Terra Property Trust, Inc.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Company and its consolidated subsidiaries. The accompanying consolidated financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. Certain prior period amounts have been reclassified to conform to the current period presentation.

Liquidity

The Company has debt obligations of approximately $57.9 million coming due (Note 8) in the next twelve months following the issuance of the consolidated financial statements. As of June 30, 2026, the Company had cash and cash equivalents of $9.7 million and did not have sufficient liquidity to satisfy these obligations.

The Company intends 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 the Company will be able to obtain the additional liquidity needed to repay the maturing debt obligations. Therefore, substantial doubt about the Company’s ability to continue as a going concern exists. The consolidated financial statements have been prepared in accordance with U.S. GAAP assuming the Company will continue as a going concern. The consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty.

Consolidation

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

The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting (see Note 4).

VIE Model

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

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

Loans Held for Investment

The Company originates, acquires, and structures, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”). Loans held for investment are carried at the principal amount outstanding, adjusted for the accretion of discounts on investments and exit fees, and the amortization of premiums on investments and origination fees. The Company’s preferred equity investments that are economically similar to mezzanine loans and subordinate to any loans but are senior to common equity are accounted for as loans held for investment. Loans are carried at amortized cost less allowance for credit losses. Amortized cost is the amount at which a financing receivable or a loan is originated or acquired, adjusted for accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash and write-offs.

The Company follows the provisions of Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Lossesto estimate potential credit losses related to its loans. ASC 326 mandates the use of a current expected credit loss (“CECL”) methodology for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” methodology previously required under U.S. GAAP. The CECL methodology requires the consideration of possible credit losses over the life of an instrument as opposed to estimating credit losses upon the occurrence of an actual loss event under the previous “incurred loss” methodology. As permitted by ASC 326, the Company elected not to measure an allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheets), but rather write off in a timely manner by reversing interest income that would likely be uncollectible.

Performing Loans

The Company uses a model-based approach forestimating the allowance for credit losses on performing loans on a collective basis, including future funding commitments for which the Company does not have the unconditional right to cancel, as these loans share similar risk characteristics. The Company utilizes 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 its loan portfolio. The Company utilizes a commercial mortgage-based, third-party loan loss model and because the Company does not have a meaningful history of realized credit losses on its loan portfolio, it subscribes to a database service to provide historical proxy loan loss information. The Company employs 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. The Company has chosen to incorporate a weighted average macroeconomic forecast that encompasses baseline, upside and downside scenarios, into its allowance for credit losses on performing loans estimate during the reasonable and supportable forecast period which is currently eight quarters. The Company selects 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. A significant amount of judgment is applied in selecting inputs and analyzing results produced by the models to determine the allowance for credit losses on performing loans. Changes in such estimates can significantly affect the expected credit losses.

Beyond the Company’s reasonable and supportable forecast period, the Company reverts to historical loss information on a straight-line basis over the remaining contractual loan term, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period.

The determination of the performing loans credit loss estimate considers historical loss information and current economic conditions for each loan, reversion period and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed.

The Company also performs a qualitative assessment and applies qualitative adjustments as necessary, usually due to limitations of the loan loss model. The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the Company to determine the amount of the expected loss more accurately and reasonably for these investments. The Company also evaluates the contractual life of its loans to determine if changes are needed for certain contractual extension options, renewals, modifications, and prepayments.

Unfunded Commitments

Some of the Company’s performing loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL methodology because the Company does not have an unconditional right to cancel such commitments. The allowance for credit losses related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets. This allowance for credit losses is estimated using the same method outlined above for the Company’s outstanding performing loan balances and increases or decreases are also recorded in earnings on the consolidated statements of operations.

Non-Performing Loans

During the loan review process, all non-performing loans are evaluated for collectability, which includes both loans in default and loans where we do not expect to collect all amounts due for both principal and interest according to the contractual terms of the loan. The Company removes these loans from the model-based approach described above and analyzes them separately. The credit loss reserve for these loans is calculated as any excess of the amortized cost of the loan over (i) the present value of expected future cash flows discounted at the appropriate discount rate or (ii) the fair value of collateral, if repayment is expected solely from the collateral.

Equity Interest in Unconsolidated Investments

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

The Company classifies distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceed cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.

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

Equity Securities Without Readily Determinable Fair Value

The Company accounts for its equity securities without readily determinable fair value at cost, which is included in other assets on the consolidated balance sheets. The Company has elected the measurement alternative and therefore will evaluate whether the security continues to qualify for the alternative at each reporting period. The Company evaluates its equity security without readily determinable fair value on a periodic basis to determine if there is an observable price change in an orderly transaction for similar investments or if there are any indicators that the value of its equity security may be impaired. The Company will make fair value adjustments, if any, or reductions for any impairment to derive the carrying value of the investment.

Available-For-Sale Debt Securities

From time to time, the Company may invest in marketable debt securities. These securities are classified as available-for-sale debt securities and are carried at fair value. Changes in the fair value of the available-for-sale debt securities are reported in other comprehensive income or loss 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 provides 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.

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. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of interest and principal becomes not probable. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. 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 may 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 represents amounts funded to an escrow account for debt services and tenant improvements. From time to time, it may also include proceeds from the repayment of loans that are held by the title company due to timing. Cash held in escrow is restricted and is not available for general corporate purposes.

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

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 not probable. See “Obligations Under Participation Agreements” in Note 8 for additional information.

Secured Financing Agreements, Net

The Company’s secured financing agreements include non-recourse property mortgages, secured borrowings, senior secured notes and term loans. The Company accounts for borrowings under these financing arrangements as secured transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. See “Secured Financing Arrangements” in Note 8 for additional information.

Fair Value Measurements

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, unsecured notes and secured financing agreements. Such financial instruments are carried at amortized cost, less impairment, where applicable. Available-for-sale 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 on 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 the Internal Revenue Code commencing with the taxable year ended December 31, 2016. In order to qualify as a REIT, the Company is required, among other things, to distribute dividends equal to at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax) beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. Any gains from the sale of foreclosed properties within two years are subject to U.S. federal and state income taxes at regular corporate rates. As of June 30, 2026, the Company had satisfied all the requirements for a REIT.

The Company did not have any uncertain tax positions that met the recognition or measurement criteria of 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 and six months ended June 30, 2026 and 2025, 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 2022-2025 federal tax returns remain subject to examination by the Internal Revenue Service.

The Company may hold certain investments through a consolidated taxable REIT subsidiary (“TRS”). Such TRS may be subject to U.S. federal and state corporate- level income taxes. The TRS recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between the tax basis of certain assets and liabilities and the reported amounts. The deferred tax assets and liabilities are included in the accompanying consolidated balance sheets using the applicable statutory tax rates in effect for the year in which any such temporary differences are expected to reverse. On December 31, 2025, the Company elected the TRS status for a wholly owned subsidiary that holds a non-real estate-related investment. In connection with this election, the Company recorded a deferred income tax expense and deferred income tax liability of $0.4 million as of December 31, 2025, related to an unrealized gain on the investment. For the three and six months ended June 30, 2026, the Company recorded additional income tax expense and deferred income tax liability of $0.8 million and $0.8 million, respectively, related to an increase in the unrealized gain on investment. Deferred tax liabilities are included in Other liabilities on the Company’s consolidated balance sheets.

Earnings Per Share

The Company has a simple equity capital structure with only common stock outstanding. As a result, earnings per share, as presented, represents 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. Actual results may ultimately differ from those estimates, and those differences could be material.

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 assume control of properties acquired in connection with foreclosures or deed in lieu of foreclosure, or it may acquire operating real estate properties that meet its investment criteria.

The Company operates asone segment, which is also its sole reportable segment, focused on mezzanine loans, senior loans and preferred equity investments, and to a lesser extent, owning and managing real estate. The Company’s chief operating decision maker (“CODM”) is its senior management team, comprised of its chief executive officer who is also the chief investment officer, chief operating officer, chief financial officer, chief originations officer and the head of asset management of the Manager.

The Company generates its revenue primarily from originating, acquiring, investing in, and managing real estate-related debt investments. The CODM evaluates the performance of any real estate owned assets with that of its real estate-related debt investments. Additionally, the Company seeks to enhance its returns on equity by utilizing leverage, and generally finances its real estate-related investments with leverage obtained through a variety of sources, including secured and unsecured debt instruments.

The CODM evaluates performance and allocates resources based on consolidated net income (loss), which is also reported as consolidated net income (loss) on the Company’s consolidated statement of operations. The Company’s consolidated net income (loss) is primarily derived through the difference between the interest income earned on its loans and the cost at which it finances them. Accordingly, interest expense, as reported on its consolidated statement of operations, is its most significant segment expense. Additionally, the measure of segment assets is reflected on the balance sheet as total consolidated assets.

The CODM uses consolidated net income (loss) to make key operating decisions, such as identifying attractive investment opportunities, evaluating underwriting standards, determining the appropriate level of leverage to enhance returns on equity and deciding on the sources of financing.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2023-09 “Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 intends to improve the transparency of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. The Company adopted this ASU on December 31, 2025. The adoption of this standard did not have a material impact to its consolidated financial statements.

Note 3. Loans Held for Investment

The Company elected the practical expedient under ASC 326 to exclude accrued interest from amortized cost. As of June 30, 2026 and December 31, 2025, accrued interest receivable of $7.6 million and $8.3 million, respectively, is included in interest receivable on the consolidated balance sheets, and is excluded from the amortized cost of loans held for investment.

Portfolio Summary

The table below provides a summary of the Company’s loan portfolio. Carrying value represents the amortized cost of loan, net of applicable allowance for credit losses.

(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.

(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).

(3)As of June 30, 2026 and December 31, 2025, two andfive loans, respectively, were subject to a SOFR or Term SOFR floor, as applicable.

(4)Excludes non-performing loans for which recovery of interest income was not probable.

(5)Excludes loans that are in maturity default and represents current effective maturity as of June 30, 2026 and December 31, 2025, exclusive of any extension available.

Lending Activities

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

(1)On January 22, 2026, the Company foreclosed onone multifamily property encumbering a $31.4 million first mortgage in exchange for the relief of the first mortgage and related expenses (Note 5).

(2)In June 2026, a non-performing loan held for investment was restructured, and in connection with the restructuring, the Company surrendered the loan to an unaffiliated third party in exchange for a contingent promote interest in the successor entity. In connection with the transaction, the Company derecognized the loan and wrote off the related amortized cost and allowance for credit losses. The Company did not recognize a separate asset for the promote interest because management determined that its fair value was zero.

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. Carrying value represents the amortized cost of loans, net of applicable allowance for credit losses. Percentages of total represented below are calculated as a percentage of the total carrying value.

As described in Note 2, the Company follows the provisions of ASC 326, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.

Certain of the Company’s performing loans contain provisions for future funding commitments, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These unfunded commitments amounted to $7.2 million and $8.8 million as of June 30, 2026 and December 31, 2025, respectively. The liability for credit losses on unfunded commitments is included in other liabilities on the consolidated balance sheets.

As discussed in Note 2, for loans that are considered non-performing, the Company removes them from the model-based approach and analyzes them separately for recoverability. As of June 30, 2026 and December 31, 2025, the Company hadtwo andfive non-performing loans with total amortized cost of $29.1 million and $154.7 million, respectively. Accordingly, the Company utilized the estimated fair value of the loan collateral or sponsor’s guarantee to estimate the total specific allowance for credit losses of $0.8 million and $58.9 million as of June 30, 2026 and December 31, 2025, respectively. Please see “Note 6. Fair Value Measurements – Valuation Process for Fair Value Measurement”for information on how the fair values of these loans were determined.

The following table presents the activity in allowance for credit losses:

(1)The write-off was primarily related to the derecognition of one non-performing loan in connection with a restructuring transaction in which the Company surrendered its prior investment and received a contingent promote interest.

Accrued Interest Receivable

The Company elected not to measure a CECL reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely manner. If the Company determines it has uncollectible accrued interest receivable, it generally would reverse the accrued and unpaid interest against interest income and no longer accrue for interest. For the three and six months ended June 30, 2026 and 2025, the Company didnot reverse any interest income accrual because all accrued interest income was deemed collectible. For the three months ended June 30, 2026 and 2025, the Company suspended interest income accrual of $4.8 million and $3.5 million onthree andtwo loans, respectively, because recovery of such income was not probable. For the six months ended June 30, 2026 and 2025, the Company suspended interest income accrual of $9.3 million and $6.9 million onthree andtwo loans, respectively, because recovery of such income was not probable.

Loan Risk Rating

The Company assesses the risk factors of each performing loan and assigns each performing 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 performing loans are rated “1” through “5”, from less risk to greater risk, as follows:

Additionally, as discussed in Note 2, during the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, or if a loan is in maturity default, the Company considers that loan non-performing.

The following tables present the amortized cost of the Company’s loan portfolio by year of origination and loan risk rating:

(1)Amount includesone loan that is in maturity default with total amortized costs of $22.9 million. The Company expects to recover the principal and interest payments in full and therefore, no specific allowance for loan losses was recorded on this loan.

(1)Amount includes three loans that were in maturity default with total amortized costs of $78.7 million. The Company expected to recover the principal and interest payments in full and therefore, no specific allowance for loan losses was recorded on these three loans.

Note 4. Equity Interest in Unconsolidated Investments

The Company owns interests in a limited partnership, joint ventures and a preferred equity investment with profit-sharing feature. The Company accounts for its interests in these investments under the equity method of accounting (Note 2).

Equity Interest in Limited Partnerships

Mavik Real Estate Special Opportunities Fund, LP

On August 3, 2020, the Company entered into a subscription agreement with Mavik Real Estate Special Opportunities Fund, LP (“VS1”) whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in VS1. VS1’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. VS1 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). VS1 completed its investment period in April 2025 and has since entered its harvest period. The general partner of VS1 is Mavik Real Estate Special Opportunities Fund GP, LLC, which is a subsidiary of the Company’s sponsor, Terra Capital Partners. The Company evaluated its equity interest in VS1 and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in VS1 is accounted for as an equity method investment.

The following tables present a summary of information regarding the Company’s equity interest in VS1:

The following tables present summarized financial information of the Company’s equity interest in VS1. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share:

Mavik Real Estate Special Opportunities VS2, LP

On December 23, 2025, the Company entered into a subscription agreement with Mavik Real Estate Special Opportunities VS2, LP (“VS2”) whereby the Company committed to fund up to $8.4 million to purchase limited partnership interests in VS2. VS2 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. VS2 commenced operations on October 17, 2024, and completed its final fundraising close in December 2025. The general partner of VS2 is Mavik Real Estate Special Opportunities VS2 GP, LLC, which is a subsidiary of the Company’s sponsor, Terra Capital Partners. The Company evaluated its equity interest in VS2 and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in VS2 is accounted for as an equity method investment.

The following tables present a summary of information regarding the Company’s equity interest in VS2:

The following tables present summarized financial information of the Company’s equity interest in VS2. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share:

Equity Interest in Joint Ventures

The Company beneficially owns 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. Non-real estate-related investments may take various forms, including preferred and common equity interests in private companies and other financial assets. The Company evaluated its equity interests in these entities and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interests in the joint ventures are accounted for as equity method investments.

The following tables present a summary of the Company’s equity interest in the joint ventures:

(1)This entity invests in opportunistic equity and debt securities. This entity is jointly owned with a related party managed by the Manager.

(2)This entity invests in opportunistic equity and debt securities. This entity is jointly owned with a related party managed by the Manager.

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

Other Equity Investments

In June 2024, the Company entered into a preferred equity agreement with TCC Boundary Partners LLC. The investment carries interest at an annual rate of 15.0% and matures on July 31, 2026. Additionally, the Company will receive distributions in the event that net proceeds from the sale of underlying property exceed certain internal rate of return thresholds. Because the Company shares residual profit from the sale of underlying property with the borrower, the Company accounts for the investment using the equity method of accounting. As of June 30, 2026 and December 31, 2025, the Company's investment had a carrying value of $20.0 million and $18.6 million, respectively.

The following table presents a summary of the Company’s equity interest in TCC Boundary Partners LLC:

Note 5. Real Estate Owned, Net

Real Estate Owned Activities

On January 22, 2026, the Company foreclosed onone multifamily property in full satisfaction of a first mortgage and related fees and expenses. The following table summarizes the carrying value of the first mortgage prior to the foreclosure and the allocation of the estimated fair value of the real estate acquired:

In March 2026, the Company soldtwo industrial buildings for net proceeds of $20.6 million and recognized a net loss on sale of $0.6 million. In connection with the sale, the Company used a portion of the proceeds to partially repay the related mortgage loan payable.

In March 2026, the Company entered into a purchase and sale agreement to sellone industrial building for a purchase price of $10.0 million. In connection with the pending sale, the Company recorded an impairment charge of $0.6 million to reduce the carrying value of the industrial building to its estimated selling price less the cost of the sale. The sale subsequently closed on April 8, 2026, resulting in a $0.03 million loss on sale of real estate for the three months ended June 30, 2026.

Operating Real Estate Owned, Net

As of December 31, 2025, real estate owned was comprised offour industrial buildings located in Texas with lease intangible assets and liabilities. During the six months ended June 30, 2026, the Company sold three industrial buildings and acquiredone multifamily property through foreclosure, resulting inone industrial building located in Texas andone multifamily property located in California with lease intangible assets and liabilities as of June 30, 2026. The following table presents the components as of:

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:

The following table presents the amortization of intangibles that is included in the consolidated statements of operations:

(1)Net amortization of above- and below-market rent intangibles is recorded as an adjustment to real estate operating revenue on the consolidated statements of operations.

(2)Amortization of in-place lease intangibles is included in depreciation and amortization expense on the consolidated statements of operations.

Note 6. Fair Value Measurements

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

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

Level 2— Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, rate of prepayment, 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 is 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 June 30, 2026 and December 31, 2025, the Company had not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, equity securities without readily determinable fair value, secured financing agreements, unsecured notes payable and obligations under participation agreements. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities and derivatives 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 debt securities. These securities are classified as available-for-sale debt securities and are carried at fair value. Changes in the fair value of the available-for-sale debt securities are reported in other comprehensive income or loss until a gain or loss on the securities is realized. Additionally, the Company may invest in short-term money market funds. These funds are included in cash and cash equivalents on the consolidated balance sheet due to their short-term nature and can be easily converted to cash.

The following tables present fair value measurements of money market funds and marketable securities, by major class according to the fair value hierarchy as of:

(1)Amount is included in cash and cash equivalents on the consolidated balance sheets.

Financial Instruments Not Carried at Fair Value

The following table presents the carrying value, which represents the amortized cost of loans, net of applicable allowance for credit losses, and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of:

(1)Amount is included in Other assets on the consolidated balance sheets.

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 June 30, 2026 and December 31, 2025 due to their short-term nature.

Other Items Measured at Fair Value (Including Impairment Charges)

The Company periodically assesses whether there are any indicators that the value of its real estate investments may be impaired or that their carrying value may not be recoverable (Note 2). The following table presents information about assets for which the Company recorded an impairment charge and that were measured at fair value on a non-recurring basis:

During the six months ended June 30, 2026, the Company recorded an impairment charge of $0.6 million to reduce the carrying value ofone industrial building to its estimated fair value, which was determined to be the selling price less the cost of the sale. There was no impairment charge for the three months ended June 30, 2026.

During the three and six months ended June 30, 2025, the Company recorded an impairment charge of $3.4 million to reduce the carrying value of the industrial buildings to their estimated fair value, which was determined to be the selling price less the cost of the sale.

Valuation Process for Fair Value Measurement

The fair value of the Company’s investment in available-for-sale debt securities and its unsecured notes payable is determined based on quoted prices in an active market and is classified as Level 1 of the fair value hierarchy.

Market quotations are not readily available for the Company’s real estate-related loan investments, all of which are included in Level 3 of the fair value hierarchy, and therefore these investments are valued utilizing a yield approach, i.e., a discounted cash flow methodology to arrive at an estimate of the fair value of each respective investment in the portfolio using an estimated market yield. In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, which may include available current market data on applicable yields of comparable debt/preferred equity instruments; market credit spreads and yield curves; the investment’s yield; covenants of the investment, including prepayment provisions; the ability of our borrowers and investees to make payments and their 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 investments. 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 Company’s board of directors (which is made up exclusively of independent directors).

The fair values of the Company’s secured financing agreements, which include mortgage loans payable, secured borrowings, senior secured notes and term loans, 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 tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of June 30, 2026 and December 31, 2025. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.

(1)Fair market value is based on purchase price.

Note 7. Related Party Transactions

Management Agreement

The Company entered into the Management Agreement with the Manager whereby the Manager is responsible for its day-to-day operations. The 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:

(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 on the consolidated statements of operations.

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

The term of the Management Agreement will expire on December 31, 2027 (the “Initial Term”) and will automatically renew for an unlimited number of additionalone-year terms upon each anniversary date of the last day of the Initial Term (each, a “Renewal Term”), unless terminated by the Company or the Manager during the Initial Term or a Renewal Term in accordance with the terms of the Management Agreement (as described below).

The Management Agreement may be terminated by the Company during the Initial Term or any Renewal Term upon a finding by either (i) at least two-thirds of the independent directors on the Board or (ii) the holders of a majority of the outstanding shares of the Company’s common stock (other than those shares held by members of the Company’s senior management team or affiliates of the Manager) that either (a) there has been unsatisfactory performance by the Manager that is materially detrimental to the Company, or (b) the compensation payable to the Manager pursuant to the Management Agreement is unfair; provided, however, that the Company will not have the right to terminate the Management Agreement on the basis of unfair compensation to the Manager if the Manager agrees to continue to provide its services under the Management Agreement in exchange for reduced fees that at least two-thirds of the independent directors on the Board determine to be fair pursuant to the procedures set forth in the Management Agreement. The Company must deliver prior written notice of any such termination to the Manager at least 180 days prior to the last calendar day of the Initial Term or the then-current Renewal Term, as applicable, and the Management Agreement will terminate effective as of the last calendar day of the Initial Term or the then-current Renewal Term, as applicable.

Upon any termination of the Management Agreement by the Company as discussed above, the Company will pay the Manager, on the date on which such termination is effective, a termination fee in an amount equal tothree times the average annual fees of all types and expense reimbursements received by or owed to the Manager pursuant to the Management Agreement during the 24-month period immediately preceding such termination (the “Termination Fee”), calculated as of the end of the most recently completed month prior to the date of such termination.

The Company may also terminate the Management Agreement, effective upon 30 calendar days’ prior written notice from the Board to the Manager, without payment of any Termination Fees or other penalties, upon (i) the material breach of the Management Agreement by the Manager or its affiliates that continues for 30 days after written notice thereof to the Manager (or 45 days after delivery of written notice thereof if the Manager takes diligent steps to cure such breach within 30 days of delivery of the written notice), (ii) any fraud or other criminal conduct, gross negligence or breach of fiduciary duty by the Manager or its affiliates in connection with the Management Agreement, as determined by a final, non-appealable judgment of a court of competent jurisdiction, (iii) the Manager’s bankruptcy, insolvency or dissolution, or (iv) an Internalization Event (as defined in the Management Agreement). No Termination Fee or other penalty is payable upon such a termination by the Company.

The Manager may terminate the Management Agreement, effective upon 60 days’ prior written notice from the Manager to the Company, if the Company breaches the Management Agreement and such breach continues for 30 days after written notice thereof. The Company will pay the Manager the Termination Fee upon such termination by the Manager.

Origination and Extension Fee Expense

Pursuant to the Management Agreement, the Manager or its affiliates receives an origination fee in the amount of 1.0% of the amount used to originate, fund, acquire or structure investments, including any third-party expenses related to such investments. In the event that the term of any loan held by the Company is extended, the Manager also receives an extension 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 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 1.0% 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 investment 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 investment 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 investment 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 June 30, 2026 and December 31, 2025, the Company hadnot 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 receive a disposition fee in the amount of 1.0% of the gross sale price received by the Company from the disposition of an investment, 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 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 1.0% of the sales price.

Due from Related Parties

As of June 30, 2026 and December 31, 2025, amount due from related parties was $1.4 million and $1.7 million, primarily representing reimbursements due from affiliates for operational expenses paid by the Company.

Promissory Note Payable

On January 24, 2024, the Company, 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 this 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 the Company’s consolidated financial statements.

Cost Sharing and Reimbursement Agreement

The Company and Terra LLC have entered into a cost sharing and reimbursement agreement effective October 1, 2022, pursuant to which Terra LLC is responsible for its allocable share of the Company’s expenses, including fees paid by the Company to the Manager based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on the Company’s consolidated financial statements.

Distributions Paid

For the three months ended June 30, 2025, the Company made distributions to related parties totaling $0.4 million, all of which were returns of capital. There wereno such distributions for the three months ended June 30, 2026. For the six months ended June 30, 2026 and 2025, the Company made distributions to related parties totaling $0.2 million and $1.3 million, respectively, all of which were returns of capital.

Due to Manager

As of June 30, 2026 and December 31, 2025, due to Manager was $1.3 million and $0.7 million, 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.

Mavik Real Estate Special Opportunities Fund, LP and Mavik Real Estate Special Opportunities VS2, LP

On August 3, 2020, the Company entered into a subscription agreement with VS1 whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in VS1. On December 23, 2025, the Company entered into a subscription agreement with VS2 whereby the Company committed to fund up to $8.4 million to purchase limited partnership interests in VS2. For more information on these investments, please see Note 4.

Participation Agreements

In the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the “Participants”). The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity.

ASC 860, Transfers and Servicing(“ASC 860”), establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (see “Participation Interests” in Note 2 and “Obligations Under Participation Agreements” in Note 8).

Participation Interests Purchased by the Company

From time to time, the Company may purchase investments from affiliates pursuant to participation agreements. In accordance with the terms of each participation agreement, each Participant’s rights and obligations, as well as the proceeds received from the related borrower/issuer of the loan, are based upon their respective pro rata participation interest in the loan.

The table below lists the participation interests purchased by the Company pursuant to participation agreements as of:

(1)The loan is held in the name of Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager.

(2)The loan was held in the name of Mavik Real Estate Special Opportunities VS2 REIT, LLC, a related-party REIT managed by the Manager. The loan was repaid in January 2026.

Transfers of Participation Interests by the Company

The following table summarizes the investment that was subject to a participation agreement with an investment partnership affiliated with the Manager as of December 31, 2025. There are no such participation agreements as of June 30, 2026:

(1)The Participant was a separately managed account managed by the Manager. In June 2026, the Company sold its interest in the underlying loan to an affiliated investment vehicle for total consideration of $25.8 million, including par value principal, accrued interest, default interest and exit fees. Concurrent with the sale, the obligations under participation agreements were repaid in full, and no related-party balances remained outstanding as of June 30, 2026.

This investment was held in the name of the Company, but 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), were based upon its pro rata participation interest in such participated investment, as specified in the participation agreement. The Participant’s share of the investment was repayable only from the proceeds received from the related borrower/issuer of the investment and, therefore, the Participant also was subject to credit risk (i.e., risk of default by the underlying borrower/issuer). Pursuant to the participation agreement with this entity, the Company received and allocated the interest income and other related investment income to the Participant based on its pro rata participation interest. The Participant paid any expenses, including any fees to the Manager, only on its pro rata participation interest, subject to the terms of the governing fee arrangements.

Note 8. Debt

Unsecured Notes Payable

The following table presents a summary of the Company’s unsecured notes payable outstanding as of:

(1)Includes issue discount, purchase discount and deferred financing costs that are amortized to interest expense over the life of the notes.

(2)On March 30, 2026, the Company exchanged $24.0 million and $1.6 million of its 6.00% Senior Notes due 2026 and of Terra LLC’s 7.00% Senior Notes due 2026, respectively, for $25.6 million of the Company’s 7.00% Senior Secured Notes due 2029.

(3)On June 30, 2026, the Company exchanged $36.2 million of its 6.00% Senior Notes due 2026 for $27.2 million of the Company’s 11.00% Senior Secured Notes due 2027 and $9.0 million cash. The remaining outstanding balance was repaid in full on the same day.

(4)On March 31, 2026, Terra LLC repaid the remaining 7.00% Senior Notes due 2026 in full.

(5)In connection with the BDC Merger, Terra LLC assumed all the obligations under the 7.00% Senior Notes due 2026 (as defined below) and recorded a purchase discount of $4.6 million, representing the difference between the carrying value and the fair value of the notes on the date of the merger.

The 6.00% Senior Notes due 2026

On June 10, 2021, Terra Property Trust issued $78.5 million in aggregate principal amount of its 6.00% notes due 2026, and on June 25, 2021, the underwriters partially exercised their option to purchase an additional $6.6 million of the notes (collectively the “6.00% Senior Notes due 2026”). On June 30, 2026, the 6.00% Senior Notes due 2026 were repaid in full and the outstanding balance as of June 30, 2026 waszero.

The 7.00% Senior Notes due 2026

On February 10, 2021, Terra BDC issued $34.8 million in aggregate principal amount of 7.00% fixed-rate notes due 2026, and on February 26, 2021, the underwriters exercised the option to purchase an additional $3.6 million of the notes (collectively the “7.00% Senior Notes due 2026”). In connection with the BDC Merger, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the outstanding 7.00% Senior Notes due 2026. On March 31, 2026, the 7.00% Senior Notes due 2026 were repaid in full by Terra LLC and the outstanding balance as of June 30, 2026 waszero.

Secured Financing Arrangements

The following table is a summary of the Company’s secured financing agreements in place as of:

(1)Amount is calculated using the applicable index rate as of June 30, 2026.

(2)To avoid double counting, the Company has not included totals for the Pledged Asset Carrying Value as certain collateral is shared across multiple financings.

(3)Interest rate is based on Term SOFR plus a spread of 5.0% with a combined floor rate of 9.85%. In connection with the foreclosure onone multifamily property in full satisfaction of a first mortgage loan investment and related fees and expenses (Note 5), the Company’s lender converted the related $13.2 million in secured borrowings to a property mortgage.

(4)The term loan payable is collateralized by the Company’s equity interest in VS1 and the Company serves as a guarantor under the loan. Under the terms of the loan agreement, the Company is required to maintain certain loan-to-value ratio and investment rating. Additionally, the Company’s interest in VS1 is only available to pay the debt under the term loan and not available to pay the debt under any other financing arrangements.

(5)Interest rate is based on Term SOFR plus a spread of 5.0% with a combined floor rate of 9.32%. The facility is used to finance the Company’s senior loan investment.

(6)Represents the Company’s estimate of the aggregate value of the equity interests in certain of the Company’s subsidiaries pledged to holders of the Company’s 7.00% Senior Secured Notes due 2029 and 11.00% Senior Secured Notes due 2027 on a pari passu basis pursuant to the Intercreditor Agreement (as defined below). The aggregate book value of the shared equity collateral is approximately $158.8 million as of June 30, 2026, after reducing for $25.0 million for the Term loan indebtedness of a subsidiary of the Company discussed in Footnote 7 and included in the shared collateral pool.

(7)Represents the Company’s estimate of the aggregate value of the equity interests in certain of the Company’s subsidiaries pledged to holders of the 7.00% Senior Secured Notes due 2029 and the 11.00% Senior Secured Notes due 2027 on a pari passu basis pursuant to the Intercreditor Agreement. The aggregate book value of the shared equity collateral is approximately $158.8 million as of June 30, 2026, after reducing for $25.0 million for Term loan indebtedness of a subsidiary of the Company discussed in Footnote 7 and included in the shared collateral pool. In addition, the 11.00% Senior Secured Notes due 2027 are secured by certain asset-level collateral (held by certain entities, or their subsidiaries, whose equity interests are included in the collateral shared on a pari passu basis pursuant to the Intercreditor Agreement), with a book value of approximately $64.7 million as of June 30, 2026.

(8)The term loan payable is secured by certain equity interests in the Company’s subsidiaries, and is mandatorily payable, with certain exceptions, to the extent the Company receives net proceeds from such investments resulting from (i) any sale, disposition or transfer of any interest, direct or indirect, therein and (ii) dividends and other distributions.

In the normal course of business, the Company is in discussions with its lenders to extend, amend, or replace any financing facilities which contain near term expirations.

The following table presents certain information about the Company’s secured financing agreements:

7.00% Senior Secured Notes due 2029

On February 13, 2026, the Company filed a registration statement on Form S-4 (as amended on March 12, 2026, and as may be amended from time to time, the “Registration Statement”) with the Securities and Exchange Commission (“SEC”) in connection with registered exchange offers (the “Exchange Offer”) to exchange any and all of the Company’s outstanding 6.00% Senior Notes due 2026 and Terra Income Fund 6 LLC’s 7.00% Senior Notes due 2026 for the Company’s newly issued 7.00% Senior Secured Notes Due 2029 (the “7.00% Senior Secured Notes due 2029”). The Registration Statement was declared effective by the SEC on March 26, 2026.

On March 30, 2026, the Exchange Offer was completed and settled. In connection with the Exchange Offer,$24.0 million ofthe Company’s outstanding 6.00% Senior Notes due 2026 and$1.6 million of Terra LLC’s 7.00% Senior Notes due 2026 were validly tendered and not withdrawn in the Exchange Offers. On March 30, 2026, the Company issued the 7.00% Senior Secured Notes due 2029 with an aggregate principal balance of $25.6 million. The 7.00% Senior Secured Notes due 2029 were issued pursuant to an Indenture (the “Indenture”), dated March 30, 2026, by and between the Company and U.S. Bank Trust Company, National Association, in its capacity as trustee and collateral agent.

The 7.00% Senior Secured Notes due 2029 bear interest at 7.00% per annum, payable monthly beginning April 30, 2026, and mature on March 31, 2029, unless earlier redeemed or repurchased by the Company in accordance with their terms prior to such date. The Company may redeem the 7.00% Senior Secured Notes due 2029 at 101% of outstanding principal amount prior to December 31, 2026, and at 100% thereafter, in each case plus accrued and unpaid interest. Subject to certain exceptions, the 7.00% Senior Secured Notes due 2029 are secured by perfected liens granted by the Company on certain equity interests in the Company’s subsidiaries held by the Company from time to time (which equity interests also secure the 11.00% Senior Secured Notes due 2027), as more fully described in the Registration Statement, subject to the terms of the Intercreditor Agreement (as defined in the Indenture).

The Indenture includes customary covenants that restrict, among other things, the incurrence of additional indebtedness, dividend payments, and certain corporate transactions, subject to a minimum collateral coverage ratio of 1.35 to 1.00. The Indenture also contains customary events of default, including nonpayment, covenant breaches, invalidity of collateral security, and certain bankruptcy or insolvency events, subject to specified cure periods and qualifications.

11.00% Senior Secured Notes due 2027

On May 7, 2026, the Company filed a second registration statement on Form S-4 (as amended from time to time, the “Second Registration Statement”) with the SEC in connection with a registered exchange offer (the “Second Exchange Offer”) to exchange any and all of the Company’s remaining outstanding 6.00% Senior Notes due 2026 for the Company’s newly issued 11.00% Senior Secured Notes Due 2027 (the “11.00% Senior Secured Notes due 2027”) and cash. The Second Registration Statement was declared effective by the SEC on June 26, 2026.

On June 30, 2026, the Second Exchange Offer was completed and settled. In connection with the Second Exchange Offer,$36.2 million ofthe Company’s outstanding 6.00% Senior Notes due 2026 were validly tendered and not withdrawn in the Exchange Offers. On June 30, 2026, the Company issued the 11.00% Senior Secured Notes due 2027 with an aggregate principal balance of $27.2 million. The 11.00% Senior Secured Notes due 2027 were issued pursuant to an Indenture (the “Second Indenture”), dated June 30, 2026, by and between the Company and U.S. Bank Trust Company, National Association, in its capacity as trustee and collateral agent.

The 11.00% Senior Secured Notes due 2027 bear interest at 11.00% per annum, payable monthly on the last day of each month, beginning July 31, 2026, and mature on July 1, 2027, unless earlier redeemed or repurchased by the Company in accordance with their terms prior to such date.

The Company is required to redeem the 11.00% Senior Secured Notes due 2027 in whole or in part upon the consummation of certain asset sales, upon the receipt of certain extraordinary receipts, upon the Company’s incurrence of certain senior secured indebtedness, with certain Excess Cash Flow (as defined in the Second Indenture) amounts, and upon the receipt of proceeds from the repayment of certain assets that secure the 11.00% Senior Secured Notes due 2027 at a redemption price equal to 102% of the outstanding principal amount of the 11.00% Senior Secured Notes due 2027 to be redeemed plus accrued and unpaid interest payments otherwise payable thereon for the then-current monthly interest period accrued to, but excluding, the date fixed for redemption. Prior to July 1, 2027, the Company may elect to redeem the 11.00% Senior Secured Notes due 2027 in whole or in part at any time, or from time to time, at a redemption price equal to 102% of the outstanding principal amount of the 11.00% Senior Secured Notes due 2027 to be redeemed plus accrued and unpaid interest payments otherwise payable thereon for the then-current monthly interest period accrued to, but excluding, the date fixed for redemption. Subject to certain exceptions, the 11.00% Senior Secured Notes due 2027 are secured by perfected liens granted by the Company on certain equity interests in the Company’s subsidiaries, as more fully described in the Second Indenture.

The Second Indenture contains certain covenants that, among other things, limit the Company’s ability to: (i) incur certain additional indebtedness; (ii) pay Dividends (as defined in the Second Indenture) (other than for purposes of maintaining REIT tax status), repurchase Capital Interests (as defined in the Second Indenture) or pay operating expenses in excess of an agreed upon budget; and (iii) merge or consolidate with another person. The Second Indenture also contains customary events of default, including nonpayment, covenant breaches, invalidity of collateral security, and certain bankruptcy or insolvency events, subject to specified cure periods and qualifications.

Term Loan

On June 29, 2026, a wholly-owned subsidiary of the Company entered into a term loan agreement (the “Term Loan Agreement”) pursuant to which the Company obtained borrowings of $25.0 million (the “Term Loan”). The proceeds of the Term Loan were used to partially repay the 6.00% Senior Notes due 2026 and to fund the cash portion of the Second Exchange Offer.

Pursuant to the Term Loan Agreement, the Company has guaranteed certain obligations under the Term Loan Agreement on an unsecured and limited recourse basis. The Term Loan bears interest at a rate of 11.00% per annum, payable in cash in arrears on the last business day of each calendar quarter. In addition, the Company paid a non-refundable upfront fee equal to 4.00% of the amount of the principal amount of the Term Loan to the lender. The Term Loan matures on December 29, 2027.

The Term Loan is secured by pledged equity interests held by certain of the Company's subsidiaries. Pursuant to the Term Loan Agreement, and subject to certain exceptions, the Term Loan is subject to mandatory prepayment from net proceeds received by such subsidiaries from (i) the sale, disposition or other transfer of investments or investment interests held by such subsidiaries, whether directly or indirectly, and (ii) dividends and other distributions received in respect of such investments.

The Term Loan Agreement contains customary covenants applicable to the Company, subject to certain limitations and exceptions, as well as customary events of default, bankruptcy and insolvency provisions, and related remedies.

Covenant Compliance

The Company’s secured financing agreements contain certain financial tests and covenants. In the event of a default or any breach of covenant of a related agreement, the lender has the right to accelerate all amounts due, charge interest at a default rate, retain all cash flow from the loans originated and/or sell such loans in a private sale on terms possibly unfavorable to the Company. As of June 30, 2026, the Company was in compliance with all such covenants, as amended or waived.

Scheduled Debt Principal Payments

Scheduled debt principal payments for each of the five calendar years following June 30, 2026 are as follows:

Obligations Under Participation Agreements

As discussed in Note 2, the Company follows the guidance in ASC 860 when accounting for loan participations. Such guidance requires the transferred interests meet certain criteria in order for the transaction to be recorded as a sale. 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. As of December 31, 2025, obligations under participation agreements were $18.2 million with an interest rate of 18.79% (see “Participation Agreements” in Note 7). As of June 30, 2026, there were no such obligations under participation agreements. For the six months ended June 30, 2026, the Company made a repayment of $18.0 million on obligations under participation agreements and did not transfer any loans to affiliates via participation agreements. There was no such repayment or transfer for the six months ended June 30, 2025 .

Note 9. Commitments and Contingencies

Unfunded Commitments on Loans Held for Investment

Certain of the Company’s loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These fundings amounted to $7.2 million and $8.8 million as of June 30, 2026 and December 31, 2025, respectively. The Company expects to maintain sufficient cash on hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on credit facilities.

Unfunded Investment Commitments

As discussed in Note 4, the Company entered into subscription agreements with VS1 and VS2 whereby the Company committed to fund up to $50.0 million and $8.4 million to purchase limited partnership interests in VS1 and VS2, respectively. As of June 30, 2026 and December 31, 2025, the unfunded investment commitments were $17.2 million and $19.7 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.

Additionally, from time to time, the Company and individuals employed by the Company and the Company’s Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with borrowers and investees. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that such proceedings will have a material effect upon the financial condition or results of operations.

See Note 7 for a discussion of the Company’s commitments to the Manager.

Note 10. Equity

Earnings Per Share

The following table presents earnings per share:

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 Board may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, into one or more classes or series of stock. As of June 30, 2026 and December 31, 2025, there wereno shares of Preferred Stock issued or outstanding.

Common Stock

On October 1, 2022, in connection with the BDC Merger, the Company amended its charter to increase the shares authorized from 500,000,000 to 950,000,000, consisting of 450,000,000 shares of Class A Common Stock, $0.01 par value per share (“Class A Common Stock”),450,000,000 shares of Class B Common Stock, and 50,000,000 shares of Preferred Stock. Concurrently,4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders and each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the BDC Merger was automatically changed intoone issued and outstanding share of Class B Common Stock. As of June 30, 2026, Terra Fund 7 and Terra Offshore REIT held 8.7% and 10.1%, respectively, of the issued and outstanding shares of the Company’s Class B Common Stock.

The Class B Common Stock rank equally with and have identical preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as each other share of the Company’s common stock, except as set forth below with respect to conversion.

In connection with the potential liquidity transactions discussed in Note 1, on December 1, 2023, the Company amended its articles of amendment and restatement (the “A&R Articles”) to provide the Board with greater flexibility to pursue a direct listing. In connection with a listing of shares of Class A Common Stock on a national securities exchange, the outstanding shares of Class B Common Stock will be convertible on aone-for-one basis into listed shares of Class A Common Stock, subject to certain conversion terms and holding periods. Currently, there are no outstanding shares of Class A Common Stock.

The A&R Articles also incorporate the provisions generally required by state regulators in order to become a non-traded REIT and publicly sell shares of the Company’s stock not listed on an exchange. These non-traded REIT provisions will spring into effect and become operative if the Company ultimately decides to register and sell shares in a non-traded REIT format.

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 Board and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors as the Board deems relevant.

For the three months ended June 30, 2025, the Company made distributions to investors totaling $2.3 million, all of which were returns of capital. There wereno such distributions for the three months ended June 30, 2026. For the six months ended June 30, 2026 and 2025, the Company made distributions to investors totaling $1.0 million and $7.0 million respectively, all of which were returns of capital.

Dividend Reinvestment Plan

On January 20, 2023, the Board adopted a distribution reinvestment plan (the “Plan”), pursuant to which the Company’s stockholders may elect to reinvest cash distributions payable by the Company in additional shares of Class A Common Stock and Class B Common Stock, at the price per share determined pursuant to the Plan. For the six months ended June 30, 2026 and 2025, the Company issued 223 and 967 shares of Class B Common Stock for a total of $1,665 and $9,288 pursuant to the Plan, respectively.

Note 11. 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.