices, industrial, mixed-use and infill properties. The profile of these properties ranges from stabilized and value-added properties to pre-development and construction. Our loans are structured across mezzanine debt, first mortgages, preferred equity investments and credit facilities.
Current wording
Each of our loans was originated by Terra Capital Partners or its affiliates. Our portfolio is diversified based on location of the underlying properties, loan structure and property type. As of June 30, 2026, our portfolio included underlying properties located in five markets, across five states and includes property types such as multifamily housing, commercial offices, industrial and infill properties. The profile of these properties ranges from stabilized and value-added properties to pre-development and construction. Our loans are structured across mezzanine debt, first mortgages, preferred equity investments and credit facilities.
Previous wording
We have significant debt obligations of approximately $69.6 million coming due, including $56.4 million of the 6.00% Senior Notes Due 2026 maturing on June 30, 2026. As of March 31, 2026, we had cash and cash equivalents of $5.0 million. We intend to refinance or repay the 6.00% Senior Notes Due 2026 that are not exchanged in the Exchange Offer through ordinary course loan repayments, real estate owned and loan sales, receipt of distributions from equity interests in unconsolidated investments, the deferral of asset management fee payments and operating expenses reimbursed to our Manager and may also use debt or equity capital sources or facilities. However, there can be no assurance that we will be able to obtain the additional liquidity needed to repay the 6.00% Senior Notes Due 2026. Therefore, substantial doubt about our ability to continue as a going concern exists. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that our investors will lose all or a part of their investment. In addition, if there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms, or at all.
Current wording
We have debt obligations of approximately $57.9 million coming due in the next twelve months following the issuance of the consolidated financial statements. As of June 30, 2026, we had cash and cash equivalents of $9.7 million. We intend to repay maturing debt obligations through asset realizations such as loan repayments (including mandatory redemptions required under the Second Indenture (as defined herein) upon certain asset sales and other events described in Note 8), the sale of real estate property, refinancings, debt or equity capital raises and other available capital sources or financing facilities. However, there can be no assurance that we will be able to obtain the additional liquidity needed to repay the maturing debt obligations. Therefore, substantial doubt about our ability to continue as a going concern exists. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that our investors will lose all or a part of their investment. In addition, if there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms, or at all.
Previous wording
(1)These loans pay a coupon rate of Secured Overnight Financing Rate (“SOFR”) or forward-looking term rate based on SOFR (“Term SOFR”), as applicable, plus a fixed spread. Coupon rates shown were determined using the average SOFR of 3.65% and Term SOFR of 3.66% as of March 31, 2026 and average SOFR of 3.79% and Term SOFR of 3.69% as of December 31, 2025.
Current wording
(1)These loans pay a coupon rate of Secured Overnight Financing Rate (“SOFR”) or forward-looking term rate based on SOFR (“Term SOFR”), as applicable, plus a fixed spread. Coupon rates shown were determined using the average SOFR of 3.63% and Term SOFR of 3.65% as of June 30, 2026 and average SOFR of 3.79% and Term SOFR of 3.69% as of December 31, 2025.
Previous wording
(2)As of March 31, 2026 and December 31, 2025, amount included $32.1 million and $63.6 million of senior mortgages used as collateral for $18.0 million and $31.3 million of borrowings under secured financing agreements, respectively (Note 8).
Current wording
(2)As of June 30, 2026 and December 31, 2025, amount included $32.5 million and $63.6 million of senior mortgages used as collateral for $17.5 million and $31.3 million of borrowings under secured financing agreements, respectively (Note 8).
Previous wording
(3)As of March 31, 2026 and December 31, 2025, four and five loans, respectively, were subject to a SOFR or Term SOFR floor, as applicable.
Current wording
(3)As of June 30, 2026 and December 31, 2025, two and five loans, respectively, were subject to a SOFR or Term SOFR floor, as applicable.
Previous wording
In addition to our net loan portfolio, we own one industrial building and one multifamily property as of March 31, 2026 and four industrial buildings as of December 31, 2025. As of March 31, 2026 and December 31, 2025, the real estate and related lease intangible assets and liabilities had a net carrying value of $46.9 million and $47.4 million, respectively, and the mortgage loans payable encumbering the real estate properties had an outstanding principal amount of $20.7 million and $20.7 million, respectively.
Current wording
In addition to our net loan portfolio, we own one industrial building and one multifamily property as of June 30, 2026 and four industrial buildings as of December 31, 2025. As of June 30, 2026 and December 31, 2025, the real estate and related lease intangible assets and liabilities had a net carrying value of $46.4 million and $47.4 million, respectively, and the mortgage loans payable encumbering the real estate properties had an outstanding principal amount of $13.3 million and $20.7 million, respectively.
Previous wording
As of both March 31, 2026 and December 31, 2025, we owned 14.9% of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. We also beneficially own equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, as well as a preferred equity investment with residual profit sharing from sale of the underlying property. These investments are accounted for using the equity method of accounting. Additionally, in December 2025, we entered into a subscription agreement with another affiliated limited partnership that invests in stressed, distressed, and special situations investments, including the origination of first mortgage loans, mezzanine loans, preferred equity, and structured equity investments, as well as the acquisition of performing and non-performing notes, and public market real estate debt and equity securities for a 1.5% interest in the partnership. As of March 31, 2026 and December 31, 2025, these equity interests had total carrying value of $90.0 million and $94.2 million, respectively.
Current wording
As of both June 30, 2026 and December 31, 2025, we owned 14.9% of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. We also beneficially own equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, as well as a preferred equity investment with residual profit sharing from sale of the underlying property. These investments are accounted for using the equity method of accounting. Additionally, in December 2025, we entered into a subscription agreement with another affiliated limited partnership that invests in stressed, distressed, and special situations investments, including the origination of first mortgage loans, mezzanine loans, preferred equity, and structured equity investments, as well as the acquisition of performing and non-performing notes, and public market real estate debt and equity securities for a 1.5% interest in the partnership. As of June 30, 2026 and December 31, 2025, these equity interests had total carrying value of $91.0 million and $94.2 million, respectively.
Previous wording
We calculate our book value per share by dividing our net equity by the number of outstanding shares of our common stock, unless otherwise determined by our Board. Our book value per share of Class B Common Stock as of March 31, 2026 and December 31, 2025 was $5.36 and $6.02, respectively.
Current wording
We calculate our book value per share by dividing our net equity by the number of outstanding shares of our common stock, unless otherwise determined by our Board. Our book value per share of Class B Common Stock as of June 30, 2026 and December 31, 2025 was $5.20 and $6.02, respectively.
Previous wording
For the three months ended March 31, 2026 and 2025, we invested $2.6 million and $29.0 million in new and add-on investments and had $1.6 million and $23.7 million of repayments, resulting in net repayments of $1.0 million and $5.3 million, respectively. Amounts are net of obligations under participation agreements and secured financing agreements.
Current wording
For the six months ended June 30, 2026 and 2025, we invested $5.5 million and $10.2 million in new and add-on investments and had $5.3 million and $33.5 million of repayments, resulting in net repayments of $0.1 million and $23.3 million, respectively. Amounts are net of obligations under participation agreements and secured financing agreements.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, interest income decreased by $8.6 million, primarily due to a decrease in contractual interest income as a result of a decrease in the weighted average principal balance of performing loans, an increase in suspended interest income accrual on one non-performing loan, and the write off of the exit fee on a non-performing loan.
Current wording
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, interest income decreased by $2.8 million and $11.4 million, respectively, primarily due to a decrease in contractual interest income as a result of a decrease in the weighted average principal balance of performing loans, an increase in suspended interest income accrual on one non-performing loan, and the write off of the exit fee on a non-performing loan in the first quarter of 2026, partially offset by the recognition of default interest in connection with the repayment of a defaulted loan.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, real estate operating revenue decreased by $0.8 million, primarily due to the sale of four and two industrial buildings in 2025 and 2026, respectively, partially offset by the acquisition of one multifamily property in 2026.
Current wording
For the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, real estate operating revenue decreased by $1.2 million, primarily due to the sale of four and three industrial buildings in 2025 and 2026, respectively, partially offset by the acquisition of one multifamily property in 2026.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, other operating income increased by $0.2 million, primarily due to an increase in dividend income earned on our money market account.
Current wording
For the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, other operating income increased by $0.2 million, primarily due to an increase in dividend income earned on our money market account.
Previous wording
For the three months ended March 31, 2026 as compared to the three months March 31, 2025, operating expenses reimbursed to our Manager decreased by $0.8 million, primarily due to a decrease in the allocation ratio as a result of a decrease in our total funds under management.
Current wording
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, operating expenses reimbursed to our Manager decreased by $0.4 million and $1.2 million, respectively, primarily due to a decrease in the allocation ratio as a result of a decrease in our total funds under management.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, asset management fees decreased by $0.4 million, primarily due to a decrease in total assets under management resulting from repayment of loans as well as the sale of four and two industrial buildings in 2025 and 2026, respectively.
Current wording
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, asset management fees decreased by $0.5 million and $1.0 million, respectively, primarily due to a decrease in total assets under management resulting from repayment of loans as well as the sale of four and three industrial buildings in 2025 and 2026, respectively.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, asset servicing fees decreased by $0.1 million, primarily due to a decrease in total assets under management resulting from the repayment of loans as well as the sale of four and two industrial buildings in 2025 and 2026, respectively.
Current wording
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, asset servicing fees decreased by $0.1 million and $0.2 million, respectively, primarily due to a decrease in total assets under management resulting from the repayment of loans as well as the sale of four and three industrial buildings in 2025 and 2026, respectively.
Previous wording
For the three months ended March 31, 2025, provision for credit losses was $2.1 million primarily related to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in funding on the senior loan.
Current wording
For the three and six months ended June 30, 2025, provision for credit losses was $1.4 million and $3.5 million, respectively, primarily related to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in funding on the senior loan, partially offset by a decrease in the allowance for credit losses on performing loans driven by repayment and approaching maturities of loans.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, depreciation and amortization decreased by $0.5 million, primarily due to the sale of four industrial buildings in 2025 as well as two industrial buildings in 2026, partially offset by the acquisition of one multifamily property in 2026.
Current wording
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, depreciation and amortization decreased by $0.6 million and $1.1 million, respectively, primarily due to the sale of four and three industrial buildings in 2025 and 2026, respectively, partially offset by the acquisition of one multifamily property in 2026.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, professional fees increased by $1.6 million, primarily due to fees incurred in 2026 related to strategic financing alternatives.
Current wording
For the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, professional fees increased by $1.5 million, primarily due to fees incurred in 2026 related to strategic financing alternatives.
Previous wording
For the three months ended March 31, 2026, in connection with the pending sale of one industrial building, we recorded an impairment charge of $0.6 million to reduce the carrying value of these industrial building to its estimated selling price less the costs to sell. There was no such impairment charge for the three months ended March 31, 2025.
Current wording
For the six months ended June 30, 2026, in connection with the pending sale of one industrial building, we recorded an impairment charge of $0.6 million to reduce the carrying value of the industrial building to its estimated selling price less the costs to sell. There was no such impairment charge for the three months ended June 30, 2026.
Previous wording
Our secured financing agreements consisted of a repurchase agreement, revolving line of credit, term loan, promissory notes, secured borrowings, secured notes payable and property mortgages. The outstanding amounts under the repurchase agreement, the revolving line of credit and the promissory notes were repaid in full and the facilities were terminated in June 2025, July 2025 and November 2025 respectively.
Current wording
Our secured financing agreements consisted of a repurchase agreement, revolving line of credit, term loans, promissory notes, secured borrowings, senior secured notes, and property mortgages. The outstanding amounts under the repurchase agreement, the revolving line of credit and the promissory notes were repaid in full and the facilities were terminated in June 2025, July 2025 and November 2025 respectively. Furthermore, property mortgages encumbering four and three industrial buildings were repaid in full in 2025 and 2026, respectively.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, interest expense on secured financing decreased by $2.7 million as a result of a decrease in the weighted average principal amount outstanding.
Current wording
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, interest expense on secured financing decreased by $1.4 million and $4.1 million, respectively, as a result of a decrease in the weighted average principal amount outstanding.
Previous wording
In June 2021, we issued $85.1 million in aggregate principal amount of 6.00% notes due 2026. In connection with the BDC Merger, we assumed $38.4 million in aggregate principal amount of 7.00% notes due in 2026. In March 2026, the 7.00% notes due in 2026 were repaid in full.
Current wording
In June 2021, we issued $85.1 million in aggregate principal amount of 6.00% notes due in 2026. In connection with the BDC Merger, we assumed $38.4 million in aggregate principal amount of 7.00% notes due in 2026. In March 2026, the 7.00% notes due in 2026 were repaid in full. In June 2026, the 6.00% notes due in 2026 were repaid in full.
Previous wording
We owned a 14.9% equity interest in RESOF as of both March 31, 2026 and December 31, 2025, and a 1.5% equity interest in VS2 as of March 31, 2026. Both RESOF and VS2 are affiliated limited partnerships that invest primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. As of both March 31, 2026 and December 31, 2025, we also beneficially owned equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, and a preferred equity investment with residual profit-sharing.
Current wording
We owned a 14.9% equity interest in VS1 as of both June 30, 2026 and December 31, 2025, and a 1.5% equity interest in VS2 as of June 30, 2026. Both VS1 and VS2 are affiliated limited partnerships that invest primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. As of both June 30, 2026 and December 31, 2025, we also beneficially owned equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, and a preferred equity investment with residual profit-sharing.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, equity income from RESOF decreased as a result of a decrease in RESOF’s net income generated due to a decrease in the amount of invested capital.
Current wording
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, equity income from VS1 decreased as a result of a decrease in VS1’s net income generated due to a decrease in the amount of invested capital.
Previous wording
For the three months ended March 31, 2026, equity income from VS2 was recorded as a result of VS2’s net income generated by invested capital. There was no such investment in VS2 or related income for the three months ended March 31, 2025.
Current wording
For the three and six months ended June 30, 2026, equity income from VS2 was recorded as a result of VS2’s net income generated by invested capital. There was no such investment in VS2 or related income for the three and six months ended June 30, 2025.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, equity loss from the joint ventures increased primarily due to an unrealized gain on investment recognized in 2025 by a joint venture.
Current wording
For the three and six months ended June 30, 2026, we recorded equity income from the joint ventures, compared to equity loss recorded for three and six months ended June 30, 2025. Equity income increased in the current year periods primarily due to an equity investee’s recognition of an unrealized gain on its investment portfolio.
Previous wording
Other equity investment relates to a preferred equity agreement we acquired in June 2024 in which we also share residual profit from the sale of underlying property with the borrower. For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, the increase in income from other equity investment is due an increase in the outstanding principal balance.
Current wording
Other equity investment relates to a preferred equity agreement we acquired in June 2024 in which we also share residual profit from the sale of underlying property with the borrower. For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, the increase in income from other equity investment is due to an increase in the outstanding principal balance.
Previous wording
For the three months ended March 31, 2026, we sold two industrial buildings and recognized a net loss on sale of $0.6 million. There was no such gain or loss for the three months ended March 31, 2025.
Current wording
For the three and six months ended June 30, 2026, we sold one and three industrial buildings and recognized a net loss on sale of $0.03 million and $0.6 million, respectively.
Previous wording
For the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, the resulting net loss increased by $13.8 million.
Current wording
For the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, the resulting net loss decreased by $5.2 million and increased by $8.5 million, respectively.
Previous wording
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, funding and maintaining our assets and operations, making distributions to our stockholders and other general business needs. We use significant cash to purchase our target assets, repay principal and interest on our borrowings, make distributions to our investors and fund our operations. Our primary sources of cash generally consist of payments of principal and interest we receive on our portfolio of investments, cash generated from our operating results and unused borrowing capacity under our financing sources. We deploy moderate amounts of leverage as part of our operating strategy and use a number of sources to finance our target assets, including our senior notes and term loan. We may use other sources to finance our target assets, including bank financing and arranged financing facilities with domestic or international financing providers. 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.
Current wording
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 and cash generated from our operating results. We deploy moderate amounts of leverage as part of our operating strategy and use a number of sources to finance our target assets, including warehouse lines, repurchase agreements, secured borrowings and term loans. 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.
Previous wording
For the three months ended March 31, 2026, cash flows used in operating activities were $1.5 million compared to cash flows provided by operating activities of $0.9 million for the three months ended March 31, 2025. The change in operating cash flows was primarily due to a decrease in contractual interest income, partially offset by a decrease in contractual interest expense.
Current wording
For the six months ended June 30, 2026, cash flows used in operating activities were $1.1 million compared to cash flows provided by operating activities of $2.0 million for the six months ended June 30, 2025. The change in operating cash flows was primarily due to a decrease in contractual interest income, partially offset by a decrease in contractual interest expense.
Previous wording
For the three months ended March 31, 2026, cash flows provided by investing activities were $24.5 million, primarily related to proceeds from sale of real estate of $20.6 million, proceeds from repayment of loans of $1.6 million and distributions received in excess of income of $4.9 million, partially offset by origination, purchase and funding of loans of $1.4 million and capital contribution to equity investments of $1.1 million.
Current wording
For the six months ended June 30, 2026, cash flows provided by investing activities were $58.1 million, primarily related to proceeds from sale of real estate of $30.4 million, proceeds from repayment of loans of $23.8 million and distributions received in excess of income of $9.3 million, partially offset by origination, purchase and funding of loans of $2.7 million and capital contribution to equity investments of $2.8 million.
Previous wording
For the three months ended March 31, 2025, cash flows provided by investing activities were $46.2 million, primarily related to proceeds from repayment of loans of $54.0 million, partially offset by origination. purchase and funding of loans of $7.9 million.
Current wording
For the six months ended June 30, 2025, cash flows provided by investing activities were $86.5 million, primarily related to proceeds from repayment of loans of $87.0 million and proceeds from sale of real estate of $13.8 million, partially offset by origination, purchase and funding of loans of $15.3 million and capital contributions to and purchase of equity interests in unconsolidated investments of $0.7 million.
Previous wording
For the three months ended March 31, 2026, cash flows used in financing activities were $52.1 million, primarily related to principal repayments on unsecured notes payable of $36.8 million, repayments on secured financing of $13.3 million, payment for financing costs of $0.3 million, distributions paid to investors of $1.0 million, and a decrease in interest reserve and other deposits held on investments of $0.6 million.
Current wording
For the six months ended June 30, 2026, cash flows used in financing activities were $83.9 million, primarily related to principal repayments on unsecured notes payable of $65.9 million, repayments on secured financing of $34.5 million, repayments on obligations under participation agreements of $18.0 million, payment for financing costs of $1.4 million, distributions paid to investors of $1.0 million, and a decrease in interest reserve and other deposits held on investments of $0.5 million, partially offset by proceeds from secured financing of $37.3 million.
Previous wording
For the three months ended March 31, 2025, cash flows used in financing activities were $45.9 million, primarily related to principal repayments on secured financing of $43.7 million, distributions paid of $4.6 million and a decrease in interest reserve and other deposits held on investments of $1.4 million, partially offset by proceeds from secured financing of $3.3 million and proceeds from obligations under participation agreements of $0.7 million.
Current wording
For the six months ended June 30, 2025, cash flows used in financing activities were $74.7 million, primarily related to principal repayments on secured financing of $91.1 million, distributions paid of $7.0 million and a decrease in interest reserve and other deposits held on investments of $1.7 million, partially offset by proceeds from secured financing of $23.4 million and proceeds from obligations under participation agreements of $1.6 million.
Previous wording
We use a model-based approach for estimating the allowance for credit losses on performing loans on a collective basis, including future funding commitments for which we do not have the unconditional right to cancel, as these loans share similar risk characteristics. We utilize information obtained from internal and external sources relating to past events, current economic conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for our loan portfolio. We utilize a commercial mortgage-based, third-party loan loss model and because we do not have a meaningful history of realized credit losses on our loan portfolio, we subscribe to a database service to provide historical proxy loan loss information. We employ logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. We have chosen to incorporate a weighted average macroeconomic forecast that encompasses baseline, upside and downside scenarios, into our allowance for credit losses on performing loans estimate during the reasonable and supportable forecast period which is currently eight quarters. We select certain economics variables from a group of independent variables such as Commercial Real Estate Price Index, unemployment and interest rate which are included in the model as part of macroeconomic forecast and updated regularly based on current economic trends. The specific loan level information input into the model includes loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. Based on the inputs, the loan loss model determines a loan loss rate through the generation of a probability of default (PD) and loss given default (LGD) for each loan. The allowance for credit losses on performing loans is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect the expected credit losses.
Current wording
We use a model-based approach for estimating the allowance for credit losses on performing loans on a collective basis, including future funding commitments for which we do not have the unconditional right to cancel, as these loans share similar risk characteristics. We utilize information obtained from internal and external sources relating to past events, current economic conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for our loan portfolio. We utilize a commercial mortgage-based, third-party loan loss model and because we do not have a meaningful history of realized credit losses on our loan portfolio, we subscribe to a database service to provide historical proxy loan loss information. We employ logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. We have chosen to incorporate a weighted average macroeconomic forecast that encompasses baseline, upside and downside scenarios, into our allowance for credit losses on performing loans estimate during the reasonable and supportable forecast period which is currently eight quarters. We select certain economic variables from a group of independent variables such as Commercial Real Estate Price Index, unemployment and interest rate which are included in the model as part of macroeconomic forecast and updated regularly based on current economic trends. The specific loan level information input into the model includes loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. Based on the inputs, the loan loss model determines a loan loss rate through the generation of a probability of default (PD) and loss given default (LGD) for each loan. The allowance for credit losses on performing loans is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect the expected credit losses.
Previous wording
On January 24, 2024, we, as borrower, entered into a revolving promissory note payable with Terra LLC. The promissory note payable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days. The promissory note matures on March 31, 2027. As of March 31, 2026 and December 31, 2025, amount outstanding under the promissory note payable was $16.0 million and $48.1 million, respectively. The activity associated with this agreement is eliminated in consolidation and therefore has no impact on our consolidated financial statements.
Current wording
On January 24, 2024, we, as borrower, entered into a revolving promissory note payable with Terra LLC. The promissory note payable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days. The promissory note matures on March 31, 2027. As of June 30, 2026 and December 31, 2025, amount outstanding under the promissory note payable was $20.3 million and $48.1 million, respectively. The activity associated with this agreement is eliminated in consolidation and therefore has no impact on our consolidated financial statements.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
For the three months ended June 30, 2026 and 2025, we invested $2.9 million and $5.4 million in new and add-on investments and had $3.8 million and $19.7 million of repayments, resulting in net investments and net repayments of $0.9 million and $14.4 million, respectively. Amounts are net of obligations under participation agreements and secured financing agreements.
Current report — wording carried from elsewhere
For both the three and six months ended June 30, 2025, in connection with the pending sale of two industrial buildings, we recorded an impairment charge of $3.4 million to reduce the carrying value of these industrial buildings to their estimated selling price less the costs to sell.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
For the three months ended March 31, 2026, provision for credit losses was $6.9 million, primarily due to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in funding on the senior loan.