TPTA 10-K Fiscal year ended Dec. 31, 2019

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

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

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

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“Terra Fund 1” refers to Terra Secured Income Fund, LLC; “Terra Fund 2” refers to Terra Secured Income Fund 2, LLC; “Terra Fund 3” refers to Terra Secured Income Fund 3, LLC; “Terra Fund 4” refers to Terra Secured Income Fund 4, LLC; "Terra Fund 5" refers to Terra Secured Income Fund 5, LLC; “Fund 5 International” refers to Terra Secured Income Fund 5 International; “Terra Fund 6” refers to Terra Income Fund 6, Inc.; “Terra International” refers to Terra Income Fund International; "Terra International 3" refers to Terra International Fund 3, L.P.; "Terra International Fund 3 REIT" refers to Terra International Fund 3 REIT, LLC, a subsidiary of Terra International 3; “Terra Fund 7” refers to Terra Secured Income Fund 7, LLC; “Terra Property Trust 2” refers to Terra Property Trust 2, Inc., a subsidiary of Terra Fund 7;

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

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

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

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

•	“Terra REIT Advisors” or our “Manager” refers to Terra REIT Advisors, a subsidiary of Terra Capital Partners and our external manager.

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

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

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

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

•	changes in our objectives and business strategy;

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

•	the performance and financial condition of our borrowers;

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

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•	borrower defaults or decreased recovery rates from our borrowers;

•	changes in prepayment rates on our loans;

•	our use of financial leverage;

•	actual and potential conflicts of interest with any of the following affiliated entities: Terra Income Advisors; our Manager; Terra Capital Partners; Fund 5 International; Terra International; Terra International 3; Terra International Fund 3 REIT; Terra Fund 5; Terra Fund 7; Terra Property Trust 2; Terra Income Advisors 2; or any of their affiliates;

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

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

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

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

•	the degree and nature of our competition.

•	changes in the economy;

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

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

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

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

•	invest primarily in floating rate rather than fixed rate loans, but our Manager reserves the right to make debt investments that bear interest at a fixed rate;

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

•	maximize current income;

•	lend to creditworthy borrowers;

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

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•	source off-market transactions; and

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

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

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

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

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

•	restrictions on specified investments;

•	prohibitions on transactions with affiliates; and

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

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•	tenant mix;

•	success of tenant businesses;

•	property management decisions;

•	property location, condition and design;

•	competition from comparable types of properties;

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

•	declines in regional or local real estate values;

•	declines in regional or local rental or occupancy rates;

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

•	costs of remediation and liabilities associated with environmental conditions;

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•	the potential for uninsured or underinsured property losses;

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

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

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

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

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

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

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

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

•	restrictions on specified investments;

•	prohibitions on transactions with affiliates; and

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

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

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

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

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

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

•	the degree and nature of our competition;

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

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

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

•	an increase in interest rates;

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

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•	legislative and regulatory changes (including changes to laws governing the taxation of REITs or the exclusion or exemption from registration as an investment company under the 1940 Act).

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•	the election and removal of directors;

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

•	the approval of equity incentive plans for our company.

•	the profitability of the assets we originate or hold;

•	our ability to make profitable acquisitions;

•	margin calls or other expenses that reduce our cash flow;

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•	defaults in our asset portfolio or decreases in the value of our portfolio; and

•	the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.

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

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

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(1)	An additional $0.03 per share was distributed each on April 30, 2018, May 31, 2018, June 30, 2018 and August 31, 2018 to allow for the repurchase of units in Terra Fund 5.

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(1)	Amount represents the operating revenue and expenses of a multi-tenant office building acquired through foreclosure and 4.9 acres of adjacent land acquired through deed in lieu of foreclosure where the borrowers conveyed their interest in the properties in satisfaction of the underlying loans.

(2)	Amount represents professional fees directly incurred, and which were previously deferred, in contemplation of us becoming a public entity. In the second quarter of 2019, management decided to postpone indefinitely our public offering.

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(1)	These loans pay a coupon rate of LIBOR plus a fixed spread. Coupon rate shown was determined using LIBOR of 1.76% and 2.50% as of December 31, 2019 and 2018 .

(2)

As of December 31, 2019 and 2018 , amounts included $114.8 million and $57.3 million, respectively, of first mortgages used as collateral for $81.1 million and $34.2 million, respectively, of borrowings under a repurchase agreement. These borrowings bear interest at an annual rate of LIBOR plus a spread ranging from 2.25% to 2.50% as of December 31, 2019 and LIBOR plus 2.5% as of December 31, 2018 .

(3)	As of December 31, 2019 and 2018 , twelve and eight of these loans, respectively, are subject to a LIBOR floor.

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(1)	Other includes $0.3 million of unused portion of a credit facility and a $1.7 million loan with collateral located in Kansas at December 31, 2019 . Other also includes a $1.9 million loan with collateral located in South Carolina at December 31, 2019 and 2018 .

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

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

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

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

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(1)

In the normal course of business, we enter into participation agreements with related parties, and to a lesser extent, unrelated parties, whereby we transfers a portion of the loans to them. These loan participations do not qualify for sale treatment. As such, the loans remain on our consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. 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. We have no direct liability to a participant under our participation agreements with respect to the underlying loan, and the participants’ share of the loan is repayable only from the proceeds received from the related borrower/issuer of the loans.

(2)	We have an option to extend the maturity of the loan by two years subject to certain conditions provided in the loan agreement. Amount excludes unamortized origination and exit fees of $0.1 million .

(3)	We may extend the maturity date of the master repurchase agreement for a period of one year. Amount excludes unamortized deferred financing costs of $1.5 million .

(4)	Interest was calculated using the applicable annual variable interest rate and balance outstanding at December 31, 2019 . Amount represents interest expense through maturity plus exit fee as application.

(5)	Certain of our loans provide for a commitment to fund the borrower at a future date. As of December 31, 2019 , we had eight of such loans with total funding commitments of $292.4 million , of which $175.7 million had been funded.

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

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

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

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

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(1)	each of our directors;

(2)	each of our executive officers;

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

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

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

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

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

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(1)

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

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

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(1)	These loans pay a coupon rate of London Interbank Offered Rate ( “ LIBOR ” ) plus a fixed spread. Coupon rate shown was determined using LIBOR of 1.76% and 2.50% as of December 31, 2019 and 2018 , respectively.

(2)

As of December 31, 2019 and 2018 , amounts included $114.8 million and $57.3 million, respectively, of senior mortgages used as collateral for $81.1 million and a $34.2 million, respectively, of borrowings under a repurchase agreement ( Note 7 ). These borrowings bear interest at an annual rate of LIBOR plus a spread ranging from 2.25% to 2.50% as of December 31, 2019 and LIBOR plus 2.5% as of December 31, 2018 .

(3)	As of December 31, 2019 and 2018 , twelve and eight of these loans, respectively, are subject to a LIBOR floor.

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(1)	On January 9, 2019, the Company acquired 4.9 acres of adjacent land encumbering a $14.3 million first mortgage via deed in lieu of foreclosure in exchange for the relief of the first mortgage and related fees and expenses ( Note 4 ).

(2)	Certain loans in the Company’s portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted to $0.8 million and $0.5 million for the years ended December 31, 2019 and 2018 , respectively.

(3)	Amount included $0.5 million of deferred origination fee that was previously recorded as unearned income.

(4)	On July 30, 2018, the Company foreclosed on a multi-tenant office building encumbering a $54.0 million first mortgage in exchange for the relief of the first mortgage and related fees and expenses ( Note 4 ).

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(1)	Other includes $1.1 million unused portion of a credit facility at December 31, 2019 . Other also includes a $3.0 million loan with collateral located in South Carolina at both December 31, 2019 and 2018 .

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(1)

These loans were deemed impaired and removed from the pool of loans on which a general allowance is calculated. As of December 31, 2019 and 2018 , no specific reserve for loan losses was recorded on these loans because the fair value of the collateral was greater than carrying value for each loan. The Company expects to recover in full the principal balance of the $4.7 million defaulted senior loan categorized as “Other” above as of December 31, 2019 . In January 2019, the Company acquired the collateral of a defaulted $14.3 million senior loan categorized as “Other” above as of December 31, 2018 via deed in lieu of foreclosure ( Note 4 ). As of the date of the deed in lieu of foreclosure, the appraised value of the collateral was greater than the principal amount of the senior loan. On June 30, 2019, the Company recorded an impairment charge of $1.6 million on the collateral in order to reduce the carrying value of the collateral to its estimated fair value, which is the estimated selling price less the cost of sale ( Note 4 ). On April 15, 2019, the second investment categorized as “Other” above as of December 31, 2018 was repaid in full.

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

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

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

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(1)	On June 27, 2018, the Company entered into a participation agreement with Terra Income Fund 6, Inc. (“Terra Fund 6”) to purchase a 25% participation interest, or $4.3 million, in a $17.0 million mezzanine loan. As of December 31, 2018 , none of the amount was funded. As of December 31, 2019 , the unfunded commitment was $1.2 million.

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

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

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

(4)	Participant is Terra Property Trust 2, Inc., an affiliated fund managed by the Manager.

(5)	Participant is a third-party.

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

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(1)	Amount is calculated using LIBOR of 1.76% and 2.50% as of December 31, 2019 and 2018 , respectively.

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

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(1)	The Company has an option to extend the maturity of the mortgage loan payable by two years subject to certain conditions provided in the credit and security agreement.

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

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

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

(3)	The Company sold a portion of its interest in this loan through a participation agreement to Terra Secured Income Fund 5 International, an affiliated fund advised by the Manager ( Note 6 ).

(4)	The Company sold a portion of its interest in this loan through a participation agreement to Terra Income Fund International, an affiliated fund advised by the Manager ( Note 6 ).

(5)	The loan participations from the Company do not qualify for sale accounting under ASC 860 and therefore, the gross amount of these loans remain in Schedule IV. See “ Obligations under Participation Agreements ” in Note 7 and “ Transfers of Participation Interest by the Company ” in Note 6 in the accompanying notes to the consolidated financial statements.

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

(7)	The Company sold a portion of its interest in this loan through a participation agreement to Terra Property Trust 2, Inc., an affiliated fund managed by a subsidiary of the Manager ( Note 6 ).

(8)	On June 27, 2018, the Company entered into a participation agreement with Terra Income Fund 6, Inc. to purchase a 25% interest, or $4.3 million, in a mezzanine loan. As of December 31, 2019 , the unfunded commitment was $1.1 million.

(9)	The Company sold a portion of its interest in this loan to a third-party through a participation agreement ( Note 6 ).

(10)	These loans were used as collateral for $81.1 million borrowing under a repurchase agreement ( Note 7 ).

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

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