UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the Quarterly Period Ended September 30, ~~2017~~2019



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

Commission File ~~Number~~Number: 000-55780

Terra Secured Income Fund 5, LLC

(Exact name of registrant as specified in its charter)



Delaware		90-0967526
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~805 Third~~550 Fifth Avenue, 86^th Floor

New York, New York ~~10022~~10036

(Address of principal executive offices)

(Zip Code)

(212) 753-5100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to section 12(g) of the Securities Exchange Act of 1934: Units of Limited Liability Company Interests

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ No ¨

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



Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ þ~~(Do not check if a smaller reporting company)~~	Smaller reporting company þ
	Emerging growth company þ

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

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

As of November 13, ~~2017,~~2019, the registrant had ~~6,697.5~~6,638.0 units of limited liability company interests outstanding.

TABLE OF CONTENTS



		Page

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Financial Condition as of September 30, 2019 (unaudited) and December 31, 2018	2

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	3

	Consolidated Statements of ~~Operations~~Changes in Members’ Capital for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	4

	Consolidated Statements of ~~Changes in Members’ Capital~~Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (unaudited)	5

	Consolidated ~~Statements~~Schedules of ~~Cash Flows~~Investments as of September 30, 2019 (unaudited) and December 31, 2018	6

	~~Consolidated Schedules of Investments~~	8

	Notes to Consolidated Financial Statements as of September 30, 2019 (unaudited)	1412

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2521

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3833

Item 4.	Controls and Procedures	3834

PART II	OTHER INFORMATION	39

Item 1.	Legal Proceedings	3935

Item 1A.	Risk Factors	3935

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3935

Item 3.	Defaults upon Senior Securities	3935

Item 4.	Mine Safety Disclosures	3935

Item 5.	Other Information	3935

Item 6.	Exhibits	3935

Signatures		4137

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Terra Secured Income Fund 5, LLC

Consolidated Statements of Financial Condition


	September 30, 2017		December 31, 2016		September 30, 2019		December 31, 2018
	(unaudited)				(unaudited)
Assets
Equity investment in Terra Property Trust, Inc. at fair value — controlled (cost of $277,456,081 and $291,468,567, respectively)	$	277,326,857	$	290,419,317
Equity investment in Terra Property Trust, Inc. at fair value — controlled (cost of $249,366,017 and $265,200,249, respectively)					$	252,111,819	$	263,092,585
Cash and cash equivalents	167,784		41,520		85,522		131,784
Due from Terra Property Trust, Inc.	25,000		—
Other assets	4,542		7,447		21,804		14,283
Total assets	$	277,524,183	$	290,468,284	$	252,219,145	$	263,238,652

Liabilities and Members’ Capital
Liabilities
Accounts payable and accrued expenses	$	189,685	$	441,388	$	247,734	$	158,210
Due to Terra Property Trust, Inc.	—		438,249
Other liabilities	21,697		—
Distributions payable	—		2,243
Total liabilities	211,382		881,880		247,734		158,210
Commitments and contingencies (Note 6)
Commitments and contingencies (Note 5)
Members’ capital:
Managing member	—		—		—		—
Non-managing members	277,312,801		289,586,404		251,971,411		263,080,442
Total members’ capital	277,312,801		289,586,404		251,971,411		263,080,442
Total liabilities and members’ capital	$	277,524,183	$	290,468,284	$	252,219,145	$	263,238,652
Net asset value per unit					$	37,959	$	39,630

See notes to consolidated financial statements (unaudited).

Terra Secured Income Fund 5, LLC

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017		2016			2019		2018			2019		2018
Investment income — controlled
Dividend income	$	4,448,792	$	9,824,336		$	15,703,171	$	25,042,346		$	2,994,149	$	5,487,805		$	6,917,024	$	17,829,718
Investment income
Other operating income	111		614			1,064		8,571			82		137			474		1,140
Total investment income	4,448,903		9,824,950			15,704,235		25,050,917			2,994,231		5,487,942			6,917,498		17,830,858
Operating expenses
Professional fees	104,100		269,635			431,465		549,211			182,081		126,966			453,414		334,802
Merger transaction fees	—		—			—		388,692
Other	3,448		(38,342		)	35,761		52,954			686		2,891			9,645		10,832
Total operating expenses	107,548		231,293			467,226		990,857			182,767		129,857			463,059		345,634
Net investment income	4,341,355		9,593,657			15,237,009		24,060,060			2,811,464		5,358,085			6,454,439		17,485,224
Net change in unrealized depreciation on investment — controlled	428,032		(730,673		)	920,026		(1,400,694		)
Net change in unrealized appreciation (depreciation) on investment — controlled											1,655,207		(179,846		)	4,853,466		(355,600		)
Net increase in members’ capital resulting from operations	$	4,769,387	$	8,862,984		$	16,157,035	$	22,659,366		$	4,466,671	$	5,178,239		$	11,307,905	$	17,129,624
Per unit data:
Net investment income per unit											$	424	$	806		$	972	$	2,622
Net increase in members’ capital resulting from operations per unit											$	673	$	779		$	1,704	$	2,569
Weighted average units outstanding											6,638		6,644			6,638		6,670

See notes to consolidated financial statements (unaudited).

Terra Secured Income Fund 5, LLC

Consolidated Statements of Changes in Members’ Capital (Unaudited)

Three and NineMonths Ended September 30, ~~2017~~2019 and ~~2016~~2018


	Managing Member		Non-Managing Members			Total			Managing Member		Non-Managing Members			Total
Balance, January 1, 2017	$	—	$	289,586,404		$	289,586,404
Balance, July 1, 2019									$	—	$	254,985,487		$	254,985,487
Capital distributions	—		(23,127,464		)	(23,127,464		)	—		(7,468,094		)	(7,468,094		)
Capital redemptions	—		(5,303,174		)	(5,303,174		)	—		(12,653		)	(12,653		)
Increase in members’ capital resulting from operations:
Net investment income	—		15,237,009			15,237,009			—		2,811,464			2,811,464
Net change in unrealized depreciation on investment	—		920,026			920,026
Net change in unrealized appreciation on investment									—		1,655,207			1,655,207
Net increase in members’ capital resulting from operations	—		16,157,035			16,157,035			—		4,466,671			4,466,671
Balance, September 30, 2017	$	—	$	277,312,801		$	277,312,801
Balance, September 30, 2019									$	—	$	251,971,411		$	251,971,411


	Managing Member		Non-Managing Members			Total			Managing Member		Non-Managing Members			Total
Balance, January 1, 2016	$	—	$	122,208,698		$	122,208,698
Capital contributions from Merger	—		155,751,516			155,751,516
Capital contributions, net of selling commissions and dealer manager fees of $1,277,916	—		25,598,261			25,598,261
Balance, July 1, 2018									$	—	$	270,804,496		$	270,804,496
Capital distributions	—		(22,949,286		)	(22,949,286		)	—		(7,479,981		)	(7,479,981		)
Capital redemptions	—		(6,771,430		)	(6,771,430		)	—		(509,859		)	(509,859		)
Increase in members’ capital resulting from operations:
Net investment income	—		24,060,060			24,060,060			—		5,358,085			5,358,085
Net change in unrealized depreciation on investment	—		(1,400,694		)	(1,400,694		)	—		(179,846		)	(179,846		)
Net increase in members’ capital resulting from operations	—		22,659,366			22,659,366			—		5,178,239			5,178,239
Balance, September 30, 2016	$	—	$	296,497,125		$	296,497,125
Balance, September 30, 2018									$	—	$	267,992,895		$	267,992,895



	Managing Member		Non-Managing Members			Total
Balance, January 1, 2019	$	—	$	263,080,442		$	263,080,442
Capital distributions	—		(22,404,283		)	(22,404,283		)
Capital redemptions	—		(12,653		)	(12,653		)
Increase in members’ capital resulting from operations:
Net investment income	—		6,454,439			6,454,439
Net change in unrealized appreciation on investment	—		4,853,466			4,853,466
Net increase in members’ capital resulting from operations	—		11,307,905			11,307,905
Balance, September 30, 2019	$	—	$	251,971,411		$	251,971,411



	Managing Member		Non-Managing Members			Total
Balance, January 1, 2018	$	—	$	275,549,455		$	275,549,455
Capital distributions	—		(22,497,394		)	(22,497,394		)
Capital redemptions	—		(2,188,790		)	(2,188,790		)
Increase in members’ capital resulting from operations:
Net investment income	—		17,485,224			17,485,224
Net change in unrealized depreciation on investment	—		(355,600		)	(355,600		)
Net increase in members’ capital resulting from operations	—		17,129,624			17,129,624
Balance, September 30, 2018	$	—	$	267,992,895		$	267,992,895

See notes to consolidated financial statements (unaudited).

Terra Secured Income Fund 5, LLC

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2019			2018
Cash flows from operating activities:
Net increase in members’ capital resulting from operations	$	16,157,035		$	22,659,366		$	11,307,905		$	17,129,624
Adjustments to reconcile net increase in members’ capital resulting from operations to net cash provided by operating activities:
Purchase of common stock of Terra Property Trust, Inc.	—			(10,000,000		)
Cash transferred to Terra Property Trust, Inc.	—			(5,034,571		)
Return of capital on investment	14,012,486			315,730			15,834,232			7,066,860
Net change in unrealized depreciation on investment	(920,026		)	1,400,694
Net change in unrealized (appreciation) depreciation on investment							(4,853,466		)	355,600

Changes in operating assets and liabilities:
Interest receivable	—			351,883
Other assets	898			(129,397		)
Due to Manager	—			(705,389		)
Accounts payable and accrued expenses	(251,702		)	(5,339,803		)
Due to Terra Property Trust, Inc.	(463,249		)	—
Taxes payable	—			(621,177		)
Interest payable	—			(172,051		)
Increase in other assets							(7,521		)	(16,716		)
Increase in accounts payable and accrued expenses							89,524			69,320
Net cash provided by operating activities	28,535,442			2,725,285			22,370,674			24,604,688

Cash flows from financing activities:
Proceeds from capital contributions, net of selling commissions and dealer manager fees	—			25,598,261
Distributions paid	(23,129,410		)	(22,949,286		)	(22,404,283		)	(22,497,365		)
Payments for capital redemptions	(5,279,768		)	(10,198,413		)	(12,653		)	(2,188,790		)
Cash acquired in the Merger	—			3,480,981
Net cash used in financing activities	(28,409,178		)	(4,068,457		)	(22,416,936		)	(24,686,155		)

Net increase (decrease) in cash and cash equivalents	126,264			(1,343,172		)
Net decrease in cash and cash equivalents							(46,262		)	(81,467		)
Cash and cash equivalents at beginning of period	41,520			1,862,798			131,784			212,366
Cash and cash equivalents at end of period	$	167,784		$	519,626		$	85,522		$	130,899

Supplemental Disclosure of Cash Flows Information:
Cash paid for income taxes	$	—		$	681,033		$	—		$	—
Cash paid for interest	$	—		$	—		$	—		$	—

~~Terra Secured Income Fund 5, LLC~~

~~Consolidated Statements of Cash Flows (unaudited) (Continued)~~

~~Supplemental Non-Cash Investing and Financing Activities:~~

In December 2015, the members approved the merger of Terra Secured Income Fund, LLC (“Terra Fund 1”), Terra Secured Income Fund 2, LLC (“Terra Fund 2”), Terra Secured Income Fund 3, LLC (“Terra Fund 3”) and Terra Secured Income Fund 4, LLC (“Terra Fund 4”) with and into subsidiaries of the Company (individually, each a “Terra Fund” and collectively, the “Terra Funds”) through a series of separate mergers effective January 1, 2016 (collectively, the “Merger”). The following table summarizes the fair values of the assets acquired and liabilities assumed in the Merger:

Total Consideration:
Fair value of units issued $ 155,751,516
155,751,516
Assets Acquired at Fair Value
Investments, at fair value 142,768,001
Investments through participation interests, at fair value 7,771,619
Equity investment in Terra Park Green Member, LLC, at fair value 16,900,000
Restricted cash 7,119,078
Interest receivable 1,412,840
Other assets 35,695
Liabilities Assumed at Fair Value
Obligations under participation agreements (8,154,822 )
Interest reserve and other deposits held on loans (7,119,078 )
Accounts payable and accrued expenses (3,113,022 )
Redemption liability (3,426,983 )
Due to Manager (1,343,020 )
Taxes payable (232,040 )
Interest payable (80,807 )
Other liabilities (266,926 )
Net assets acquired excluding cash 152,270,535
Cash acquired in the Merger $ 3,480,981

Following the Merger, the Company contributed the consolidated portfolio of net assets of the five Terra Funds to Terra Property Trust, Inc. (“Terra Property Trust”), a newly-formed and wholly-owned subsidiary of the Company, in exchange for the common shares of Terra Property Trust. The following table summarizes the fair values of the net assets contributed to Terra Property Trust:

Total Consideration:
Fair value of common stock of Terra Property Trust received $ 288,259,804
288,259,804
Assets Contributed at Fair Value
Investments, at fair value 276,746,475
Investments through participation interests, at fair value 13,789,884
Equity investment in Terra Park Green Member, LLC, at fair value 16,900,000
Restricted cash 21,421,501
Interest receivable 2,382,546
Due from related parties 438,249
Other assets 35,695
Liabilities Transferred at Fair Value
Obligations under participation agreements (24,147,097 )
Interest reserve and other deposits held on loans (21,421,501 )
Due to Manager (2,011,003 )
Other liabilities (909,516 )
Net assets transferred excluding cash 283,225,233
Cash transferred to Terra Property Trust $ 5,034,571

See notes to consolidated financial statements (unaudited).

Terra Secured Income Fund 5, LLC

Consolidated ~~Schedule~~Schedules of Investments

September 30, ~~2017~~2019 (unaudited) and December 31, ~~2016~~2018

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company’s only investment is its equity interest in a ~~wholly-owned~~majority-owned subsidiary as presented below:


		Number of Shares of Common Stock			September 30, 2017									December 31, 2016										Number of Shares of Common Stock		September 30, 2019									December 31, 2018
Investment — Controlled	Date Acquired			Cost				Fair Value			% of Net Assets		Cost				Fair Value			% of Net Assets		Date Acquired		Number of Shares of Common Stock	Cost			Fair Value			% of Members’ Capital			Cost			Fair Value			% of Members’ Capital
Terra Property Trust, Inc. — 100% Owned	1/1/2016 and 3/7/2016	Number of Shares of Common Stock	14,912,990			$	277,456,081		$	277,326,857		100.1	%		$	291,468,567		$	290,419,317		100.3	%
Terra Property Trust, Inc. — Controlled																							1/1/2016 and 3/7/2016	14,912,990		$	249,366,017		$	252,111,819		100.1	%		$	265,200,249		$	263,092,585		100.0	%

As ofSeptember 30, 2019, the Company owned 98.6% of the outstanding shares of common stock of Terra Property Trust, Inc. (“Terra Property Trust”). The following table presents a schedule of loans held for investment by Terra Property Trust at 100% and the Company’s ~~wholly-owned subsidiary,~~pro-rata share of the fair value at September 30, 2019:



Portfolio Company	Collateral Location	Property Type	Coupon Rate		Current Interest Rate		Exit Fee		Acquisition Date	Maturity Date	Principal Amount		Amortized Cost		Fair Value ⁽¹⁾		Pro Rata Fair Value ⁽²⁾		% ⁽³⁾
Loans held for investment — non-controlled:
Mezzanine loans:
150 Blackstone River Road, LLC	US - MA	Industrial	8.5	%	8.5	%	—	%	9/21/2017	9/6/2027	$	7,000,000	$	7,000,000	$	7,164,239	$	7,063,940	2.8	%
2539 Morse, LLC ^(4)(5)(6)	US - CA	Student housing	11.0	%	11.0	%	1.0	%	10/20/2017	11/1/2020	7,000,000		7,067,142		7,069,334		6,970,363		2.8	%
37 Gables Member LLC ⁽⁵⁾⁽⁶⁾	US - FL	Multifamily	13.0	%	13.0	%	1.0	%	6/16/2016	12/16/2019	5,750,000		5,807,500		5,806,875		5,725,579		2.3	%
Austin H. I. Owner LLC ⁽⁴⁾⁽⁶⁾	US - TX	Hotel	12.5	%	12.5	%	1.0	%	9/30/2015	10/6/2020	3,500,000		3,530,790		3,534,111		3,484,633		1.4	%
High Pointe Mezzanine Investments, LLC ⁽⁵⁾⁽⁶⁾	US - SC	Student housing	13.0	%	13.0	%	1.0	%	12/27/2013	1/6/2024	3,000,000		3,278,061		3,135,003		3,091,113		1.2	%
LD Milipitas Mezz, LLC ⁽⁹⁾	US - CA	Hotel	LIBOR +10.25% (2.75% Floor)		13.0	%	1.0	%	6/27/2018	6/27/2021	1,967,591		1,975,543		1,983,228		1,955,463		0.8	%
SparQ Mezz Borrower, LLC ^(4)(5)(6)	US - CA	Multifamily	12.0	%	12.0	%	1.0	%	9/29/2017	10/1/2020	8,700,000		8,782,112		8,786,126		8,663,120		3.4	%
Stonewall Station Mezz LLC ⁽⁶⁾⁽⁷⁾	US - NC	Hotel	12.0% current 2.0% PIK		14.0	%	1.0	%	5/31/2018	5/20/2021	9,735,113		9,815,561		9,807,313		9,670,011		3.8	%
											46,652,704		47,256,709		47,286,229		46,624,222		18.5	%

Terra Secured Income Fund 5, LLC

Consolidated Schedule of Investments (Continued)

September 30, 2019 (unaudited) and December 31, 2018

Terra Property Trust Schedule of Loans Held for Investment as of September 30, ~~2017:~~2019 (Continued):

Collateral Location Portfolio Company Structure Property
Type Coupon
Rate Acquisition Date
Maturity
Date
Principal Amount
Amortized
Cost
Fair
Value ⁽¹⁾
% of Net
Assets⁽²⁾
Loans held for investment — non-controlled:
US - AL ASA Mgt. Holdings, LLC Preferred equity investment Multifamily 16.0 % 4/7/2012 8/1/2022 $ 2,100,000
$ 2,141,204
$ 2,124,927
0.8 %
SVA Mgt. Holdings, LLC Preferred equity investment Multifamily 16.0 % 4/7/2012 8/1/2022 1,600,000
1,633,817
1,619,625
0.6 %
Total US - AL 3,700,000
3,775,021
3,744,552
1.4 %
US - CA Palmer City-Core Stockton Street, LLC Preferred equity investment Hotel 12.0 % 1/17/2014 12/17/2017 4,325,000
4,368,250
4,367,145
1.6 %
Maguire Partners-1733 Ocean, LLC First mortgage Office LIBOR+8.5%
3/7/2016 3/9/2018 52,986,912
53,494,280
53,637,569
19.3 %

L.A. Warner Hotel Partners, LLC ^(3)(4)(5)
Preferred equity investment Hotel 12.0 % 7/25/2014 8/4/2018 32,100,000
32,669,975
32,417,458
11.7 %

TSG-Parcel 1, LLC ^(3)(5)(6)(7)
First mortgage Land 12.0 % 7/10/2015 10/10/2017 18,000,000
18,180,000
18,174,048
6.6 %

SparQ Mezz Borrower, LLC ⁽⁸⁾
Mezzanine loan Multifamily 12.0 % 9/29/2017 10/1/2020 —
—
—
— %
Total US - CA 107,411,912
108,712,505
108,596,220
39.2 %
US - DE
BPG Office Partners III/IV LLC ^(3)(4)(5)
Mezzanine loan Office 13.5 % 6/5/2015 6/5/2018 10,000,000
10,091,154
10,096,628
3.6 %
US - FL
1100 Biscayne Management
   Holdco, LLC ^(3)(5)(7)
Mezzanine loan Hotel 12.0% current
3.0% PIK
4/24/2015 10/9/2017 15,809,601
15,954,054
15,952,786
5.8 %

37 Gables Member LLC ⁽⁴⁾⁽⁵⁾
Mezzanine loan Multifamily 13.0 % 6/16/2016 6/16/2019 5,750,000
5,795,947
5,800,317
2.1 %

Greystone Gables Holdings Member
   LLC ⁽⁴⁾⁽⁵⁾
Preferred equity investment Multifamily 13.0 % 6/16/2016 6/16/2019 500,000
503,995
504,375
0.2 %

RS JZ 2700 NW2, LLC ⁽³⁾⁽⁵⁾
First mortgage Land 12.0 % 9/1/2016 12/1/2017 21,360,000
21,569,263
21,575,419
7.8 %
Total US - FL 43,419,601
43,823,259
43,832,897
15.9 %
US - GA YMP Georgia Portfolio Mezzanine, LLC Mezzanine loan Multifamily 14.0 % 12/19/2013 1/6/2019 4,250,000
4,487,398
4,286,112
1.5 %

OHM Atlanta Owner, LLC ^(5)(6)(9)
First mortgage Land 12.0 % 6/20/2017 6/20/2018 24,500,000
24,724,490
24,724,490
8.9 %
Total US - GA 28,750,000
29,211,888
29,010,602
10.4 %
US - IN Muncie Mezz, LLC Mezzanine loan Student
housing 13.0 % 8/29/2013 9/6/2023 2,700,000
2,688,171
3,059,033
1.1 %
US - MA 150 Blackstone River Road, LLC Mezzanine loan Industrial 8.5 % 9/21/2017 9/6/2027 7,000,000
7,000,000
7,000,000
2.5 %
US - NC
Milestone Greensboro Holdings,
   LLC ⁽⁴⁾⁽⁵⁾
Mezzanine loan Hotel 14.0 % 3/1/2013 3/1/2018 3,500,000
3,540,614
3,534,591
1.3 %



Portfolio Company	Collateral Location	Property Type	Coupon Rate		Current Interest Rate		Exit Fee		Acquisition Date	Maturity Date	Principal Amount			Amortized Cost			Fair Value ⁽¹⁾			Pro Rata Fair Value ⁽²⁾			% ⁽³⁾
Loans held for investment — non-controlled:
Preferred equity investments:
370 Lex Part Deux, LLC ^(6)(7)(8)	US - NY	Office	LIBOR + 8.25% (2.44% Floor)		10.7	%	—	%	12/17/2018	1/9/2022	$	47,066,628		$	47,066,628		$	47,066,628		$	46,407,695		18.4	%
City Gardens 333 LLC ^{(4)(5)(6)(7)(8)}	US - CA	Student housing	LIBOR + 9.95% (2.0% Floor)		12.0	%	—	%	4/11/2018	4/1/2021	27,213,272			27,212,145			27,221,456			26,840,356			10.7	%
Greystone Gables Holdings Member LLC ⁽⁵⁾⁽⁶⁾	US - FL	Multifamily	13.0	%	13.0	%	1.0	%	6/16/2016	12/16/2019	500,000			505,000			504,946			497,877			0.2	%
NB Private Capital, LLC ^(6)(7)(8)	US - IL	Student housing	LIBOR +10.5% (3.5% Floor)		14.0	%	1.0	%	7/27/2018	7/27/2020	25,500,000			25,726,977			25,726,977			25,366,799			10.1	%
Orange Grove Property Investors, LLC ⁽⁶⁾⁽⁷⁾	US - CA	Condominium	LIBOR + 8.0% (4.0% Floor)		12.0	%	1.0	%	5/24/2018	6/1/2021	9,350,000			9,421,280			9,433,752			9,301,679			3.7	%
REEC Harlem Holdings Company, LLC	US - NY	Infill land	LIBOR + 12.5% (no Floor)		14.5	%	—	%	3/9/2018	3/9/2023	18,444,375			18,444,375			18,419,767			18,161,890			7.2	%
RS JZ Driggs, LLC ⁽⁶⁾⁽⁷⁾	US - NY	Multifamily	12.3	%	12.3	%	1.0	%	5/1/2018	5/1/2020	8,200,000			8,290,209			8,276,854			8,160,978			3.2	%
The Bristol at Southport, LLC ^(4)(5)(6)(8)	US - WA	Multifamily	12.0	%	12.0	%	1.0	%	9/22/2017	9/22/2022	23,500,000			23,656,903			23,767,698			23,434,950			9.3	%
Windy Hill PV Seven CM, LLC ^(4)(5)(6)	US - CA	Office	10.0% current 2.5% PIK		12.5	%	1.0	%	1/9/2018	1/9/2021	21,492,366			21,684,371			21,669,904			21,366,525			8.5	%
											181,266,641			182,007,888			182,087,982			179,538,749			71.3	%
First mortgages:
14th & Alice Street Owner, LLC	US - CA	Multifamily	LIBOR + 5.75% (3.25% Floor)		9.0	%	0.5	%	3/5/2019	3/5/2022	6,479,224			6,380,011			6,504,640			6,413,575			2.5	%
1389 Peachtree St, LP; 1401 Peachtree St, LP; 1409 Peachtree St, LP ⁽¹⁰⁾	US - GA	Office	LIBOR + 4.5% (no Floor)		6.5	%	0.5	%	2/22/2019	2/10/2022	27,076,048			26,933,741			27,207,707			26,826,799			10.6	%
330 Tryon DE LLC ⁽¹⁰⁾	US - NC	Office	LIBOR + 3.85% (2.5% Floor)		6.4	%	0.5	%	2/7/2019	3/1/2022	22,800,000			22,888,678			22,904,516			22,583,853			8.9	%
MSC Fields Peachtree Retreat, LLC. ⁽¹⁰⁾	US - GA	Multifamily	LIBOR + 3.85% (2.0% Floor)		5.9	%	0.5	%	3/15/2019	4/1/2022	23,308,334			23,401,586			23,417,352			23,089,509			9.2	%
REEC 286 Lenox LLC	US - NY	Office	LIBOR + 2.95% (no Floor)		5.0	%	—	%	8/2/2019	11/22/2019	4,740,000			4,740,000			4,740,000			4,673,640			1.9	%
TSG-Parcel 1, LLC ^(4)(6)(7)	US - CA	Infill land	LIBOR + 10.0% (2.0% Floor)		12.0	%	1.0	%	7/10/2015	12/31/2019	18,000,000			18,180,000			18,178,191			17,923,696			7.1	%
Windy Hill PV Five CM, LLC	US - CA	Office	LIBOR + 2.25% (2.05% Floor)		4.3	%	0.5	%	9/20/2019	9/20/2022	9,572,776			9,095,560			9,615,758			9,481,137			3.8	%
											111,976,382			111,619,576			112,568,164			110,992,209			44.0	%
Total gross loans held for investment											339,895,727			340,884,173			341,942,375			337,155,180			133.8	%
Obligations under participation agreements ^{(4)(5)(6)(7)(8)}											(97,688,326		)	(98,315,641		)	(98,321,184		)	(96,944,687		)	(38.5	)%
Net loans held for investment											$	242,207,401		$	242,568,532		$	243,621,191		$	240,210,493		95.3	%

Terra Secured Income Fund 5, LLC

Consolidated Schedule of Investments (Continued)

September 30, ~~2017~~2019 (unaudited) and December 31, ~~2016~~2018

Terra Property Trust Schedule of Loans Held for Investment as of September 30, ~~2017~~2019 (Continued):

Collateral Location Portfolio Company Structure Property
Type Coupon
Rate Acquisition Date
Maturity
Date
Principal Amount
Amortized
Cost
Fair
Value ⁽¹⁾
% of Net
Assets⁽²⁾
Loans held for investment — non-controlled:
US - NY
Cape Church Mezz, LLC ^(3)(4)(5)
Mezzanine loan Multifamily 12.0 % 3/15/2016 7/15/2019 $ 16,663,302
$ 16,797,445
$ 16,730,367
6.0 %

140 Schermerhorn Street Mezz LLC ⁽⁵⁾⁽⁶⁾
Mezzanine loan Hotel 12.0 % 11/16/2016 12/1/2019 15,000,000
15,115,355
15,130,717
5.5 %
575 CAD I LLC Mezzanine loan Land 12.0% current
2.5% PIK
1/31/2017 8/1/2019 9,280,360
9,350,309
9,352,034
3.4 %
WWML96MEZZ, LLC Mezzanine loan Multifamily 13.0 % 12/18/2015 12/31/2018 7,687,862
7,753,121
7,767,565
2.8 %
WWML96, LLC Preferred equity investment Multifamily 13.0 % 12/18/2015 12/31/2018 1,438,384
1,450,594
1,447,064
0.5 %
Total US - NY 50,069,908
50,466,824
50,427,747
18.2 %
US - OR
Pollin Hotels PDX Mezzanine, LLC ⁽⁴⁾⁽⁵⁾
Mezzanine loan Hotel 13.0 % 9/23/2013 10/6/2018 5,000,000
5,225,052
5,240,101
1.9 %
US - PA
Millennium Waterfront Associates,
   L.P.
First mortgage Land 12.0 % 7/2/2015 12/29/2017 14,150,000
14,291,500
14,290,080
5.2 %
US - SC
High Pointe Mezzanine Investments,
   LLC ⁽⁴⁾⁽⁵⁾
Mezzanine loan Student
housing 13.0 % 12/27/2013 1/6/2024 3,000,000
3,396,889
3,428,790
1.2 %
US - TN
Kingsport 925-Mezz LLC ⁽⁴⁾⁽⁵⁾
Mezzanine loan Multifamily 13.0 % 1/6/2014 12/5/2018 3,000,000
3,138,451
3,120,351
1.1 %
US - TX
Northland Museo Member, LLC ⁽⁴⁾⁽⁵⁾
Mezzanine loan Multifamily 12.0 % 11/22/2013 12/6/2018 4,000,000
3,967,600
4,072,570
1.5 %

Austin H. I. Owner LLC ⁽³⁾⁽⁵⁾
Mezzanine loan Hotel 12.5 % 9/30/2015 10/6/2020 3,500,000
3,523,928
3,539,140
1.3 %
AHF-Heritage #1, LLC Mezzanine loan Multifamily 14.0 % 7/30/2012 8/11/2022 2,689,038
2,919,386
2,729,307
1.0 %
Total US - TX 10,189,038
10,410,914
10,341,017
3.8 %
US - UT
NB Factory JV, LLC ⁽⁵⁾⁽⁶⁾
Preferred equity
   investment
Student
   housing
15.0 % 6/29/2017 6/26/2020 3,595,670
3,595,670
3,595,670
1.2 %
US - WA
The Bristol at Southport, LLC ⁽⁵⁾⁽⁹⁾
Preferred equity
   investment
Multifamily 10.0% current
2.0% PIK
9/22/2017 10/1/2022 22,500,000
22,623,164
22,685,693
8.2 %
US - Various
Nelson Brothers Professional Real
   Estate, LLC ⁽⁷⁾
Facility Various 15.0 % 8/31/2016 1/27/2018 8,000,000
8,080,000
8,078,999
2.9 %
Total loans held for investment — non-controlled: 325,986,129
330,071,076
330,082,971
119.1 %

Loan held for investment through participation interest — non-controlled ⁽¹⁰⁾:

US - PA
KOP Hotel XXXI Mezz LP ⁽³⁾⁽⁵⁾
Participation in
mezzanine loan Hotel 13.0 % 11/24/2015 12/6/2022 1,800,000
1,804,562
1,820,502
0.7 %
Total loan held for investment through participation interest — non-controlled 1,800,000
1,804,562
1,820,502
0.7 %

Total gross loans held for investment 327,786,129
331,875,638
331,903,473
119.7 %

Obligations under participation agreements ^{(3)(4)(6)(9)(10)}
(70,020,950 ) (70,992,661 ) (70,910,091 ) (25.6 )%
Net loans held for investment $ 257,765,179
$ 260,882,977
$ 260,993,382
94.1 %



Operating real estate:
Description	Acquisition Date	Real estate owned, net		Encumbrance		Net Investment		Pro Rata Net Investment ⁽²⁾		% ^(3)(13)
Multi-tenant office building in Santa Monica, CA ⁽¹¹⁾	7/30/2018	$	53,578,394	$	44,745,024	$	8,833,370	$	8,709,703	3.5	%
Land in Conshohocken, PA ⁽¹²⁾	1/9/2019	13,395,430		—		13,395,430		13,207,894		5.2	%
		$	66,973,824	$	44,745,024	$	22,228,800	$	21,917,597	8.7	%

^{___________________________}


(1)	Because there is no readily available market for these loans, these loans were valued using significant unobservable inputs under Level 3 of the fair value hierarchy and were approved in good faith by Terra REIT Advisors, LLC (“Terra REIT Advisors”), Terra Property Trust’s manager, pursuant to Terra Property Trust’s valuation policy.


(2)	Amount represents the Company’s portion, or 98.6%, of the fair value or net investment value.


(3)	Percentage is based on the Company’s pro rata share of the fair value or net investment value over the Company’s total members’ capital of $252.0 million at September 30, 2019.


(4)	Terra Property Trust sold a portion of its interests in these loans via participation agreements to Terra Secured Income Fund 5 International, an affiliated fund advised by Terra REIT Advisors.


(5)	Terra Property Trust sold a portion of its interests in these loans via participation agreements to Terra Income Fund International, an affiliated fund advised by Terra REIT Advisors.


(6)	The loan participations from Terra Property Trust do not qualify for sale accounting and therefore, the gross amount of these loans remain in the consolidated statements of financial condition.


(7)	Terra Property Trust sold a portion of its interest in this loan through a participation agreement to Terra Income Fund 6, Inc., an affiliated fund advised by Terra Income Advisors, LLC (“Terra Income Advisors”), an affiliate of our sponsor and Terra Property Trust’s manager.


(8)	Terra Property Trust sold a portion of its interest in this loan through a participation agreement to Terra Property Trust 2, Inc., an affiliated fund managed by Terra REIT Advisors.


(9)	On June 27, 2018, Terra Property Trust 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 September 30, 2019, the unfunded commitment was $2.3 million.


(10)	These loans were used as collateral for $51.3 million of borrowings under a repurchase agreement.


(11)	Terra Property Trust acquired this property through foreclosure of a $54.0 million first mortgage. Real estate owned, net amount includes building and building improvements, tenant improvements and lease intangible assets and liabilities, net of accumulated depreciation and amortization.


(12)	Terra Property Trust acquired the collateral for this loan via deed in lieu of foreclosure. On June 30, 2019, Terra Property Trust 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.


(13)	Percentage is based on Terra Property Trust’s net exposure on the property (real estate owned less encumbrance).

Terra Secured Income Fund 5, LLC

Consolidated Schedule of Investments (Continued)

September 30, ~~2017~~2019 (unaudited) and December 31, ~~2016~~2018

The following table presents a schedule of loans held for investment held by Terra Property Trust as of December 31, 2018:



Portfolio Company	Collateral Location	Property Type	Coupon Rate		Current Interest Rate		Exit Fee		Acquisition Date	Maturity Date	Principal Amount		Amortized Cost		Fair Value ⁽¹⁾		% ⁽²⁾
Loans held for investment — non-controlled:
Mezzanine loans:
150 Blackstone River Road, LLC	US - MA	Industrial	8.5	%	8.5	%	—	%	9/21/2017	9/6/2027	$	7,000,000	$	7,000,000	$	6,895,383	2.6	%
140 Schermerhorn Street Mezz LLC ^(3)(5)(6)	US - NY	Hotel	12.0	%	12.0	%	1.0	%	11/16/2016	12/1/2019	15,000,000		15,134,200		15,148,494		5.8	%
221 W. 17th Street Owner, LLC ^(3)(4)(5)(6)	US - NY	Condominium	12.8	%	12.8	%	1.0	%	1/19/2018	3/31/2019	4,700,000		4,745,513		4,746,499		1.8	%
2539 Morse, LLC ^(3)(4)(5)	US - CA	Student housing	11.0	%	11.0	%	1.0	%	10/20/2017	11/1/2020	7,000,000		7,057,092		7,063,795		2.7	%
37 Gables Member LLC ^(4)(5)(8)	US - FL	Multifamily	13.0	%	13.0	%	1.0	%	6/16/2016	6/16/2019	5,750,000		5,804,127		5,806,875		2.2	%
575 CAD I LLC ^(3)(4)(5)	US - NY	Condominium	12.0% current 2.5% PIK		14.5	%	1.0	%	1/31/2017	7/31/2019	14,627,148		14,755,657		14,758,825		5.6	%
Austin H. I. Owner LLC ⁽³⁾⁽⁵⁾	US - TX	Hotel	12.5	%	12.5	%	1.0	%	9/30/2015	10/6/2020	3,500,000		3,528,012		3,512,468		1.3	%
High Pointe Mezzanine Investments, LLC ⁽⁴⁾⁽⁵⁾	US - SC	Student housing	13.0	%	13.0	%	1.0	%	12/27/2013	1/6/2024	3,000,000		3,322,499		3,088,463		1.2	%
LD Milipitas Mezz, LLC ⁽⁹⁾	US - CA	Hotel	LIBOR +10.25% (2.75% Floor)		13.0	%	1.0	%	6/27/2018	6/27/2021	—		—		—		—	%
SparQ Mezz Borrower, LLC	US - CA	Multifamily	12.0	%	12.0	%	1.0	%	9/29/2017	10/1/2020	8,150,000		8,215,918		8,224,401		3.1	%
Stonewall Station Mezz LLC ⁽⁵⁾⁽⁶⁾	US - NC	Hotel	12.0% current 2.0% PIK		14.0	%	1.0	%	5/31/2018	5/20/2021	8,548,954		8,609,379		8,618,238		3.3	%
WWML96MEZZ, LLC ⁽¹⁰⁾	US - NY	Condominium	13.0	%	13.0	%	1.0	%	12/18/2015	1/14/2019	15,950,638		16,110,144		16,108,411		6.1	%
											93,226,740		94,282,541		93,971,852		35.7	%

Terra Secured Income Fund 5, LLC

Consolidated Schedule of Investments (Continued)

September 30, 2019 (unaudited) and December 31, 2018

Terra Property Trust Schedule of Loans Held for Investment as of December 31, 2018 (Continued):



Portfolio Company	Collateral Location	Property Type	Coupon Rate		Current Interest Rate		Exit Fee		Acquisition Date	Maturity Date	Principal Amount			Amortized Cost			Fair Value ⁽¹⁾			% ⁽²⁾
Loans held for investment — non-controlled:
Preferred equity investments:
370 Lex Part Deux, LLC ^(5)(6)(7)	US - NY	Office	LIBOR + 8.25% (2.44% Floor)		10.8	%	—	%	12/17/2018	1/9/2022	$	43,500,000		$	43,500,000		$	43,500,000		16.5	%
ASA Mgt. Holdings, LLC	US - AL	Multifamily	16.0	%	16.0	%	1.0	%	4/7/2012	8/1/2022	2,100,000			2,135,189			2,120,720			0.8	%
City Gardens 333 LLC ^(5)(6)(7)	US - CA	Student housing	LIBOR + 9.95% (2.0% Floor)		12.5	%	—	%	4/11/2018	4/1/2021	20,816,038			20,816,038			20,816,038			7.9	%
Greystone Gables Holdings Member LLC ^(4)(5)(8)	US - FL	Multifamily	13.0	%	13.0	%	1.0	%	6/16/2016	6/16/2019	500,000			504,707			504,946			0.2	%
NB Private Capital, LLC ^(5)(6)(7)	US - IL US - OH	Student housing	LIBOR +10.5% (3.5% Floor)		14.0	%	1.0	%	7/27/2018	7/27/2020	25,500,000			25,704,182			25,704,182			9.8	%
Nelson Brothers Professional Real Estate, LLC ⁽¹¹⁾	US - CO	Student housing	14.0	%	14.0	%	1.0	%	7/27/2016	2/1/2019	4,027,736			4,068,014			4,067,543			1.5	%
Orange Grove Property Investors, LLC ⁽⁵⁾⁽⁶⁾	US - CA	Condominium	LIBOR + 8.0% (4.0% Floor)		12.0	%	1.0	%	5/24/2018	6/1/2021	8,350,000			8,414,582			8,415,618			3.2	%
REEC Harlem Holdings Company, LLC	US - NY	Infill land	LIBOR + 12.5% (no Floor)		15.0	%	—	%	3/9/2018	3/9/2023	20,619,375			20,619,375			20,619,375			7.8	%
RS JZ Driggs, LLC ⁽⁵⁾⁽⁶⁾	US - NY	Multifamily	12.3	%	12.3	%	1.0	%	5/1/2018	5/1/2020	4,041,350			4,075,613			4,075,613			1.5	%
SVA Mgt. Holdings, LLC	US - AL	Multifamily	16.0	%	16.0	%	1.0	%	4/7/2012	8/1/2022	1,600,000			1,628,607			1,615,786			0.6	%
The Bristol at Southport, LLC ^(3)(4)(5)(7)	US - WA	Multifamily	10.0% current 2.0% PIK		12.0	%	1.0	%	9/22/2017	9/22/2022	23,115,541			23,258,826			23,185,858			8.8	%
Windy Hill PV Seven CM, LLC ^(3)(4)(5)	US - CA	Office	10.0% current 2.5% PIK		12.5	%	1.0	%	1/9/2018	1/9/2021	19,001,150			19,146,400			19,146,400			7.3	%
WWML96, LLC ⁽¹⁰⁾	US - NY	Condominium	13.0	%	13.0	%	1.0	%	12/18/2015	1/14/2019	1,549,420			1,564,914			1,564,746			0.6	%
											174,720,610			175,436,447			175,336,825			66.5	%
First mortgages:
CGI 1100 Biscayne Management LLC⁽¹²⁾	US - FL	Hotel	LIBOR + 5.65% (2.3% Floor)		8.2	%	2.0	%	11/19/2018	11/19/2020	57,269,351			58,244,986			58,286,097			22.2	%
Millennium Waterfront Associates, L.P. ⁽¹³⁾	US - PA	Infill land	12.0	%	12.0	%	1.0	%	7/2/2015	12/28/2018	14,325,000			14,325,000			14,325,000			5.4	%
OHM Atlanta Owner, LLC ^{(5)(6)(7)(14)}	US - GA	Infill land	LIBOR + 9.0% (3.0% Floor)		12.0	%	1.0	%	6/20/2017	1/24/2019	27,500,000			27,775,000			27,772,240			10.6	%
TSG-Parcel 1, LLC ^(3)(5)(6)	US - CA	Infill land	LIBOR + 10.0% (2.0% Floor)		12.5	%	1.0	%	7/10/2015	12/31/2019	18,000,000			18,180,000			18,178,116			6.9	%
											117,094,351			118,524,986			118,561,453			45.1	%
Total gross loans held for investment											385,041,701			388,243,974			387,870,130			147.4	%
Obligations under participation agreements ^{(3)(4)(5)(6)(7)}											(113,458,723		)	(114,298,591		)	(114,189,654		)	(43.4	)%
Net loans held for investment											$	271,582,978		$	273,945,383		$	273,680,476		104.0	%

Terra Secured Income Fund 5, LLC

Consolidated Schedule of Investments (Continued)

September 30, 2019 (unaudited) and December 31, 2018

Terra Property Trust Schedule of Loans Held for Investment as of December 31, 2018 (Continued):



Operating real estate:
Description	Real estate owned, net ⁽¹⁵⁾		Encumbrance		Acquisition Date	% ⁽¹⁶⁾
Multi-tenant office building in Santa Monica, CA	$	55,984,868	$	45,000,000	7/30/2018	4.2	%

^{___________________________}


(1)	Because there is no readily available market for these loans, these loans were valued using significant unobservable inputs under Level 3 of the fair ~~values of these loans are~~value hierarchy and were approved in good faith by Terra ~~Income~~REIT Advisors, ~~LLC (the “Manager”)~~Terra Property Trust’s manager, pursuant to Terra Property Trust’s valuation policy.


(2)	Percentages are based on the fair value of the Company’s investment in Terra Property Trust of ~~$277.3~~$263.1 million as of ~~September 30, 2017.~~December 31, 2018.


(3)	Terra Property Trust sold a portion of its interests in these loans via participation agreements to Terra Secured Income Fund 5 International, an affiliated fund advised by ~~the Manager.~~Terra REIT Advisors.


(4)	Terra Property Trust sold a portion of its interests in these loans via participation agreements to Terra Income Fund International, an affiliated fund advised by ~~the Manager.~~Terra REIT Advisors.


(5)	The loan participations from Terra Property Trust do not qualify for sale accounting ~~under Accounting Standards Codification (~~“~~ASC~~”~~) Topic 860,~~ ~~Transfers and Servicing,~~and therefore, the gross amount of these loans remain in the ~~Consolidated Schedule~~consolidated statements of ~~Loans Held for Investments.~~ financial condition.


(6)	Terra Property Trust 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 Manager.~~Terra Income Advisors, an affiliate of our sponsor and Terra Property Trust’s manager.


(7)	~~The maturity date of this loan was extended subsequent to September 30, 2017.~~


~~(8)~~	On September 29, 2017, Terra Property Trust entered into agreement with the borrower to provide funding commitment of up to $8.7 million. As of September 30, 2017, none of the commitment has been funded.


~~(9)~~	Terra Property Trust 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~~Terra REIT Advisors.


(8)	In January 2019, the borrower extended the maturity of the ~~Manager.~~loan to December 16, 2019.


(9)	On June 27, 2018, Terra Property Trust 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, 2018, none of the commitment has been funded.


(10)	~~Terra Property Trust purchased its interest~~This loan was repaid in ~~this loan from Terra Income Fund 6, Inc. through a participation agreement.~~

~~Terra Secured Income Fund 5, LLC~~

~~Consolidated Schedule of Investments (Continued)~~

~~September 30, 2017~~ ~~(unaudited) and December 31, 2016~~

~~The following table presents a schedule of loans held for investment held by Terra Property Trust as of December 31, 2016:~~

Collateral Location Portfolio Company Structure Property
Type Coupon
Rate Acquisition Date
Maturity
Date
Principal Amount
Amortized
Cost
Fair
Value ⁽¹⁾
% of Net
Assets⁽²⁾
Loans held for investment — non-controlled:
US - AL ASA Mgt. Holdings, LLC Preferred equity investment Multifamily 15.0 % 4/7/2012 8/1/2022 $ 2,100,000
$ 2,145,498
$ 2,120,737
0.7 %
SVA Mgt. Holdings, LLC Preferred equity investment Multifamily 15.0 % 4/7/2012 8/1/2022 1,600,000
1,637,463
1,615,800
0.6 %
Total US - AL 3,700,000
3,782,961
3,736,537
1.3 %
US - CA Palmer City-Core Stockton Street, LLC Preferred equity investment Hotel 12.0 % 1/17/2014 12/17/2017 4,325,000
4,368,250
4,369,096
1.5 %

Encino Courtyard Mezzanine, LLC ⁽³⁾
Mezzanine loan Retail 13.5 % 12/19/2012 1/6/2023 2,500,000
2,609,852
2,529,828
0.9 %
Maguire Partners-1733 Ocean, LLC First mortgage Office LIBOR+8.5%
3/7/2016 3/9/2018 50,450,061
50,902,766
50,924,056
17.4 %

L.A. Warner Hotel Partners, LLC ⁽⁴⁾⁽⁵⁾
Preferred equity investment Hotel 13.3 % 7/25/2014 8/4/2017 20,000,000
20,579,513
20,201,344
7.0 %

SD Carmel Hotel Partners, LLC ^(3)(4)(5)
Preferred equity investment Hotel 12.0 % 3/13/2015 1/31/2017 6,000,000
6,059,398
6,059,398
2.1 %

TSG-Parcel 1, LLC ^(4)(5)(6)
First mortgage Land 12.0 % 7/10/2015 4/10/2017 18,000,000
18,180,000
18,178,193
6.3 %
Total US - CA 101,275,061
102,699,779
102,261,915
35.2 %
US - DE
BPG Office Partners III/IV LLC ⁽⁴⁾⁽⁵⁾
Mezzanine loan Office 13.0 % 6/5/2015 6/5/2018 10,000,000
10,082,308
10,123,340
3.5 %
US - FL Beach Resort Management, LLC Mezzanine loan Hotel 13.0 % 7/16/2012 8/1/2017 4,500,000
4,518,850
4,517,228
1.6 %

CGI Mezz 55MM, LLC ^(3)(4)(5)
Mezzanine loan Mixed use 12.0% current
2.0% PIK
8/21/2014 9/6/2019 3,593,947
3,619,217
3,610,816
1.2 %

1100 Biscayne Management
   Holdco, LLC ⁽⁴⁾⁽⁵⁾
Mezzanine loan Hotel 12.0% current
3.0% PIK
4/24/2015 10/9/2017 15,359,671
15,488,644
15,257,412
5.2 %

Caton Mezz, LLC ^(3)(4)(5)
Mezzanine loan Office 12.0% current
2.0% PIK
7/27/2015 1/27/2017 5,160,404
5,210,404
5,189,222
1.8 %
37 Gables Member LLC Mezzanine loan Multifamily 13.0 % 6/16/2016 6/16/2019 5,750,000
5,791,644
5,797,477
2.0 %
Greystone Gables Holdings Member LLC Preferred equity investment Multifamily 13.0 % 6/16/2016 6/16/2019 500,000
503,621
504,128
0.2 %
RS JZ 2700 NW2, LLC First mortgage Land 12.0 % 9/1/2016 12/1/2017 19,620,000
19,795,534
19,800,927
6.8 %
Total US - FL 54,484,022
54,927,914
54,677,210
18.8 %
US - GA YMP Georgia Portfolio Mezzanine, LLC Mezzanine loan Multifamily 14.0 % 12/19/2013 1/6/2019 4,250,000
4,604,941
4,387,683
1.5 %
US - IN Muncie Mezz, LLC Mezzanine loan Student
housing 13.0 % 8/29/2013 9/6/2023 2,700,000
2,683,938
3,039,674
1.0 %
US - MA
Phoenix CR 2012A, LLC, Phoenix CR
   2012B, LLC, & Phoenix CR 2012C,
   LLC
Mezzanine loan Multifamily 12.0 % 7/27/2012 8/11/2022 4,000,000
4,112,275
4,071,618
1.4 %

~~Terra Secured Income Fund 5, LLC~~

~~Consolidated Schedule of Investments (Continued)~~

~~September 30, 2017~~ ~~(unaudited) and December 31, 2016~~

~~Terra Property Trust Schedule of Loans Held for Investment as of December 31, 2016 (Continued):~~

Collateral Location Portfolio Company Structure Property
Type Coupon
Rate Acquisition Date
Maturity
Date
Principal Amount
Amortized
Cost
Fair
Value ⁽¹⁾
% of Net
Assets⁽²⁾
Loans held for investment — non-controlled:
US - NC Milestone Greensboro Holdings, LLC Mezzanine loan Hotel 14.0 % 3/1/2013 3/1/2018 $ 3,500,000
$ 3,551,028
$ 3,550,732
1.2 %
US - NJ Essence 144 Urban Renewal, LLC First mortgage Multifamily 12.0 % 1/14/2015 3/14/2017 22,639,955
22,865,291
22,864,082
7.9 %
US - NY Cape Church Mezz, LLC Mezzanine loan Multifamily 12.0 % 3/15/2016 7/15/2019 15,207,664
15,323,482
15,341,724
5.3 %
140 Schermerhorn Street Mezz LLC Mezzanine loan Hotel 12.0 % 11/16/2016 12/1/2019 15,000,000
15,105,343
15,118,900
5.2 %
WWML96MEZZ, LLC Mezzanine loan Multifamily 13.0 % 12/18/2015 12/31/2018 4,075,585
4,106,941
4,104,596
1.4 %
WWML96, LLC Preferred equity investment Multifamily 13.0 % 12/18/2015 12/31/2018 1,303,583
1,313,612
1,281,507
0.4 %
Total US - NY 35,586,832
35,849,378
35,846,727
12.3 %
US - OR Pollin Hotels PDX Mezzanine, LLC Mezzanine loan Hotel 13.0 % 9/23/2013 10/6/2018 5,000,000
5,356,923
5,324,812
1.8 %
US - PA PHL Hotel Partners, LLC Preferred equity investment Hotel 13.0 % 10/8/2013 11/1/2017 3,742,000
3,779,420
3,772,758
1.3 %
Millennium Waterfront Associates, L.P. First mortgage Land 12.0 % 7/2/2015 1/2/2017 13,980,000
14,119,800
14,118,397
4.9 %
Total US - PA 17,722,000
17,899,220
17,891,155
6.2 %
US - SC
High Pointe Mezzanine
Investments, LLC
Mezzanine loan Student
housing 13.0 % 12/27/2013 1/6/2024 3,000,000
3,441,697
3,176,165
1.1 %
US - TN Kingsport 925-Mezz LLC Mezzanine loan Multifamily 13.0 % 1/6/2014 12/5/2018 3,000,000
3,208,266
3,111,362
1.1 %

315 JV, LLC ⁽⁶⁾
Mezzanine loan Office 12.0% current
3.0% PIK
11/15/2013 5/28/2017 6,877,843
6,971,219
6,935,693
2.4 %
Total US - TN 9,877,843
10,179,485
10,047,055
3.5 %
US - TX Northland Museo Member, LLC Mezzanine loan Multifamily 12.0 % 11/22/2013 12/6/2018 4,000,000
3,946,771
4,051,342
1.4 %

Austin H. I. Owner LLC ⁽⁴⁾⁽⁵⁾
Mezzanine loan Hotel 12.5 % 9/30/2015 10/6/2020 3,500,000
3,521,769
3,549,105
1.2 %
AHF-Heritage #1, LLC Mezzanine loan Multifamily 14.0 % 7/30/2012 8/11/2022 2,689,038
2,951,669
2,794,286
1.0 %
Total US - TX 10,189,038
10,420,209
10,394,733
3.6 %
US - Various Capital Square Realty Advisors, LLC Facility Various 13%-14%
12/17/2013 7/29/2017 15,500,000
15,643,328
15,643,328
5.4 %

Nelson Brothers Professional Real
Estate, LLC
Facility Various 15.0 % 8/31/2016 7/27/2017 8,000,000
8,073,342
8,073,342
2.8 %
Total US - Various 23,500,000
23,716,670
23,716,670
8.2 %
Total loans held for investment — non-controlled: 311,424,751
316,174,017
315,110,108
108.5 %

~~Terra Secured Income Fund 5, LLC~~

~~Consolidated Schedule of Investments (Continued)~~

~~September 30, 2017~~ ~~(unaudited) and December 31, 2016~~

~~Terra Property Trust Schedule of Loans Held for Investment as of December 31, 2016 (Continued):~~

Collateral Location Portfolio Company Structure Property
Type Coupon
Rate Acquisition Date
Maturity
Date
Principal Amount
Amortized
Cost
Fair
Value ⁽¹⁾
% of Net
Assets⁽²⁾

Loans held for investment through participation interests — non-controlled ⁽⁷⁾:

US - NY
QPT 24th Street Mezz LLC ⁽⁴⁾⁽⁵⁾
Participation in
mezzanine loan
Land 12.0% current
2.0% PIK
12/15/2015 6/15/2017 12,780,220
12,897,391
12,897,392
4.5 %
US - PA
KOP Hotel XXXI Mezz LP ⁽⁴⁾⁽⁵⁾
Participation in
mezzanine loan
Hotel 13.0 % 11/24/2015 12/6/2022 1,800,000
1,804,135
1,847,839
0.6 %
Total loans held for investment through participation interest — non-controlled 14,580,220
14,701,526
14,745,231
5.1 %

Total gross loans held for investment 326,004,971
330,875,543
329,855,339
113.6 %

Obligations under participation agreements ⁽⁴⁾⁽⁶⁾
(32,635,785 ) (32,986,194 ) (32,904,955 ) (11.3 )%
Net loans held for investment $ 293,369,186
$ 297,889,349
$ 296,950,384
102.3 %

^{___________________________}


~~(1)~~	~~Because there is no readily available market for these loans, the fair values of these loans are approved in good faith by the Manager pursuant to Terra Property Trust’s valuation policy.~~January 2019.


~~(2)~~(11)	~~Percentages are based on the fair value of the Company’s investment in~~In February 2019, Terra Property Trust ~~of $290.4 million as of December 31, 2016.~~entered into a forbearance agreement with the borrower whereby the borrower has until April 15, 2019 to repay the loan in full.


~~(3)~~(12)	This loan was used as collateral for a $34.2 million borrowing under a repurchase agreement.


(13)	In January 2019, Terra Property Trust acquired the collateral for this loan via deed in lieu of foreclosure.


(14)	In January 2019, the borrower made a partial repayment of $18.5 million on this loan. In connection with the repayment, the maturity of the loan was extended to March 5, 2019. On March 5, 2019, the loan was repaid in full.

~~(4)~~(15)

Terra Property Trust ~~sold~~acquired this property through foreclosure of a ~~portion~~$54.0 million first mortgage. Amount includes building and building improvements, tenant improvements and lease intangible assets and liabilities, net of ~~its interests in these loans via participation agreements to Terra Secured Income Fund 5 International, an affiliated fund advised by the Manager.~~accumulated depreciation and amortization.


~~(5)~~(16)	~~The loan participations from~~Percentage is based on Terra Property ~~Trust do not qualify for sale accounting under ASC Topic 860,~~ ~~Transfers and Servicing,~~ ~~and therefore,~~Trust’s net exposure on the ~~gross amount of these loans remain in the Consolidated Schedule of Loans Held for Investments.~~ property (real estate owned less encumbrance).


~~(6)~~	~~Terra Property Trust 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 Manager.~~


~~(7)~~	~~Terra Property Trust purchased its interests in these loans from Terra Income Fund 6, Inc. through participation agreements.~~

See notes to consolidated financial statements (unaudited).

~~Notes to Consolidated Financial Statements (Unaudited)~~

Terra Secured Income Fund 5, LLC

Notes to Consolidated Financial Statements (Unaudited)

September 30, ~~2017~~2019

Note 1. Business

Terra Secured Income Fund 5, LLC (and, together with its consolidated subsidiaries, the “Company”), is a real estate credit focused company that originates, structures, funds and manages high yielding commercial real estate investments, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments throughout the United States. The Company’s loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. The Company focuses on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties in primary and secondary markets. The Company believes loans of this size are subject to less competition, offer higher risk adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. The Company was formed as a Delaware limited liability company on April 24, 2013 and commenced operations on August 8, 2013. The Company was formed to originate, acquire and structure real estate-related loans, including mezzanine loans, first and second mortgage loans, subordinated mortgage loans, bridge loans, preferred equity investments and other loans related to high quality commercial real estate. The Company completed its original offering on January 31, 2015 and raised approximately $142 million in gross proceeds. The Company’s investment strategy is to investmakes substantially all of its investments and conducts substantially all of its real estate lending business through Terra Property Trust, which has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2016. The Company’s objectives are to (i) preserve its members’ capital contributions, (ii) realize income from its investments and (iii) make monthly distributions to its members from cash generated from investments. There can be no assurances that the ~~net proceeds of membership interests~~Company will be successful in and manage a diverse portfolio of, real estate-related loans. The Company seeks to create and maintain a portfolio of investments that generates a low volatility income stream for attractive and consistent cash distributions. The real-estate loans are typically investments between $3 million and $25 million, with unlevered yields on subordinated positions and levered yields on senior positions ranging from 12% to 16% and maturities between one to ten years.meeting its objectives.

In December 2015, the members approved the merger of Terra Secured Income Fund, 1, LLC (“Terra Fund 1”), Terra Secured Income Fund 2, LLC (“Terra Fund 2”), Terra Secured Income Fund 3, LLC (“Terra Fund 3”) and Terra Secured Income Fund 4, LLC (“Terra Fund 4”) with and into subsidiaries of the Company (individually, each a “Terra Fund” and collectively, the “Terra Funds”) through a series of separate mergers effective January 1, ~~2016.~~2016 (collectively, the “Merger”). Following the Merger, the Company contributed the consolidated portfolio of net assets of the five Terra Funds to Terra Property Trust, a newly-formed and wholly-owned subsidiary of the Company that elected to be taxed as a ~~real estate investment trust (“REIT”),~~REIT, in exchange for the shares of common ~~shares~~stock of Terra Property Trust. Upon completion of the Merger, the Company became the parent company of Terra Funds 1 through 4 and the direct and indirect sole common stockholder of, and began conducting substantially all of its real estate lending business through, Terra Property Trust. As of September 30, 2019, the Company owned 14,912,990 shares, or 98.6%, of Terra Property Trust’s outstanding common stock. The Company does not consolidate Terra Property Trust as Terra Property Trust is not an investment company.

The Company’s investment activities ~~are~~were externally managed by Terra Income Advisors, ~~LLC,~~ a private investment firm affiliated with the Company until February 8, 2018 when Terra Capital Partners, LLC (“Terra Capital Partners”), the Company’s sponsor, caused a new subsidiary of Terra Capital Partners, Terra Fund Advisors, LLC (“Terra Fund Advisors”), to be admitted as the replacement manager of the Company. When used herein the term “Manager” refers to Terra Income Advisors for periods prior to February 8, 2018 and refers to Terra Fund Advisors beginning on such date. The Company does not currently have any employees and does not expect to have any employees. Services necessary for the Company’s business are provided by individuals who are employees of the Manager or its affiliates or by individuals who were contracted by the Company or by the Manager or its affiliates to work on behalf of the Company pursuant to the terms of the operating agreement, as amended.

The Company will continue in existence until December 31, 2023; however, the Company expects to be terminated or to consummate an alternative liquidity transaction on or prior to the five-year anniversary of the completion of the Company’s original offering, which was January 31, 2015, unless extended for up to a maximum of two one-year extensions at the discretion of the Manager, in order to facilitate an orderly liquidation or to consummate such alternative liquidity transaction.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include all of the Company’s accounts and those of its consolidated subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications that, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented. All intercompany balances and transactions have been eliminated. The accompanying interim 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. The Company is an investment company, as defined under U.S. GAAP, and applies accounting and reporting guidance in accordance with Financial Accounting Standards Board (“FASB”) ~~ASC~~Accounting Standards Codification (“ASC”) Topic 946, Financial Services - Investment Companies.

Notes to Consolidated Financial Statements (Unaudited)

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 disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of gains (losses), income and expenses during the reporting period. Actual results could significantly differ from those estimates. The most significant estimates inherent in the preparation of the Company’s consolidated financial statements is the valuation of ~~investments.~~

its investment (Note 314).

~~Notes to Consolidated Financial Statements (Unaudited)~~

Equity Investment in Terra Property Trust

Equity investment in Terra Property Trust represents the Company’s equity interest in Terra Property Trust, which was initially recorded at cost. Subsequent to the asset contribution, the equity investment is reported, at each reporting date, at fair value on the consolidated statements of financial condition. Change in fair value is reported in net change in unrealized appreciation or depreciation on investment on the consolidated statements of operations.

Revenue Recognition

~~Revenue is accounted for under ASC 605,~~ ~~Revenue Recognition~~, which provides among other things that revenue be recognized when there is persuasive evidence an arrangement exists, delivery and services have been rendered, price is fixed and determinable and collectability is reasonably assured.

Dividend Income: Dividend income associated with the Company’s ownership of Terra Property Trust is recognized on the record date as declared by Terra Property Trust. Any excess of dividends over Terra Property Trust’s cumulative net income are recorded as return of capital.

Other Operating Income: All other income is recognized when earned.

Cash and Cash Equivalents

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.

Income Taxes

No provision for U.S. federal and state income taxes has been made in the accompanying consolidated financial statements, as individual members are responsible for their proportionate share of the Company’s taxable income. The Company, however, may be liable for New York City Unincorporated Business Tax (the “NYC UBT”) and similar taxes of various other municipalities. New York City imposes the NYC UBT at a statutory rate of 4% on net income generated from ordinary business activities carried on in New York City. For the three and nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, none of the Company’s income was subject to the NYC UBT.

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the consolidated financial statements and tax basis assets and liabilities using enacted tax rates in effect for the year in which differences are expected to reverse. Such deferred tax assets and liabilities were not material.

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 nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its primary tax jurisdiction is federal. The Company’s ~~inception-to-date~~2015-2019 federal tax years remain subject to examination by the Internal Revenue Service.

Recent Accounting ~~Pronouncements~~Pronouncement

In ~~May 2014,~~February 2016, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The core principle of the revenue model is that an entity recognizes revenue 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 the goods or services. The Company will adopt this standard on January 1, 2018 using the cumulative effect transition method. The Company is evaluating the impact of ASU 2014-09 but does not currently believe that the application of ASU 2014-09 will have a material impact on its consolidated financial statements and disclosures.

~~Notes to Consolidated Financial Statements (Unaudited)~~

financial liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance is effective for the Company beginning on January 1, 2018. Management is currently

~~evaluating the impact these changes will have on the Company’s consolidated financial statements and disclosures.~~

~~In February 2016, the FASB issued ASU~~ 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 outlines a new model for accounting by lessees, whereby their rights and obligations under substantially all leases, existing and new, would be capitalized and recorded on the balance sheet. For lessors, however, the accounting remains largely unchanged from the ~~current~~ model under ASC 840, Leases (“ASC 840”), with the distinction between operating and financing leases retained, but updated to align with certain changes to the lessee model and the new revenue recognition standard. The new standard also replaces ~~existing~~the sale-leaseback guidance under ASC 840 with a new model applicable to both lessees and lessors. Additionally, the new standard requires extensive quantitative and qualitative disclosures. ASU 2016-02 iswas effective for U.S. GAAP public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ~~Early application will be permitted for all entities.~~

Notes to Consolidated Financial Statements (Unaudited)

The ~~new standard must be~~Company adopted ~~using a modified retrospective transition~~ASU 2016-02 on January 1, 2019. The adoption of ~~the new guidance and provides for certain practical expedients. Transition will require application of the new model at the beginning of the earliest comparative period presented. This~~ ASU is2016-02 did not ~~expected to~~ have any impact on the Company’s consolidated financial statements and disclosures as the Company does not have any lease arrangements.

In August ~~2016,~~2018, the FASB issued ASU ~~2016-15, Statement~~2018-13, Fair Value Measurement (Topic 820): Disclosure framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The objective of ~~Cash Flows (Topic 230): Classification~~ASU 2018-13 is to improve the effectiveness of ~~Certain Cash Receipts and Cash Payments, a Consensus of the FASB’s Emerging Issues Task Force (“ASU 2016-15”). ASU 2016-15 provides guidance on how certain transactions are classified~~disclosures in the ~~statement~~notes to financial statements by facilitating clear communication of ~~cash flows.~~information required by U.S. GAAP. The amendments in ASU ~~2016-15~~2018-13 added, removed and modified certain fair value measurement disclosure requirements. ASU 2018-13 is effective for ~~annual~~all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2017.~~2019. The ~~guidance requires application using a retrospective transition method.~~amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of ASU 2018-13. The Company does not expect the adoption of ASU ~~2016-15~~2018-13 to have a material impact on its consolidated financial statements and disclosures.

In ~~October 2016,~~August 2018, the ~~U.S.~~ Securities and Exchange Commission (the “SEC”) adopted ~~new rules and amended rules (together, “final rules”~~a final rule that eliminates or amends disclosure requirements that have become duplicative, overlapping, or outdated in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment (the “Final Rule”). The Final Rule is intended to ~~modernize~~simplify and update the ~~reporting and~~ disclosure of information ~~by registered investment companies. In part,~~to investors and reduce compliance burdens for companies, without significantly altering the ~~final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives~~total mix of information available to investors. Among other items, the Final Rule requires registrants to include in ~~investment company~~their interim financial statements a reconciliation of changes in net assets or stockholders’ equity in the notes or as ~~well as other amendments.~~a separate statement. The Final Rule was effective for all filings made on or after November 5, 2018; however, the SEC would not object if a filer’s first presentation of the changes in net assets or stockholders' equity was included in its Form 10-Q for the quarter that begins after the effective date of the Final Rule. The Company adopted the ~~amendments to Regulation S-X on August 1, 2017.~~Final Rule in the first quarter of fiscal year 2019. The adoption of the Final Rule did not have a material impact on ~~its~~the Company’s consolidated financial statements and disclosures.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 intends to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business: inputs, processes, and outputs. While an integrated set of assets and activities, collectively referred to as a “set,” that is a business usually has outputs, outputs are not required to be present. ASU 2017-01 provides a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. ASU 2017-01 will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. Management is currently evaluating the impact of this change will have on the Company’s consolidated financial statements and

~~disclosures.~~

Note 3. Investment and Fair Value

Equity Investment in Terra Property Trust

The Company invests substantially all of its equity capital in the purchase of common shares of Terra Property ~~Trust and its primary investment position is the common shares of Terra Property~~ Trust.

The following table presents a summary of the Company’s investment at September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:


	September 30, 2017						December 31, 2016						September 30, 2019						December 31, 2018
Investment	Cost		Fair Value		% of Net Assets		Cost		Fair Value		% of Net Assets		Cost		Fair Value		% of Members’ Capital		Cost		Fair Value		% of Members’ Capital
14,912,990 common shares of Terra Property Trust, Inc.	$	277,456,081	$	277,326,857	100.1	%	$	291,468,567	$	290,419,317	100.3	%	$	249,366,017	$	252,111,819	100.1	%	$	265,200,249	$	263,092,585	100.0	%

For the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company received approximately ~~$13.1~~$7.6 million and ~~$9.6~~$8.1 million of ~~dividends~~distributions from Terra Property Trust, respectively, of which ~~$8.7~~$4.6 million and ~~none~~$2.6 million were returns of capital, respectively. For the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company received approximately ~~$29.7~~$22.8 million and ~~$25.4~~$24.9 million of ~~dividends~~distributions from Terra Property Trust, respectively, of which ~~$14.0~~$15.8 million and ~~$0.3~~$7.1 million were returns of capital, respectively.

1614

Notes to Consolidated Financial Statements (Unaudited)

The following tables present the summarized financial information of Terra Property Trust:


	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
Carrying value of investments	$	331,875,638		$	330,683,840
Carrying value of loans held for investment							$	340,884,173		$	388,243,974
Real estate owned, net							78,547,358			68,004,577
Other assets	79,469,290			53,966,401			81,243,328			35,306,172
Total assets	411,344,928			384,650,241			500,674,859			491,554,723
Mortgage loan payable and obligations under participation agreements	(105,051,385		)	(66,855,038		)
Mortgage loan payable, repurchase agreement payable and obligations under participation agreements							(192,679,205		)	(190,687,574		)
Accounts payable, accrued expenses and other liabilities	(28,725,822		)	(26,203,277		)	(43,355,713		)	(23,555,081		)
Lease intangible liabilities							(11,573,534		)	(12,019,709		)
Total liabilities	(133,777,207		)	(93,058,315		)	(247,608,452		)	(226,262,364		)
Stockholder’s equity	$	277,567,721		$	291,591,926		$	253,066,407		$	265,292,359


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Revenues	$	9,651,677		$	14,408,350		$	28,197,274		$	37,395,488		$	13,092,968		$	12,788,205		$	39,163,596		$	35,751,197
Expenses	(4,598,716		)	(4,584,017		)	(12,379,894		)	(12,493,517		)	(9,945,334		)	(7,300,400		)	(32,246,572		)	(17,921,479		)
Realized gain on investments	(604,169		)	—			(114,209		)	140,375
Net income	$	4,448,792		$	9,824,333		$	15,703,171		$	25,042,346		$	3,147,634		$	5,487,805		$	6,917,024		$	17,829,718

Fair Value Measurements

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

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

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

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

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

Notes to Consolidated Financial Statements (Unaudited)

Assets and Liabilities Reported at Fair Value

The following table summarizes the Company’s equity investment in Terra Property Trust at fair value on a recurring basis as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:


	September 30, 2017								September 30, 2019
	Fair Value Measurements								Fair Value Measurements
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Investment:
Equity investment in Terra Property Trust	$	—	$	—	$	277,326,857	$	277,326,857	$	—	$	—	$	252,111,819	$	252,111,819


	December 31, 2016								December 31, 2018
	Fair Value Measurements								Fair Value Measurements
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Investment:
Equity investment in Terra Property Trust	$	—	$	—	$	290,419,317	$	290,419,317	$	—	$	—	$	263,092,585	$	263,092,585

Changes in Level 3 investment for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 were as follows:

Equity Investment in Terra Property Trust
Nine Months Ended September 30,
2017 2016
Beginning balance $ 290,419,317
$ —
Shares of Terra Property Trust common stock received in exchange for the Company’s
consolidated portfolio of net assets
—
288,259,804
Shares of Terra Property Trust common stock purchased —
10,000,000
Return of capital (14,012,486 ) (315,730 )
Net change in unrealized depreciation on investment 920,026
(1,400,694 )
Ending balance $ 277,326,857
$ 296,543,380
Net change in unrealized depreciation on investment for the period relating to those
Level 3 assets that were still held by the Company
$ 920,026
$ (1,400,694 )



	Equity Investment in Terra Property Trust
	Nine Months Ended September 30,
	2019			2018
Beginning balance	$	263,092,585		$	275,428,953
Return of capital	(15,834,232		)	(7,066,860		)
Net change in unrealized appreciation (depreciation) on investment	4,853,466			(355,600		)
Ending balance	$	252,111,819		$	268,006,493
Net change in unrealized appreciation (depreciation) on investment for the period relating to those Level 3 assets that were still held by the Company	$	4,853,466		$	(355,600	)

Transfers between levels, if any, are recognized at the beginning of the period in which transfers occur. For the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, there were no transfers.

The Company estimated that its other financial assets and liabilities had fair values that approximated their carrying values at September 30, ~~2017~~2019 and December 31, ~~2016~~2018 due to their short-term nature.

Valuation Process for Fair Value Measurement

Market quotations are not readily available for the Company’s ~~real estate-related investments through~~investment in Terra Property Trust, ~~all of~~ which ~~are~~is included in Level 3 of the fair value ~~hierarchy,~~hierarchy. The fair value of the Company’s sole investment takes into consideration the fair value of Terra Property Trust’s assets and ~~therefore these investments~~liabilities which 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.~~methodology. In following this methodology, ~~investments~~loans are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of ~~the Company’s investments,~~Terra Property Trust’s loans, relevant factors, including available current market data on applicable yields of comparable debt/preferred equity instruments; market credit spreads and yield curves; the investment’s yield; covenants of the investment, including prepayment ~~provisions,~~provisions; the portfolio company’s ability to make payments, its net operating income, debt-service coverage ~~ratio (“DSCR”),~~ratio; construction progress reports and construction budget analysis; the nature, quality, and realizable value of any collateral (and loan-to-value ratio); and 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, replacement costs and the anticipated duration of each real estate-related ~~loan investment.~~loan.

~~Notes to Consolidated Financial Statements (Unaudited)~~

The Manager designates a valuation committee to oversee the entire valuation process of ~~the Company’s~~Terra Property Trust’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~~Terra Property Trust investments being valued as well as the inputs used in the proprietary valuation model. Valuations determined by the valuation committee are supported

Notes to Consolidated Financial Statements (Unaudited)

by pertinent data and, in addition to a proprietary valuation model, are based on market data, ~~industry accepted~~ third-party valuation ~~models~~data and discount rates or other methods the valuation committee deems to be appropriate.

The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 investments as of September 30, ~~2017~~2019 and December 31, ~~2016.~~2018. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.


	Fair Value		Primary Valuation Technique		Unobservable Inputs		September 30, 2017							Fair Value			Primary Valuation Technique		Unobservable Inputs		September 30, 2019
Asset Category				Minimum		Maximum		Weighted Average					Minimum					Maximum		Weighted Average
Assets:
Equity investment in Terra Property Trust	$	277,326,857	Discounted cash flow			Discount rate		2.56	%	15.00	%	12.71	%		$	252,111,819				Discounted cash flow ⁽¹⁾		Discount rate ⁽¹⁾	4.27	%	14.95	%	13.15	%


	Fair Value		Primary Valuation Technique		Unobservable Inputs		December 31, 2016							Fair Value			Primary Valuation Technique		Unobservable Inputs		December 31, 2018
Asset Category				Minimum		Maximum		Weighted Average					Minimum					Maximum		Weighted Average
Assets:
Equity investment in Terra Property Trust	$	290,419,317	Discounted cash flow			Discount rate		9.09	%	15.96	%	12.19	%		$	263,092,585				Discounted cash flow ⁽¹⁾		Discount rate ⁽¹⁾	5.02	%	16.00	%	14.19	%

_______________


(1)	Discounted cash flows and discount rates applied to Terra Property Trust’s assets and liabilities.

Risks and Uncertainties

The Company’s investment in Terra Property Trust is highly illiquid and there is no assurance that the Company will achieve its investment objectives, including targeted returns. Terra Property Trust’s loans are highly illiquid. Due to the illiquidity of the loans, valuation of the loans may be difficult, as there generally will be no established markets for these loans. As the Company’s investment is carried at fair value with fair value changes recognized in the consolidated statements of operations, any changes in fair value would directly affect the Company’s members’ capital.

Note 4. Related Party Transactions

~~Merger~~Axar Transaction

~~In December 2015, the members approved the merger~~On February 8, 2018, Terra Capital Partners caused (i) a new subsidiary of Terra ~~Fund 1,~~Capital Partners, Terra REIT Advisors to become the external manager of Terra Property Trust, (ii) a new subsidiary of Terra Capital Partners, Terra Fund ~~2, Terra Fund 3 and Terra Fund 4 with and into subsidiaries~~Advisors, to be admitted as the replacement manager of the Company ~~through~~and the equity interests in Terra Fund Advisors to be distributed to the equity owners of Terra Capital Partners on a ~~series~~pro rata basis and (iii) the equity interests in another subsidiary of ~~separate mergers effective January 1, 2016. Following~~Terra Capital Partners, Terra Income Advisors, which also serves as the ~~Merger, the Company contributed the consolidated portfolio of net assets of the five Terra Funds~~external adviser to Terra ~~Property Trust in exchange for~~Income Fund 6, Inc. (“Terra Fund 6”), to be distributed to the ~~common shares~~equity owners of Terra ~~Property Trust. Upon~~Capital Partners on a pro rata basis. After the completion of the Merger, the Company became the parent company of Terra Funds 1 through 4 and the direct and indirect sole common stockholder of, and began conducting substantially all of its real estate lending business through, Terra Property Trust.

~~Consent Solicitation~~

above steps, a pooled investment vehicle advised by Axar Capital Management L.P. (“Axar”) entered into an investment agreement with Terra Capital ~~Markets, LLC (“~~Partners and its affiliates (which is referred to collectively as the “Axar Transaction”), pursuant to which Axar acquired from the respective owners thereof: (i) a 49% economic interest in Terra Fund Advisors; (ii) a 65.7% economic and voting interest in Terra Capital ~~Markets”),~~Partners (and thereby Terra REIT Advisors); and (iii) an ~~affiliate of~~initial 49% economic interest in Terra Income Advisors. On November 30, 2018, Axar acquired the ~~manager, served as the dealer manager for the consent solicitation on the Merger, and was paid a voting advisory fee of $750 per initial unit sold to members~~remaining 34.3% economic interest in the Terra Funds and a dealer manager fee of 0.5% of the aggregate offering price of the units originally issued by the Terra Funds. Most of these fees were re-allowed to participating dealers. The Terra Funds also incurred costs for legal, accounting, and other professional services in connection with the consent solicitation. For the nine months ended September 30, 2016, the Company incurred $0.4 million of merger transaction costs.

~~Rights Offering~~

In connection with the Merger, the Company offered existing members of the Terra Funds the opportunity to invest in the Company through purchase of additional membership units (the “Rights Offering”). Terra Capital ~~Markets served as~~Partners. On April 30, 2019, Axar acquired the ~~dealer manager for the sale of the Company’s membership units and received compensation of 3%~~remaining 51% economic interest in selling commission, 1% in dealer manager fees and a 1% broker dealer fee. Most of these fees are re-allowed to independent broker dealers and financial advisors. These fees amounted to approximately $1.3 million for the nine months ended September 30, 2016 and have been deducted from capital contributions received as selling commissions and dealer manager fees.Terra Income Advisors.

Operating Agreement

The Company ~~entered into~~had an operating agreement, as amended, with ~~the Manager~~Terra Income Advisors whereby ~~the Manager is~~Terra Income Advisors was responsible for the Company’s day-to-day operations. As part of the Axar Transaction, on February 8, 2018, Terra Income Advisors assigned all of its rights, title and interest in the Company pursuant to the Amended and Restated Limited Liability Company Agreement of the Company, dated January 1, 2016, to Terra Fund Advisors. The operating agreement, as amended, is scheduled to terminate on December 31, 2023 unless the Company is dissolved earlier. Starting January 1, 2016, the Company conducts all of its real estate lending business through Terra Property Trust. As such, Terra Property Trust is responsible for management compensation paid and operating expenses reimbursed to ~~the Manager~~its manager pursuant to a management agreement with the ~~Manager.~~manager.

Notes to Consolidated Financial Statements (Unaudited)

~~Due from Terra Property Trust~~Management Agreement

As part of ~~September 30, 2017, amount due from~~the Axar Transaction, Terra Income Advisors, Terra Property Trust’s manager prior to February 8, 2018, assigned all of its rights, title and interest in and to its then current external management agreement with Terra Property Trust ~~was $0.03 million, related to a professional fee invoice the Company paid on its behalf. As of December 31, 2016, there was no amount due from Terra Property Trust.~~

~~Due~~ to Terra ~~Property Trust~~

~~As of September 30, 2017, there was no amount due to~~REIT Advisors and immediately thereafter, Terra ~~Property Trust. As of December 31, 2016, approximately $0.4 million was due to~~REIT Advisors and Terra Property Trust ~~as reflected~~amended and restated such management agreement. Such amended and restated management agreement has the same economic terms and is in all material respects otherwise on the ~~consolidated statements of financial condition, primarily related to an adjustment to~~same terms as the ~~contribution of the consolidated portfolio of net assets of the five~~management agreement between Terra ~~Funds to~~Income Advisors and Terra Property Trust ~~on January 1, 2016.~~in effect immediately prior to the Axar Transaction, except for the identity of the manager.

Dividend Income

As discussed in Note 3, for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company received approximately ~~$13.1~~$7.6 million and ~~$9.6~~$8.1 million of distributions from Terra Property Trust, respectively, of which ~~$8.7~~$4.6 million and ~~none was a return~~$2.6 million were returns of capital, respectively. For the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company received approximately ~~$29.7~~$22.8 million and ~~$25.4~~$24.9 million of distributions from Terra Property Trust, respectively, of which ~~$14.0~~$15.8 million and ~~$0.3~~$7.1 million was a return of capital, respectively.

~~Note 5. Significant Risk Factors~~Terra International 3

In the normal course of business, the Company enters into transactions in various financial instruments. The Company’s financial instruments are subject to, but are not limited to, the following risks:

~~Market Risk~~

~~The Company’s loans through~~On September 30, 2019, Terra Property Trust ~~are highly illiquid~~entered into a Contribution and ~~there is no assurance that the Company will achieve its investment objectives, including targeted returns. Due~~Repurchase Agreement with Terra International Fund 3, L.P. (“Terra International 3”) and Terra International Fund 3 REIT, LLC (“Terra International Fund 3 REIT”), a wholly-owned subsidiary of Terra International 3.

Pursuant to the illiquidity of the loans, valuation of the loans may be difficult, as there generally will be no established markets for these loans. As the Company’s loans were carried at fair value with fair value changes recognizedthis agreement, Terra International 3, through Terra International Fund 3 REIT, contributed cash in the ~~consolidated statements~~amount of ~~operations, all changes in market conditions would directly affect the Company’s members’ capital.~~

~~Credit Risk~~

~~Credit risk represents the potential loss that~~$3.6 million to Terra Property Trust ~~would incur if the borrowers failed~~in exchange for 212,691 shares of common stock, at a price of $17.02 per share. In addition, Terra International 3 agreed to ~~perform pursuant to the terms of their obligations~~contribute to Terra Property ~~Trust. Thus, the value of the underlying collateral, the creditworthiness of the borrower or other counterparty,~~Trust future cash proceeds, if any, raised from time to time by it, and ~~the priority of Terra Property Trust’s lien on the borrower’s assets are of importance.~~ Terra Property Trust ~~minimizes its exposure~~agreed to ~~credit risk by limiting exposure~~issue shares of common stock to International Fund 3 in exchange for any ~~one individual borrower~~such future cash proceeds, in each case pursuant to and ~~any one asset class. Additionally, Terra Property Trust employs an asset management approach~~in accordance with the terms and ~~monitors~~conditions specified in the ~~portfolio~~agreement. The shares were issued in a private placement in reliance on Section 4(a)(2) of ~~loans, through, at a minimum, quarterly financial review~~the Securities Act of ~~property performance including net operating income, loan-to-value ratio, DSCR~~1933, as amended, and the debt yield. Terra Property Trust also requires certain borrowers to establish a cash reserve, as a form of additional collateral, for the purpose of providing for future interest or property-related operating payments.

~~Mezzanine loans~~rules and preferred equity investments are subordinate to senior mortgage loans and, therefore, involve a higher degree of risk. In the event of a default, mezzanine loans and preferred equity investments will be satisfied only after the senior lender’s investment is fully recovered. As a result, in the event of a default, Terra Property Trust may not recover all of its investment.

~~The Company maintains all of its cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation.~~

~~Concentration Risk~~regulations promulgated thereunder.

Terra ~~Property Trust holds real estate related loans. Thus,~~REIT Advisors also serves as adviser to the ~~loan portfolio~~Terra International 3 and Terra International Fund 3 REIT. In addition, the general partner of Terra ~~Property Trust may be subject to a more rapid change in value than would be the case if~~International 3 is Terra ~~Property Trust maintained a wide diversification among industries, companies and types of loans. The result of such concentration in real estate assets~~International Fund 3 GP, LLC, which is ~~that a loss in such loans could materially reduce Terra Property Trust’s capital.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~Liquidity Risk~~

~~Liquidity risk represents the possibility that the Company may not be able to sell its positions at a reasonable price in times of low trading volume, high volatility and financial stress.~~

~~Interest Rate Risk~~

~~Interest rate risk represents the effect from a change in interest rates, which could result in~~ an ~~adverse change in the fair value~~affiliate of Terra ~~Property Trust’s interest-bearing financial instruments.~~

~~Prepayment Risk~~

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

~~Use of Leverage~~

As part of Terra Property Trust’s investment strategy, Terra Property Trust may borrow and utilize leverage. While borrowing and leverage present opportunities for increasing total return, they may have the effect of potentially creating or increasing losses.

~~Property Acquisitions~~

Terra Property Trust may find it necessary to take possession of collateral including, without limitation, an asset or a business, through a purchase or foreclosure action. Borrowers may resist mortgage foreclosure or sales actions by asserting numerous claims and defenses, which delay both repayments of existing loan investments and acquisition of the collateral and add cost to such actions.

~~There can be no assurance that Terra Property Trust will be able to successfully operate, hold or maintain the collateral in accordance with its expectations.~~

Further, there can be no assurance that there will be a ready market for resale of foreclosed or acquired properties because investments in real estate generally are not liquid and holding periods are difficult to predict. In addition, there may be significant expenditures associated with holding real property, including real estate taxes and maintenance costs. The liquidation proceeds upon sale of the real estate may be less than the amount invested in the loan, and its fair value and such differences could be material.Fund Advisors, our manager.

Note 6.5. Commitments and Contingencies

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

The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material adverse effect upon its financial condition or results of operations.

Note 7.6. Members’ Capital

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Company had ~~6,697.5~~6,638.0 units and ~~6,826.5~~6,638.4 units outstanding, ~~respectively. The~~respectively, and the net asset value per unit was ~~$41,405~~$37,959 and ~~$42,423 as of September 30, 2017 and December 31, 2016,~~$39,630, respectively.

Capital Contributions

As of January 31, 2015, the offering period ended, and the Company stopped accepting capital contributions.

In connection with the Merger, between the Terra Funds, original membership units of Terra Funds 1 through 4 were exchanged for 3,206.7 Continuing Income Units (regular units in the Company) and 463.6 Termination Units (membership interest in the Company ~~offered to members of Terra Funds 1 through 4 who wish to enter the liquidation phase of their investments). The Company also~~ offered existing members of the Terra Funds the opportunity to invest in the Company through ~~the~~purchase of additional units (the “Rights Offering”). The Rights Offering. For the nine months ended September 30, 2016, the Company sold 573.3 units and received capital contributions of approximately $25.6 million, net of selling commissions and dealer manager fees.Offering was completed on May 17, 2016.

Notes to Consolidated Financial Statements (Unaudited)

Capital Distributions

At the discretion of the Manager, the Company may make distributions from net cash flow from operations, net disposition proceeds, or other cash available for distribution. Distributions are made to holders of Continuing Income Units (regular units of limited liability company interest in the Company) in proportion to their unit holdings until they receive a return of their initial Deemed Capital Contribution, as defined in the operating agreement, plus a preferred return ranging from 8.5% to 9.0% depending on the historical preferred return applicable to their Terra Fund units, after which time distributions are made 15% to the Manager which the Company ~~referred~~refers to as the carried interest distribution, and 85% to the holders of Continuing Income Units. The preferred return applicable to the Continuing Income Units sold in the ~~Rights Offering~~offering concurrent with the Merger is 8.5%.

In addition, holders of Termination Units ~~receive~~(membership interest in the Company that were issued to members of Terra Funds 1 through 4 who chose to enter the liquidation phase of their investments) received monthly distributions at a fixed rate of 6.0% per annum of the Unreturned Invested Capital ~~as defined~~(capital contributions less cumulative stated distributions of principal and less any amounts paid in ~~the operating agreement.~~redemption).

For the ~~nine~~three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company made total ~~capital distribution~~distributions to non-manager members of ~~$23.1~~$7.5 million and ~~$22.9~~$7.5 million, respectively. For the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company made total distributions to non-manager members of $22.4 million and $22.5 million, respectively. For the three and nine months ended September 30, 2019 and 2018, the Company did not make any carried interest distributions to the Manager.

Capital Redemptions

In the Merger, members of Terra Funds 1 through 4 who wished to enter the liquidation phase of their investments chose to receive Termination Units as merger consideration. These Termination Units ~~will be~~were redeemed on the original expected liquidation dates of the funds. As of September 30, 2019 and December 31, 2018, there were no Termination Units outstanding. For the nine months ended September 30, ~~2017, 121.1 Termination~~2019, the Company redeemed 0.4 Continuing Income Units ~~of Terra Fund 3 were redeemed~~ for ~~$5.0~~$0.01 million. For the nine months ended September 30, ~~2016, 161.3 Termination Units of Terra Fund 1 were~~2018, the Company redeemed for $6.8 million. These Termination Units were redeemed at book value as defined in the amended and restated operating agreement. Additionally, for the nine months ended September 30, 2017, 7.9 units of3.6 Continuing Income Units ~~were redeemed~~ for ~~$0.3 million. For the nine months ended September 30, 2016, the Company also paid $3.4~~$0.1 million ~~to members the Manager was unable to establish their continuation to qualify as “accredited investors” under the Securities Act of 1933, as amended,~~ and ~~to members holding their interests through a qualified ERISA plan to redeem their units.~~

~~The following table presents a summary of the~~50.4 Termination Units ~~outstanding as of September 30, 2017:~~



~~Fund~~	~~Number of~~ ~~Units~~	~~Scheduled~~ ~~Redemption Date~~
~~Terra Fund 4~~	~~50.4~~	~~July 2018~~

for $2.1 million.

At the discretion of the Manager, a reserve of 5% of cash from operations may be established in order to repurchase units from non-managing members. The Manager is under no obligation to redeem non-managing members’ units. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, no such reserve was established.

Allocation of Income (Loss)

Profits and losses are allocated to the members in proportion to the units held in a given calendar year.

Member Units

Each membership interest through the original offering was offered for a price of $50,000 per unit. The membership interests in Terra Funds 1 through 4 were exchanged for units of the Company at a price of $43,410 per unit, which was the exchange value per unit of the Company on December 31, 2015, and the units in the Rights Offering ~~was~~were offered at a price of $47,000 per unit. The following table provides a roll forward of the units outstanding of the Company for the nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018:


	Nine Months Ended September 30, 2017					Nine Months Ended September 30, 2016					Nine Months Ended September 30, 2019					Nine Months Ended September 30, 2018
	Managing Member	Non-Managing Members		Total		Managing Member	Non-Managing Members		Total		Managing Member	Non-Managing Members		Total		Managing Member	Non-Managing Members		Total
Units outstanding, beginning of period	—	6,826.5		6,826.5		—	2,878.9		2,878.9		—	6,638.4		6,638.4		—	6,697.4		6,697.4
Units issued in the Merger	—	—		—		—	3,670.4		3,670.4
Units admitted through the Rights Offering	—	—		—		—	573.3		573.3
Early redemption of Continuing Income Units	—	(7.9	)	(7.9	)	—	—		—		—	(0.4	)	(0.4	)	—	(3.6	)	(3.6	)
Termination Units redeemed	—	(121.1	)	(121.1	)	—	(161.3	)	(161.3	)	—	—		—		—	(50.4	)	(50.4	)
Units outstanding, end of period	—	6,697.5		6,697.5		—	6,961.3		6,961.3		—	6,638.0		6,638.0		—	6,643.4		6,643.4

Notes to Consolidated Financial Statements (Unaudited)

Note 8.7. Financial Highlights

The financial highlights represent the per unit operating performance, return and ratios for the non-managing members’ class, taken as a whole, for the nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018. These financial highlights consist of the operating performance, the internal rate of return (“IRR”) since inception of the Company, and the expense and net investment income ratios which are annualized except for the non-recurring expenses.

The IRR, net of all fees and carried interest (if any), is computed based on actual dates of the cash inflows (capital contributions), outflows (capital distributions), and the ending capital at the end of the respective period (residual value) of the non-managing members’ capital account.

The following summarizes the Company’s financial highlights for the nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018:

Nine Months Ended September 30,
2017 2016
Per unit operating performance:
Net asset value per unit, beginning of period $ 42,423
$ 42,451
Increase in members’ capital from operations ⁽¹⁾:

Net investment income 2,240
3,469
Net change in unrealized depreciation on investment 135
(202 )
Total increase in members’ capital from operations 2,375
3,267
Distributions to member ⁽²⁾:

Capital distributions (3,401 ) (3,309 )
Net decrease in members’ capital resulting from distributions (3,401 ) (3,309 )
Capital share transactions:
Other ⁽³⁾
8
181
Net increase in members’ capital resulting from capital share transactions 8
181
Net asset value per unit, end of period $ 41,405
$ 42,590


	Nine Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2019			2018
Per unit operating performance:
Net asset value per unit, beginning of period					$	39,630		$	41,143
Increase in members’ capital from operations ⁽¹⁾:
Net investment income					972			2,622
Net change in unrealized appreciation (depreciation) on investment					732			(53		)
Total increase in members’ capital from operations					1,704			2,569
Distributions to member ⁽²⁾:
Capital distributions					(3,375		)	(3,372		)
Net decrease in members’ capital resulting from distributions					(3,375		)	(3,372		)
Capital share transactions:					—			—
Net asset value per unit, end of period					$	37,959		$	40,340

Ratios to average net assets:
Expenses ⁽⁴⁾	0.22	%	0.40	%
Expenses					0.24		%	0.17		%
Net investment income	7.13	%	10.99	%	3.31		%	8.61		%

IRR, beginning of period	5.43	%	0.34	%	6.56		%	6.26		%
IRR, end of period	6.07	%	4.91	%	6.49		%	6.70		%

_______________


(1)	The per unit data was derived by using the weighted average units outstanding during the applicable periods, which were ~~6,801~~6,638 units and ~~6,935~~6,670 units for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.


(2)	The per unit data for distributions reflects the actual amount of distributions paid per ~~share~~unit during the periods.


~~(3)~~	Represents the impact of the different unit amounts used in calculating per unit data as a result of calculating certain per unit data based upon the weighted average units outstanding during the period and certain per unit data based on the units outstanding as of a period end or transaction date.


~~(4)~~	~~Total expenses used for calculating the ratio included~~ ~~$0.4 million~~ ~~of merger transaction fees for the nine months ended September 30, 2016, which are non-recurring expenses.~~

Note 9.8. 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.

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

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto and other financial information included elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us” and “our” refer to Terra Secured Income Fund 5, LLC and its consolidated subsidiaries.

FORWARD-LOOKING STATEMENTS

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

our expected financial performance, operating results and our ability to make distributions to our members 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 ~~investment~~ objectives and strategies;

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

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

changes in our investment objectives and business strategy;

the availability of financing on acceptable terms or at all;

the performance and financial condition of our borrowers;

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

borrower defaults or decreased recovery rates from our borrowers;

changes in prepayment rates on our ~~investments;~~loans;

our use of financial leverage;

actual and potential conflicts of interest with any of the following affiliated entities: Terra Fund Advisors, LLC (“Terra Fund Advisors”), Terra REIT Advisors, LLC (“Terra REIT Advisors”), Terra Income Advisors, LLC (“Terra Income Advisors”~~, or the “Manager”~~); Terra Capital Partners, LLC (“Terra Capital Partners”), our sponsor; Terra Secured Income Fund, LLC (“Terra Fund 1”); Terra Secured Income Fund 2, LLC (“Terra Fund 2”); Terra Secured Income Fund 3, LLC (“Terra Fund 3”); Terra Secured Income Fund 4, LLC (“Terra Fund 4”); Terra Secured Income Fund 5 International; Terra Income Fund International; Terra Secured Income Fund 7, LLC; Terra Property Trust, Inc. (“Terra Property Trust”), our wholly-owned subsidiary; Terra Property Trust 2, Inc., a subsidiary of Terra Secured Income Fund 7, LLC; Terra International Fund 3, L.P. (“Terra International 3”); Terra International Fund 3 REIT, LLC (“Terra International 3 REIT”), a subsidiary of Terra International 3; Terra Capital Advisors, LLC; Terra Capital Advisors 2, LLC; Terra Income Advisors 2, LLC; or any of their affiliates;

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

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

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

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

the degree and nature of our competition.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the ~~forward-~~

~~looking~~forward-looking statements for any reason, including the factors set forth ~~as “Risk~~in “Part I — Item 1A. Risk Factors” in our ~~registration statement~~annual report on Form ~~10.~~10-K for the year ended December 31, 2018. Other factors that could cause actual results to differ materially include:

changes in the economy;

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

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

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

Overview

We are a ~~specialized~~ real estate ~~finance~~credit focused company that originates, structures, funds and manages high yielding commercial real estate ~~loans. We focus primarily on the origination of~~investments, including mezzanine loans, ~~which are subordinate commercial real estate loans secured by ownership interests in the entity that owns commercial real estate. We also originate~~ first mortgage loans, ~~bridge~~subordinated mortgage loans and preferred equity investments ~~in each case to~~throughout the United States. Our loans finance the acquisition, construction, development or redevelopment of ~~high~~ quality commercial real estate in the ~~U.S.~~United States. We focus on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties in primary and secondary markets. We believe loans of this size are subject to less competition, offer higher risk adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. We were formed as a Delaware limited liability company on April 24, 2013 and commenced operations on August 8, 2013. We make substantially all of our investments and conduct substantially all of our real estate lending business through ~~our wholly-owned subsidiary,~~ Terra Property ~~Trust.~~Trust, which has elected to be taxed as a REIT for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2016. Our ~~objective is~~objectives are to ~~continue~~(i) preserve our members’ capital contributions, (ii) realize income from our investments and (iii) make monthly distributions to ~~provide attractive risk-adjusted returns to~~our members ~~primarily through distributions.~~from cash generated from investments. There can be no assurances that we will be successful in meeting our ~~objective.~~objectives.

On January 1, 2016, Terra Fund 1, Terra Fund 2, Terra Fund 3 and Terra Fund 4 merged with and into our subsidiaries (individually, each a “Terra Fund” and collectively, the “Terra Funds”) through a series of separate mergers (collectively, the “Merger”). Following the Merger, we contributed the consolidated portfolio of net assets of the Terra Funds to Terra Property Trust in exchange for all of the common shares of Terra Property Trust. We elected to engage in these transactions, which we refer to ~~continue~~as the “REIT formation transactions,” to make our ~~business as a REIT for U.S. federal income tax purposes,~~investments through Terra Property Trust and to provide our members with a more broadly diversified portfolio of assets, while at the same time providing us with enhanced access to capital and borrowings, lower operating costs and enhanced opportunities for growth.

~~Our investment activities are externally managed by our Manager,~~On February 8, 2018, Terra Capital Partners caused (i) a new subsidiary of Terra Capital Partners, Terra REIT Advisors, to become the external manager of Terra Property Trust, (ii) a ~~real estate finance~~new subsidiary of Terra Capital Partners, Terra Fund Advisors, to be admitted as the replacement manager of the Company and the equity interests in Terra Fund Advisors to be distributed to the equity owners of Terra Capital Partners on a pro rata basis and (iii) the equity interests in another subsidiary of Terra Capital Partners, Terra Income Advisors, which also serves as the external advisor to Terra Income Fund 6, Inc. (“Terra Fund 6”), to be distributed to the equity owners of Terra Capital Partners on a pro rata basis. After the completion of the above steps, a pooled investment ~~firm based~~vehicle advised by Axar Capital Management L.P. (“Axar”) entered into an investment agreement with Terra Capital Partners and its affiliates (which is referred to collectively as the “Axar Transaction”), pursuant to which Axar acquired from the respective owners thereof: (i) a 49% economic interest in ~~New York City that focus primarily~~Terra Fund Advisors; (ii) a 65.7% economic and voting interest in Terra Capital Partners (and thereby Terra REIT Advisors); and (iii) an initial 49% economic interest in Terra Income Advisors. On November

30, 2018, Axar acquired the remaining 34.3% economic interest in Terra Capital Partners. On April 30, 2019, Axar acquired the remaining 51% economic interest in Terra Income Advisors. When used herein the term “Manager” refers to Terra Income Advisors for periods prior to February 8, 2018 and refers to Terra Fund Advisors beginning on ~~the origination and management of mezzanine loans, as well as first mortgage loans, bridge loans, and preferred equity investments in all major property types.~~such date.

Portfolio Summary

The following tables provide a summary of Terra Property Trust’s net loan portfolio as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

September 30, 2017
Fixed Rate
Floating
Rate ⁽¹⁾
Total Gross Loans Obligations under Participation Agreements Total Net Loans
Number of loans 32
1
1
33
19
33
Principal balance $ 274,799,217
$ 52,986,912
$ 327,786,129
70,020,950
$ 257,765,179
Amortized cost 278,381,358
53,494,280
331,875,638
70,992,661
260,882,977
Fair value 278,265,904
53,637,569
331,903,473
70,910,091
260,993,382
Weighted average coupon rate 12.60 % 9.73 % 12.13 % 12.49 % 11.99 %
Weighted-average remaining
terms (year)
1.68
0.44
1.48
1.26
1.54



	September 30, 2019
	Fixed Rate			Floating Rate ^(1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements			Total Net Loans
Number of loans	11			13			24			15			24
Principal balance	$	98,377,479		$	241,518,248		$	339,895,727		$	97,688,326		$	242,207,401
Amortized cost	99,417,649			241,466,524			340,884,173			98,315,641			242,568,532
Fair value	99,522,403			242,419,972			341,942,375			98,321,184			243,621,191
Weighted average coupon rate	12.12		%	9.89		%	10.53		%	12.05		%	9.92		%
Weighted-average remaining term (years)	2.11			1.98			2.02			1.60			2.19


	December 31, 2016														December 31, 2018
	Fixed Rate			Floating Rate ⁽¹⁾			Total Gross Loans			Obligations under Participation Agreements		Total Net Loans			Fixed Rate			Floating Rate ^(1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements		Total Net Loans
Number of loans	37			1			38			11		38			20			9			29			18		29
Principal balance	$	275,554,910		$	50,450,061		$	326,004,971		32,635,785		$	293,369,186		$	163,486,937		$	221,554,764		$	385,041,701		113,458,723		$	271,582,978
Amortized cost	279,781,074			50,902,766			330,683,840			32,986,194		297,697,646			164,989,811			223,254,163			388,243,974			114,298,591		273,945,383
Fair value	278,931,283			50,924,056			329,855,339			32,904,955		296,950,384			164,578,464			223,291,666			387,870,130			114,189,654		273,680,476
Weighted average coupon rate	12.98		%	9.19		%	12.38		%	12.96	%	12.33		%	12.54		%	11.35		%	11.86		%	12.22	%	11.70		%
Weighted-average remaining terms (year)	1.42			1.19			1.39			1.35		1.37
Weighted-average remaining term (years)															1.84			2.05			1.96			1.84		2.01

_______________


(1)	~~This loan pays an annual~~These loans pay a coupon rate of London Interbank Offered Rate (“LIBOR”) plus ~~8.5% with~~ a ~~LIBOR floor of 0.5%.~~fixed spread. Coupon rate shown was determined using ~~the applicable annual coupon rate~~LIBOR of 2.02% and 2.50% as of September 30, ~~2017~~2019 and December 31, ~~2016.~~2018.


(2)	As of September 30, 2019 and December 31, 2018, amounts included $73.2 million and $57.3 million, respectively, of senior mortgages used as collateral for $51.3 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%.


(3)	As of September 30, 2019 and December 31, 2018, ten and eight of these loans, respectively, are subject to a LIBOR floor.

In addition to its net loan portfolio, as of September 30, 2019, Terra Property Trust owns 4.9 acres of adjacent land acquired via deed in lieu of foreclosure and a multi-tenant office building acquired via foreclosure. The land and building and related lease intangible assets and liabilities had a net carrying value of $67.0 million and $56.0 million as of September 30, 2019 and December 31, 2018, respectively. The mortgage loan payable encumbering the office building had an outstanding principal amount of $44.7 million and $45.0 million as of September 30, 2019 and December 31, 2018, respectively.

Portfolio Investment Activity

For the three months ended September 30, 2019 and 2018, Terra Property Trust invested $16.2 million and $4.8 million in new and add-on loans, respectively, and had $33.0 million and $20.6 million of repayments, respectively, resulting in net repayments of $16.8 million and net investments of $15.7 million, respectively. Amounts are net of obligations under participation agreements, mortgage loan payable, repurchase agreement payable and borrowings under the revolving credit facility.

For the nine months ended September 30, 2019 and 2018, Terra Property Trust invested $44.5 million and $66.6 million in new and add-on loans, respectively, and had $78.2 million and $65.5 million of repayments, respectively, resulting in net repayments

of $33.7 million and net investments of $1.1 million, respectively. Amounts are net of obligations under participation agreements, mortgage loan payable, repurchase agreement payable and borrowings under the revolving credit facility. In addition, on January 9, 2019, Terra Property Trust 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.

Portfolio Information

The tables below ~~detail~~set forth the types of loans in Terra Property Trust’s loan portfolio, as well as the property type and geographic location of the properties securing these loans, on a net loan basis, which represents Terra Property Trust’s proportionate share of the loans, based on its economic ownership of these loans.


	September 30, 2017								December 31, 2016									September 30, 2019								December 31, 2018
Loan Structure	Principal Balance		Amortized Cost		Fair Value		% of Total		Principal Balance		Amortized Cost			Fair Value		% of Total		Principal Balance		Amortized Cost		Fair Value		% of Total		Principal Balance		Amortized Cost		Fair Value		% of Total
First mortgages	$	106,946,912	$	107,981,096	$	108,124,338	41.4	%	$	117,890,016	$	118,995,391		$	119,018,338	40.1	%	$	105,176,382	$	104,751,576	$	105,700,847	43.4	%	$	95,141,290	$	96,352,394	$	96,391,095	35.2	%
Preferred equity investments																		104,969,220		105,374,774		105,397,836		43.3	%	110,099,644		110,540,228		110,470,658		40.4	%
Mezzanine loans	89,335,269		90,756,354		90,821,211		34.8	%	118,524,437		121,037,421			120,466,609		40.6	%	32,061,799		32,442,182		32,522,508		13.3	%	66,342,044		67,052,761		66,818,723		24.4	%
Preferred equity investments	53,482,998		54,065,527		53,968,834		20.7	%	47,415,691		48,229,921			47,838,821		16.1	%
Other ⁽¹⁾	8,000,000		8,080,000		8,078,999		3.1	%	9,539,042		9,626,616			9,626,616		3.2	%
Allowance for loan losses	—		—		—		—	%	—		(191,703		)	—		—	%
Total	$	257,765,179	$	260,882,977	$	260,993,382	100.0	%	$	293,369,186	$	297,697,646		$	296,950,384	100.0	%	$	242,207,401	$	242,568,532	$	243,621,191	100.0	%	$	271,582,978	$	273,945,383	$	273,680,476	100.0	%



	September 30, 2019								December 31, 2018
Property Type	Principal Balance		Amortized Cost		Fair Value		% of Total		Principal Balance		Amortized Cost		Fair Value		% of Total
Office	$	99,880,319	$	99,452,712	$	100,248,246	41.1	%	$	32,555,575	$	32,628,200	$	32,628,200	11.9	%
Multifamily	56,835,660		57,065,075		57,255,842		23.5	%	31,099,953		31,366,215		31,307,286		11.4	%
Student housing	37,107,793		37,468,165		37,386,272		15.3	%	40,450,320		40,857,137		40,716,877		14.9	%
Infill land	29,644,375		29,756,375		29,730,641		12.3	%	58,491,314		58,726,783		58,724,373		21.5	%
Hotel	9,869,254		9,946,038		9,949,201		4.1	%	69,756,765		70,832,816		70,873,011		25.9	%
Industrial	7,000,000		7,000,000		7,164,239		2.9	%	7,000,000		7,000,000		6,895,383		2.5	%
Condominium	1,870,000		1,880,167		1,886,750		0.8	%	32,229,051		32,534,232		32,535,346		11.9	%
Total	$	242,207,401	$	242,568,532	$	243,621,191	100.0	%	$	271,582,978	$	273,945,383	$	273,680,476	100.0	%



	September 30, 2019								December 31, 2018
Geographic Location	Principal Balance		Amortized Cost		Fair Value		% of Total		Principal Balance		Amortized Cost		Fair Value		% of Total
United States
California	$	65,957,112	$	65,708,984	$	66,357,903	27.2	%	$	48,459,159	$	48,756,874	$	48,768,414	17.8	%
New York	52,229,688		52,281,761		52,243,507		21.4	%	81,504,101		81,860,466		81,866,377		29.9	%
Georgia	50,384,382		50,335,327		50,625,059		20.8	%	12,346,939		12,470,408		12,469,169		4.6	%
North Carolina	28,251,663		28,387,620		28,396,611		11.7	%	4,787,414		4,821,252		4,826,213		1.8	%
Washington	13,525,556		13,615,861		13,679,631		5.6	%	13,304,278		13,386,747		13,344,750		4.9	%
Illinois	8,909,490		8,988,794		8,988,794		3.7	%	11,139,020		11,228,212		11,228,212		4.1	%
Massachusetts	7,000,000		7,000,000		7,164,239		2.9	%	7,000,000		7,000,000		6,895,383		2.5	%
Florida	3,925,000		3,964,250		3,963,823		1.6	%	61,194,351		62,206,934		62,249,920		22.7	%
Texas	2,450,000		2,471,553		2,473,878		1.1	%	2,450,000		2,469,608		2,458,728		0.9	%
Ohio	—		—		—		—	%	5,452,125		5,495,781		5,495,781		2.0	%
Colorado	—		—		—		—	%	4,027,736		4,068,014		4,067,543		1.5	%
Alabama	—		—		—		—	%	3,700,000		3,763,796		3,736,506		1.4	%
Pennsylvania	—		—		—		—	%	14,325,000		14,325,000		14,325,000		5.2	%
Other ⁽¹⁾	9,574,510		9,814,382		9,727,746		4.0	%	1,892,855		2,092,291		1,948,480		0.7	%
Total	$	242,207,401	$	242,568,532	$	243,621,191	100.0	%	$	271,582,978	$	273,945,383	$	273,680,476	100.0	%

_______________


(1)	Other includes ~~$8.0~~$7.7 million of unused ~~cash from~~portion of a credit facility at September 30, ~~2017 and $9.5~~2019. Other also includes a $1.9 million ~~of unused cash from two credit facilities at December 31, 2016.~~

September 30, 2017 December 31, 2016
Property Type Principal Balance Amortized Cost Fair
Value % of Total Principal Balance Amortized Cost Fair
Value % of Total
Multifamily $ 71,765,501
$ 72,775,385
$ 72,426,060
27.8 % $ 83,510,933
$ 85,021,199
$ 84,556,067
28.5 %
Office 57,382,912
57,930,352
58,076,047
22.3 % 69,506,033
70,159,209
70,158,868
23.6 %
Land 53,960,000
54,486,816
54,486,769
20.8 % 53,746,133
54,255,486
54,258,353
18.2 %
Hotel 53,922,152
54,641,489
54,562,580
20.9 % 66,351,287
67,557,902
67,077,247
22.6 %
Industrial 7,000,000
7,000,000
7,000,000
2.7 % —
—
—
— %
Student housing 5,734,614
5,968,935
6,362,927
2.4 % 5,700,000
6,125,635
6,215,839
2.1 %
Mixed use —
—
—
— % 2,515,758
2,533,450
2,527,566
0.9 %
Other ⁽¹⁾
8,000,000
8,080,000
8,078,999
3.1 % 12,039,042
12,236,468
12,156,444
4.1 %
Allowance for
loan losses
—
—
—
— % —
(191,703 ) —
— %
Total $ 257,765,179
$ 260,882,977
$ 260,993,382
100.0 % $ 293,369,186
$ 297,697,646
$ 296,950,384
100.0 %

~~_______________~~


~~(1)~~	~~Other includes $8.0 million of unused cash from a credit facility~~loan with collateral located in South Carolina at September 30, ~~2017~~2019 and ~~$9.5 million of unused cash from two credit facilities at~~ December 31, ~~2016. Other also includes $2.5 million of retail properties as of December 31, 2016.~~2018.

September 30, 2017 December 31, 2016
Geographic Location Principal Balance Amortized Cost Fair
Value % of Total Principal Balance Amortized Cost Fair
Value % of Total
United States
California $ 90,816,912
$ 91,818,221
$ 91,838,599
35.2 % $ 89,925,061
$ 91,165,200
$ 90,798,926
30.5 %
New York 37,805,463
38,107,156
38,068,216
14.5 % 37,032,965
37,324,858
37,315,430
12.6 %
Florida 34,529,152
34,851,771
34,858,786
13.3 % 49,122,324
49,520,673
49,320,018
16.6 %
Washington 20,250,000
20,360,848
20,417,124
7.8 % —
—
—
— %
Pennsylvania 15,410,000
15,554,693
15,564,431
6.0 % 18,982,000
19,162,115
19,184,642
6.5 %
Georgia 15,250,000
15,588,190
15,386,904
5.9 % 4,250,000
4,604,941
4,387,683
1.5 %
Texas 7,651,038
7,879,004
7,764,279
3.0 % 9,139,038
9,363,678
9,330,002
3.1 %
Massachusetts 7,000,000
7,000,000
7,000,000
2.7 % 4,000,000
4,112,275
4,071,618
1.4 %
Delaware 4,396,000
4,436,072
4,438,478
1.7 % 7,000,000
7,057,616
7,086,338
2.4 %
Alabama 3,700,000
3,775,021
3,744,552
1.4 % 3,844,445
3,928,742
3,882,318
1.3 %
Oregon 3,140,000
3,273,511
3,290,784
1.3 % 5,000,000
5,356,923
5,324,812
1.8 %
North Carolina 2,198,000
2,222,837
2,219,723
0.9 % 4,921,404
4,985,576
4,985,280
1.7 %
Tennessee 1,884,000
1,966,718
1,959,580
0.8 % 9,877,843
10,179,485
10,047,055
3.4 %
New Jersey —
—
—
— % 22,639,955
22,865,291
22,864,082
7.7 %
Virginia —
—
—
— % 6,675,510
6,737,238
6,737,238
2.3 %
Arizona —
—
—
— % 5,719,598
5,772,487
5,772,487
1.9 %
Other ⁽¹⁾
13,734,614
14,048,935
14,441,926
5.5 % 15,239,043
15,752,251
15,842,455
5.3 %
Allowance for
loan losses
—
—
—
— % —
(191,703 ) —
— %
Total $ 257,765,179
$ 260,882,977
$ 260,993,382
100.0 % $ 293,369,186
$ 297,697,646
$ 296,950,384
100.0 %

~~_______________~~


~~(1)~~	Other includes $8.0 million of unused cash from a credit facility, $2.7 million of properties in Indiana, $1.9 million of properties in South Carolina and $1.1 million of properties in Utah at September 30, 2017. Other includes $9.5 million of unused cash from two credit facilities, $2.7 million of properties in Indiana and $3.0 million of properties in South Carolina at December 31, 2016.

Factors Impacting Operating Results

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

Market Risk

Terra Property Trust’s loans are highly illiquid and there is no assurance that it will achieve its investment objectives, including targeted returns. Due to the illiquidity of the loans, valuation of Terra Property Trust’s loans may be difficult, as there generally will be no established markets for these loans.

Credit Risk

Credit risk represents the potential loss that Terra Property Trust would incur if the borrowers failed to perform pursuant to the terms of their obligations to Terra Property Trust. Terra Property Trust ~~minimizes its~~manages exposure to credit risk by limiting exposure to any one individual borrower and any one asset class. Additionally, Terra Property Trust employs an asset management approach and ~~monitor~~monitors the portfolio of loans, through, at a minimum, quarterly financial review of property performance including net operating income, loan-to-value ratio, debt service coverage ratio, and the debt yield. Terra Property Trust also requires certain borrowers to establish a cash reserve, as a form of additional collateral, for the purpose of providing for future interest or property-related operating payments.

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

In addition, Terra Property Trust is exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond its control. Terra Property Trust seeks to manage these risks through its underwriting and asset management processes.

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

Concentration Risk

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

Liquidity Risk

Liquidity risk represents the possibility that we may not be able to sell our ~~positions~~equity interest in Terra Property Trust at a reasonable price in times of low trading volume, high volatility and financial stress.

Interest Rate Risk

Interest rate risk represents the effect from a change in interest rates, which could result in an adverse change in the fair value of our interest-bearing financial instruments. With respect to Terra Property Trust’s business operations, increases in interest rates, in general, may over time cause: (i) the interest expense associated with variable rate borrowings to increase; (ii) the value of real estate-related loans to decline; (iii) coupons on variable rate loans to reset, although on a delayed basis, to higher interest rates; (iv) to the extent applicable under the terms of Terra Property Trust’s investments, prepayments on real estate-related loans to

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

Prepayment Risk

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

Extension Risk

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

Real Estate Risk

The market values of commercial and residential mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause Terra Property Trust to suffer losses.

Use of Leverage

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

Results of Operations

The following table presents the comparative results of our operations for the three and nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018:


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended September 30,								Nine Months Ended September 30,
	2017		2016			Change			2017		2016			Change			2019		2018			Change			2019		2018			Change
Investment income
Dividend income	$	4,448,792	$	9,824,336		$	(5,375,544	)	$	15,703,171	$	25,042,346		$	(9,339,175	)	$	2,994,149	$	5,487,805		$	(2,493,656	)	$	6,917,024	$	17,829,718		$	(10,912,694	)
Other operating income	111		614			(503		)	1,064		8,571			(7,507		)	82		137			(55		)	474		1,140			(666		)
Total investment income	4,448,903		9,824,950			(5,376,047		)	15,704,235		25,050,917			(9,346,682		)	2,994,231		5,487,942			(2,493,711		)	6,917,498		17,830,858			(10,913,360		)
Operating expenses
Professional fees	104,100		269,635			(165,535		)	431,465		549,211			(117,746		)	182,081		126,966			55,115			453,414		334,802			118,612
Merger transaction fees	—		—			—			—		388,692			(388,692		)
Other	3,448		(38,342		)	41,790			35,761		52,954			(17,193		)	686		2,891			(2,205		)	9,645		10,832			(1,187		)
Total operating expenses	107,548		231,293			(123,745		)	467,226		990,857			(523,631		)	182,767		129,857			52,910			463,059		345,634			117,425
Net investment income	4,341,355		9,593,657			(5,252,302		)	15,237,009		24,060,060			(8,823,051		)
Net change in unrealized depreciation on investment	428,032		(730,673		)	1,158,705			920,026		(1,400,694		)	2,320,720
Net investment (loss) income																	2,811,464		5,358,085			(2,546,621		)	6,454,439		17,485,224			(11,030,785		)
Net change in unrealized appreciation (depreciation) on investment																	1,655,207		(179,846		)	1,835,053			4,853,466		(355,600		)	5,209,066
Net increase in members’ capital resulting from operations	$	4,769,387	$	8,862,984		$	(4,093,597	)	$	16,157,035	$	22,659,366		$	(6,502,331	)	$	4,466,671	$	5,178,239		$	(711,568	)	$	11,307,905	$	17,129,624		$	(5,821,719	)

Dividend Income

Dividend income associated with our ownership of Terra Property Trust represents Terra Property Trust’s net income for the period. Any excess of distributions received from Terra Property Trust over its net income is recorded as return of capital.

For the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, we received distributions of ~~$13.1~~$7.6 million and ~~$9.6~~$8.1 million, respectively, or ~~$0.88~~$0.51 and ~~$0.65~~$0.54 per share, respectively, from Terra Property Trust, of which ~~$4.4~~$3.0 million and ~~$9.6~~$5.5 million was recorded as dividend income, respectively, ~~representing Terra Property Trust’s net income for the periods presented,~~ and ~~$8.7~~$4.6 million and ~~none~~$2.6 million was recorded as return of capital, respectively. The $5.4 million decrease in Terra Property Trust’s net income was primarily due to (i) $3.6 million of prepayment fee income received from one loan during the three months ended September 30, 2016 as the borrower repaid the loan two years before the scheduled maturity date; (ii) a decrease in net interest income of 0.8 million as a result of lower weighted average principal balance and lower weighted average coupon rate; and (iii) operating income of $0.5 million for three months ended September 30, 2016 from Terra Park Green Members, LLC (“Terra Park Green”), a wholly-owned subsidiary of Terra Property Trust that owned two commercial office building parks and the related operations, which was subsequently sold in November 2016. The $8.7 million increase in return of capital was primarily due to the decrease in Terra Property Trust’s net income as well as additional cash needed to redeem Terra Fund 3’s Termination Units.

For the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, we received distributions of ~~$29.7~~$22.8 million and ~~$25.4~~$24.9 million, respectively, or ~~$1.99~~$1.53 and ~~$1.71~~$1.67 per share, respectively, from Terra Property Trust, of which ~~$15.7~~$6.9 million and ~~$25.0~~$17.8 million was recorded as dividend income, respectively, ~~representing Terra Property Trust’s net income for the periods presented,~~ and ~~$14.0~~$15.8 million and ~~$0.3~~$7.1 million was recorded as return of capital, respectively. ~~The $9.3 million decrease in Terra Property Trust’s net income was primarily due to (i) $3.6 million of prepayment fee income received from one loan during~~

For the three months ended September 30, ~~2016~~2019 as compared to the ~~borrower repaid the loan two years before the scheduled maturity date; (ii)~~same period in 2018, Terra Property Trust’s net income decreased by $2.3 million, primarily due to a $1.5 million decrease in net interest income ~~of 3.7 million~~ as a result of ~~lower~~a decrease in the weighted average outstanding principal balance ~~lower~~of net investments resulting from a higher volume of loan repayments than new loan originations and a decrease in the weighted average interest rate on net investments driven by new loan originations having lower coupon ~~rate~~rates than those of the loans that were repaid, and ~~the suspension of $1.2~~a $0.5 million ~~of net interest income accrual on two loans as discussed~~decrease in “~~Annualized Net Effective Yield” below; and (iii) operating income of $1.5 million for~~prepayment fee received.

For the nine months ended September 30, ~~2016 from Terra Park Green which was subsequently sold in November 2016. The $13.7 million increase in return of capital was primarily due~~2019 as compared to the ~~decrease~~same period in 2018, Terra Property Trust’s net income decreased by $10.9 million, primarily due to (i) a $3.7 million decrease in net interest income as ~~well~~a result of a decrease in the weighted average outstanding principal balance of net investments resulting from a higher volume of loan repayments than new loan originations and a decrease in the weighted average interest rate on net investments driven by new loan originations having lower coupon rates than those of the loans that were repaid; and (ii) $2.4 million of professional fees directly incurred, and which were previously deferred, in contemplation of Terra Property Trust consummating an initial public offering which, in the second quarter of 2019, management decided to postpone indefinitely. Terra Property Trust’s net income also decreased as ~~additional cash needed~~a result of a $2.2 million decrease in prepayment fee received and an $1.6 million impairment charge recorded for the nine months ended September 30, 2019 on a piece of land in order to ~~redeem Terra Fund 3’s Termination Units.~~

reduce the carrying value of the land to its estimated fair value.

Net Loan Portfolio

In assessing the performance of Terra Property Trust’s loans, we believe it is appropriate to evaluate the loans on an economic basis, that is, gross loans net of obligations under participation agreements, ~~and~~ mortgage loan payable and repurchase agreement payable.

The following tables present a reconciliation of Terra Property Trust’s loan portfolio from a gross basis to a net basis for the three and nine months ended September 30, ~~2017~~2019 and ~~2016:~~

Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
Weighted Average Principal Amount Weighted Average Coupon Rate Weighted Average Principal Amount Weighted Average Coupon Rate
Gross loans $ 314,920,884
12.1% $ 318,263,084
12.5%
Obligations under participation
   agreements
(68,234,833 ) 12.5% (24,792,000 ) 13.2%
Mortgage loan payable (34,000,000 ) 5.7% (34,000,000 ) 5.8%
Net loans $ 212,686,051

      13.0% ⁽¹⁾
$ 259,471,084

   13.3% ⁽¹⁾
2018:


	Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016				Three Months Ended September 30, 2019				Three Months Ended September 30, 2018
	Weighted Average Principal Amount			Weighted Average Coupon Rate	Weighted Average Principal Amount			Weighted Average Coupon Rate	Weighted Average Principal Amount ⁽¹⁾			Weighted Average Coupon Rate ⁽²⁾	Weighted Average Principal Amount ⁽¹⁾			Weighted Average Coupon Rate ⁽²⁾
Total portfolio
Gross loans	$	338,889,294		12.0%	$	309,970,724		12.8%	$	374,934,899		10.5%	$	348,579,866		12.7%
Obligations under participation agreements	(52,385,371		)	12.4%	(22,848,289		)	13.4%	(96,876,184		)	12.1%	(94,438,132		)	12.7%
Mortgage loan payable	(36,928,955		)	5.7%	(30,435,055		)	5.8%	—			—%	(11,389,269		)	7.3%
Net loans	$	249,574,968		12.8% ⁽¹⁾	$	256,687,380		13.6% ⁽¹⁾
Repurchase agreement payable									(72,591,206		)	4.5%	—			—%
Revolving credit facility									(347,826		)	6.4%	—			—%
Net loans ⁽³⁾									$	205,119,683		11.8%	$	242,752,465		12.9%
Senior loans
Gross loans									$	143,834,648		7.6%	$	78,020,652		11.6%
Obligations under participation agreements									(6,800,000		)	12.0%	(21,953,061		)	12.0%
Mortgage loan payable									—			—%	(11,389,269		)	7.3%
Repurchase agreement payable									(72,591,206		)	4.5%	—			—%
Net loans ⁽³⁾									$	64,443,442		10.7%	$	44,678,322		12.5%
Subordinated loans ⁽⁴⁾
Gross loans									$	231,100,251		12.3%	$	270,559,214		13.0%
Obligations under participation agreements									(90,076,184		)	12.1%	(72,485,071		)	12.9%
Revolving credit facility									(347,826		)	6.4%	—			—%
Net loans ⁽³⁾									$	140,676,241		12.4%	$	198,074,143		13.1%



	Nine Months Ended September 30, 2019				Nine Months Ended September 30, 2018
	Weighted Average Principal Amount ⁽¹⁾			Weighted Average Coupon Rate ⁽²⁾	Weighted Average Principal Amount ⁽¹⁾			Weighted Average Coupon Rate ⁽²⁾
Total portfolio
Gross loans	$	370,659,620		10.8%	$	349,249,585		12.6%
Obligations under participation agreements	(96,571,005		)	12.2%	(81,621,459		)	12.7%
Mortgage loan payable	—			—%	(26,313,017		)	7.1%
Repurchase agreement payable	(66,824,004		)	4.7%	—			—%
Revolving credit facility	(117,216		)	6.4%	—			—%
Net loans ⁽³⁾	$	207,147,395		12.1%	$	241,315,109		13.1%
Senior loans
Gross loans	$	132,815,080		7.9%	$	104,708,261		11.4%
Obligations under participation agreements	(8,391,500		)	12.0%	(22,475,039		)	12.0%
Mortgage loan payable	—			—%	(26,313,017		)	7.1%
Repurchase agreement payable	(66,824,004		)	4.5%	—			—%
Net loans ⁽³⁾	$	57,599,576		11.3%	$	55,920,205		13.3%
Subordinated loans ⁽⁴⁾
Gross loans	$	237,844,540		12.4%	$	244,541,324		13.1%
Obligations under participation agreements	(88,179,505		)	12.2%	(59,146,420		)	13.0%
Revolving credit facility	(117,216		)	6.4%	—			—%
Net loans ⁽³⁾	$	149,547,819		12.5%	$	185,394,904		13.1%

_______________


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


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


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


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

For the three and nine months ended September 30, ~~2017~~2019 as compared to the same periods in ~~2016,~~2018, the decrease in weighted average coupon rate was due to an increase in investments in senior loans, which are typically larger principal-balance loans paying lower levels of interest reflecting the lower perceived risk due to their senior position in the borrower's capital structure as compared to investments in subordinated loans, as well as the new subordinated loans we originated and purchased during the current periods have coupon rates that are lower than those of the maturing subordinated loans.

~~Annualized Net Effective Yield~~

~~The following table presents a calculation of Terra Property Trust’s annualized net effective yield on its net loan portfolio for the periods presented:~~

Three Months Ended September 30,
2017 2016 Change
Interest income $ 9,598,478
$ 9,245,815
$ 352,663
Interest expense — obligations under participation agreements (2,001,349 ) (839,996 ) (1,161,353 )
Interest expense — mortgage loan payable (625,477 ) (503,466 ) (122,011 )
Net interest income $ 6,971,652
$ 7,902,353
$ (930,701 )

Weighted average carrying value of gross loans $ 320,242,875
$ 325,305,778
$ (5,062,903 )
Weighted average carrying value of obligations under
participation agreements
(69,032,326 ) (25,292,536 ) (43,739,790 )
Weighted average carrying value of mortgage loan payable (33,921,185 ) (33,736,918 ) (184,267 )
Weighted average carrying value of net loans $ 217,289,364
$ 266,276,324
$ (48,986,960 )

Annualized net effective yield ⁽¹⁾
12.7 % 12.7 % — %

Three Months Ended September 30,
2017 2016 Change
Senior loans
Weighted average carrying value of net loans $ 84,784,385
$ 71,433,279
$ 13,351,106
Annualized net effective yield ⁽¹⁾
11.4 % 12.7 % (1.3 )%
Subordinated loans
Weighted average carrying value of net loans $ 132,504,979
$ 194,843,045
$ (62,338,066 )
Annualized net effective yield ⁽¹⁾
13.4 % 12.6 % 0.8 %

Nine Months Ended September 30,
2017 2016 Change
Interest income $ 27,721,062
$ 29,008,206
$ (1,287,144 )
Interest expense — obligations under participation agreements (4,712,165 ) (2,321,418 ) (2,390,747 )
Interest expense — mortgage loan payable (2,021,006 ) (1,174,968 ) (846,038 )
Net interest income $ 20,987,891
$ 25,511,820
$ (4,523,929 )

Weighted average carrying value of gross loans $ 345,427,543
$ 318,048,375
$ 27,379,168
Weighted average carrying value of obligations under
participation agreements
(56,230,271 ) (23,284,885 ) (32,945,386 )
Weighted average carrying value of mortgage loan payable (36,737,795 ) (26,701,336 ) (10,036,459 )
Weighted average carrying value of net loans $ 252,459,477
$ 268,062,154
$ (15,602,677 )

Annualized net effective yield ⁽¹⁾
11.4 % 12.8 % (1.4 )%

Senior loans
Weighted average carrying value of net loans $ 104,279,060
$ 61,575,436
$ 42,703,624
Annualized net effective yield ⁽¹⁾
9.2 % 13.0 % (3.8 )%
Subordinated loans
Weighted average carrying value of net loans $ 148,180,417
$ 206,486,718
$ (58,306,301 )
Annualized net effective yield ⁽¹⁾
12.8 % 12.6 % 0.2 %

~~_______________~~


~~(1)~~	Represents the annualized net interest income divided by the weighted average carrying value of net loans during the period. We do not annualize one-time transaction fee income and expenses such as net origination fee income or expenses and net exit fee income or expenses.

~~The following table presents the components of the annualized net effective yield on Terra Property Trust’s net loan portfolio:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change 2017 2016 Change
Net contractual interest income ⁽¹⁾
12.7 % 13.3 % (0.6 )% 12.5 % 13.5 % (1.0 )%
Non-collection of interest income, net ⁽²⁾
— % — % — % (0.5 )% — % (0.5 )%
Amortization of net purchase premium ⁽³⁾
(0.1 )% (0.6 )% 0.5 % (0.5 )% (0.7 )% 0.2 %
Net transaction fee income (expense) 0.1 % — % 0.1 % (0.1 )% — % (0.1 )%
Total 12.7 % 12.7 % — % 11.4 % 12.8 % (1.4 )%

~~_______________~~


~~(1)~~	~~The decrease was primarily due to a decrease in weighted average coupon rate (see “Net Loan Portfolio” above).~~


~~(2)~~	The increase was primarily due to a decrease in amortization of net purchase premium as a result of the majority of the net purchase premium recognized in connection with the Merger in 2016 became substantially amortized.


~~(3)~~	During the nine months ended September 30, 2017, Terra Property Trust did not receive interest income payment of $1.2 million, net of interest expense on obligations under participation agreements, on a senior loan and a subordinated loan. In July 2017, the principal balances of these two loans were repaid in full.

~~Professional Fees~~

~~For the three and nine months ended September 30, 2017 as compared to the same periods in 2016, professional fees decreased by $0.2 million and $0.1 million, respectively,~~ primarily due to ~~professional fees incurred in 2016 related to the additional SEC financial statement audit and reporting requirements in relation to the initial filing~~a higher volume of ~~our registration statement on Form 10.~~loan originations with lower coupon rates.

~~Merger Transaction Fees~~

Merger transaction fees represent fees incurred in connection with the Merger. Terra Capital Markets, LLC, an affiliate of our Manager, served as the dealer manager for the consent solicitation and was paid a voting advisory fee of $750 per initial unit sold to members of the Terra Funds and a dealer manager fee of 0.5% of the aggregate offering price of the units originally issued by the Terra Funds. Most of these fees were re-allowed to participating dealers. The Terra Funds also incurred costs for legal, accounting, and other professional services in connection with the consent solicitation.

For the three and nine months ended September 30, 2017 and the three months ended September 30, 2016, there were no merger transaction fees recorded. For the nine months ended September 30, 2016, we recorded additional merger transaction fees of $0.4 million.

Net Change in Unrealized ~~Depreciation~~Appreciation (Depreciation) on Investment

Net change in unrealized appreciation or depreciation on investment reflects the change in Terra Property Trust’s ~~net loan portfolio~~fair value during the reporting ~~period, including any reversal of previously recorded unrealized gains or losses, when gains or losses are realized.~~period. There may be fluctuations in unrealized gains and losses of the underlying portfolio as loans within the portfolio approach their respective maturity ~~dates and fair value premiums are amortized or discounts are accreted to each loan’s respective collectible value.~~dates. In addition, the unrealized gains or losses in the portfolio may fluctuate over time due to changes in the market ~~yields or carrying value adjustments such as the amortization or accretion of premiums, discounts, origination fees, and exit fees.~~yields.

~~2017~~2019 — For the three and nine months ended September 30, ~~2017,~~2019, we recorded ~~a decrease~~an increase in unrealized ~~depreciation~~appreciation on ~~investment~~investments of ~~$0.4~~$1.7 million and ~~$0.9~~$4.9 million, respectively, ~~primarily due to~~as the ~~amortization of a substantial portion of the net purchase premiums recognized in connection with the Merger in 2016, which reduced the carrying~~fair value of the ~~loans.~~ Company’s investment in Terra Property Trust went up as a result of higher fair values of the underlying loans and assets.

~~2016~~2018 — For the three and nine months ended September 30, ~~2016,~~2018, we recorded ~~an increase~~a decrease in the unrealized ~~depreciation~~appreciation on investment of ~~$0.7~~$0.2 million and ~~$1.4~~$0.4 million, respectively, ~~primarily due to amortization of fair value premiums on loans within the portfolio~~ as ~~they neared their respective maturity dates, which reduced~~ the fair value of the ~~loans.~~Company’s investment in Terra Property Trust decline at slightly less than the cost primarily due to higher discount rates applied to certain of the underlying loans during the periods.

Net Increase in Members’ Capital Resulting from Operations

For each of the three and nine months ended September 30, ~~2017~~2019 as compared to the same periods in ~~2016,~~2018, the resulting net increase in members’ capital results from operations decreased by ~~$4.1~~$0.7 million and ~~$6.5~~$5.8 million, respectively.

Financial Condition, Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including funding and maintaining our assets and operations, making distributions to our members and other general business needs. Our primary cash requirements for the next twelve months are making the discretionary recurring distributions to our members and, to a lesser extent, redeeming Terra Fund 4 Termination Units for approximately $2.1 million. “Termination Units” refer to the membership interest in our fund that were issued to members of Terra Funds 1 through 4 who chose to enter the liquidation phase of their investments.members. We expect to use cash distributions received from Terra Property Trust to meet such cash requirements. Terra Property Trust’s expected loan and liability maturities during the next twelve months include the sole mortgage loan payable with a principal amount of $34.0 million which matures in March 2018, assuming no extensions, and obligations under participation agreements totaling ~~$43.6 million. The first mortgage loan held by Terra Property Trust has a coupon rate of LIBOR plus 8.5%,~~$22.1 million will mature in the ~~borrowings under the mortgage loan incurred to finance the asset bear interest at an annual rate of LIBOR plus 5.25%, and the weighted average net interest spread~~

~~between the yield on the first mortgage loan and the cost of funds under the mortgage loan payable was 2.26% for the nine months ended September 30, 2017.~~next twelve months. Terra Property Trust expects to use the proceeds from the repayment of the corresponding investments to repay the ~~mortgage loan payable and~~ participation obligations. Additionally, Terra Property Trust expects to fund approximately ~~$27.4~~$83.7 million of the unfunded commitments to borrowers during the next twelve months. Terra Property Trust expects to maintain sufficient cash on hand to fund such ~~commitment~~commitments through matching these commitments with principal repayments on outstanding loans. In addition, Terra Property Trust may also issue additional equity, equity-related and debt securities to fund its investment strategies. Terra Property Trust may issue these securities to unaffiliated third parties or to vehicles advised by affiliates of Terra Capital Partners or third parties. As part of its capital raising transactions, Terra Property Trust may grant to one or more of these vehicles certain control rights over its activities including rights to approve major decisions it takes as part of its business.

On December 12, 2018, Terra Property Trust entered into a master repurchase agreement that provides for advances of up to $150 million in the aggregate, which Terra Property Trust expects to use to finance certain secured performing commercial real estate loans, including senior mortgage loans. Advances under the master repurchase agreement accrue interest at an annual rate equal to the sum of (i) the 30-day LIBOR and (ii) the applicable spread, which ranges from 2.25% to 3.00%, and have a maturity date of December 12, 2020. As of September 30, 2019, the weighted average interest rate on borrowings outstanding under the master repurchase agreement was approximately 4.5%, calculated using the 30-day LIBOR of 2.02% as of September 30, 2019. As of September 30, 2019, the amount remaining available under the repurchase agreement was $98.7 million.

On June 20, 2019, Terra Property Trust entered into a credit agreement that provides for revolving credit loans of up to $35.0 million in the aggregate, which Terra Property Trust expects to use solely for short term financing needed to bridge the timing of anticipated loans repayments and funding obligations. Borrowings under the Revolving Credit Facility can be either prime rate

loans or LIBOR rate loans and accrue interest at an annual rate of prime rate plus 1% or LIBOR plus 4% with a floor of 6%. The credit facility matures on June 20, 2020. As of September 30, 2019, the amount remaining available under the credit facility was $35.0 million.

Cash Flows Provided by Operating Activities

~~2017~~2019 — For the nine months ended September 30, ~~2017,~~2019, cash flows provided by operating activities were ~~$28.5~~$22.4 million, primarily due to ~~$29.7~~$22.8 million of dividends received from Terra Property Trust, of which ~~$14.0~~$15.8 million was recorded as a return of capital.

~~2016~~2018 — For the nine months ended September 30, ~~2016,~~2018, cash flows provided by operating activities were ~~$2.7~~$24.6 million, primarily due to ~~$25.4~~$24.9 million of dividends received from Terra Property Trust, of which ~~$0.3~~$7.1 million was recorded as a return of capital, partially offset by (i) $10.0 million used to purchase shares of common stock of Terra Property Trust; (ii) the payment of $5.3 million related to merger transaction fees that were accrued; (iii) $5.0 million of cash transferred to Terra Property Trust in connection with the Merger; (iv) $0.7 million reimbursed to the Manager for merger transaction fees paid; and (v) a $0.6 million of state and local tax paid in connection with the filing of the 2015 tax returns.capital.

Cash Flows used in Financing Activities

~~2017~~2019 — For the nine months ended September 30, ~~2017,~~2019, cash flows used in financing activities ~~was $28.4~~were $22.4 million ~~consisting of~~primarily related to distributions paid to ~~members of $23.1 million and cash of $5.3 million used to primarily redeem Terra Fund 3 Termination Units.~~members.

~~2016~~2018 — For the nine months ended September 30, ~~2016,~~2018, cash flows used in financing activities was ~~$4.1~~$24.7 million, ~~primarily due to~~consisting of distributions paid to members of ~~$22.9~~$22.5 million, and ~~cash used for capital redemptions of $10.2~~$2.2 million ~~of which $6.8 million was~~ used to redeem ~~Terra Fund 1~~50.4 Termination Units and $3.4 million was paid to other redeeming members. These cash outflows were partially offset by $25.6 million of proceeds from capital contributions from the offering concurrent with the Merger, net of selling commissions and dealer manager fees, and cash of $3.5 million acquired in the Merger.3.6 continuing income units.

Critical Accounting Policies and Use of Estimates

Our consolidated financial statements are prepared in conformity with United States generally accepted accounting principles, ~~(“U.S. GAAP”),~~ which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the consolidated financial statements, management has utilized available information, including industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As we execute our expected operating plans, we will describe additional critical accounting policies in the notes to our future consolidated financial statements in addition to those discussed below.

~~Allowance for Loan Losses~~

Terra Property Trust’s investments are typically collateralized by either the sponsors’ equity interest in real estate properties or real estate properties. As a result, Terra Property Trust regularly evaluates the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. The Manager employs an asset management approach and monitors the portfolio of investments, through, at a minimum, quarterly financial review of property performance including net operating income, loan-to-value, debt-service coverage ratio and the debt yield, supplemented by occasional site visits to evaluate the assets. The Manager also requires certain borrowers to establish a cash reserve, as a form of additional collateral, for the purpose of providing for future interest or property-related operating payments. The information gathered by way of the asset management process is sufficient in assessing collectability.

Using the information gathered by way of the asset management process, the Manager performs a quarterly, or more frequently as needed, review of Terra Property Trust’s portfolio of investments. In conjunction with this review, the Manager assesses the risk factors of each investment and assigns each investment a risk rating. Based on a 5-point scale, Terra Property Trust’s investments are rated “1” through “5”, from less risk to greater risk. For investments with a risk rating of “4” and “5”, the Manager assesses each investment for collectability. This includes the ability to realize the full amount of principal and interest in the event that Terra Property Trust needs to exercise its rights under the terms of the agreement and/or any other contemplated workout or modification. To the extent the net realizable amount analysis indicates the principal amount of the recorded investment as of the reporting date is in jeopardy, an appropriate allowance for loan losses will be recorded. Additionally, Terra Property Trust records a general allowance for loan losses equal to 1.5% of the aggregate principal amount of loans rated as a “4” and 5% of the aggregate principal amount of loans rated as a “5”. Loans on which a specific allowance is recorded are removed from the pool of loans on which a general allowance is calculated.

Fair Value Measurements

The fair value of ~~financial instruments~~our investment is categorized based on the priority of the inputs to the valuation technique and categorized into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Our ~~financial assets and liabilities were~~investment was recorded at fair value on our consolidated statements of assets and liabilities and were categorized based on the inputs valuation techniques as follows:

Level 1. Quoted prices for identical assets or liabilities in an active market.

Level 2. Financial assets and liabilities whose values are based on the following:

◦Quoted prices for similar assets or liabilities in active markets.

◦Quoted prices for identical or similar assets or liabilities in non-active markets.

◦Pricing models whose inputs are observable for substantially the full term of the asset or liability.

◦Pricing models whose inputs are derived principally from or corroborated by observable market data for

substantially full term of the asset or liability.

Level 3. Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

Unobservable inputs reflect our assumptions about the factors that market participants would use in pricing an asset or liability, and would be based on the best information available.

Any changes to the valuation methodology will be reviewed by management to ensure the changes are appropriate. As markets and products develop and the pricing for certain products becomes more transparent, we will continue to refine our valuation methodologies. The methods used may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we anticipate that our valuation methods will be appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We will use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.

Income Taxes

No provision for U.S. federal and state income taxes has been made in the accompanying consolidated financial statements, as individual members are responsible for their proportionate share of our taxable income. We, however, may be liable for New York City Unincorporated Business Tax (the “NYC UBT”) and similar taxes of various other municipalities. New York City imposes the NYC UBT at a statutory rate of 4% on net income generated from ordinary business activities carried on in New York City. For the three and nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, none of our income was subject to the NYC UBT.

We did not have any uncertain tax positions that met the recognition or measurement criteria of Accounting Standards Codification 740-10-25, Income Taxes, nor did we have any unrecognized tax benefits as of the periods presented herein. We recognize interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in our consolidated statements of operations. For the three and nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, we did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal. Our ~~inception-to-date~~2015-2019 federal tax years remain subject to examination by the Internal Revenue Service.

Contractual Obligations of Terra Property Trust

~~Our wholly-owned subsidiary,~~

The following table provides a summary of Terra Property Trust’s contractual obligations at September 30, 2019:



	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Obligations under participation agreements — principal ⁽¹⁾	$	97,688,326	$	22,125,000	$	74,447,325	$	1,116,001	$	—
Mortgage loan payable — principal ⁽²⁾	44,745,024		44,745,024		—		—		—
Repurchase agreement payable — principal ⁽³⁾	51,290,313		—		51,290,313		—		—
Interest on borrowings ⁽⁴⁾	25,771,145		15,574,742		9,998,654		197,749		—
Unfunded lending commitments ⁽⁵⁾	124,852,668		83,734,108		41,118,560		—		—
Ground lease commitment ⁽⁶⁾	84,668,813		1,159,125		2,529,000		2,529,000		78,451,688
	$	429,016,289	$	167,337,999	$	179,383,852	$	3,842,750	$	78,451,688

^{___________________________}

(1)

In the normal course of business, Terra Property Trust enters into participation agreements with related parties whereby it transfers a portion of the loans to them. These loan participations do not qualify for sale treatment. As such, the loans remain on its 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. Terra Property Trust has 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)	Terra Property Trust has 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 $73,036.


(3)	Terra Property Trust may extend the maturity date of the master repurchase agreement for a period of one year. Amount excludes unamortized deferred financing costs of $1.7 million.


(4)	Interest was calculated using the applicable annual variable interest rate and balance outstanding at September 30, 2019. Amount represents interest expense through maturity plus exit fee as application.


(5)	Certain of Terra Property Trust’s loans provide for a commitment to fund the borrower at a future date. As of September 30, 2019, Terra Property Trust had eight of such loans with total funding commitments of $271.4 million, of which $146.5 million had been funded.


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

Management Agreement with Terra REIT Advisors

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

Terra Property Trust currently pays the following fees to ~~the Manager~~Terra REIT Advisors pursuant to a management agreement:

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

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

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

Disposition Fee. A disposition fee in the amount of 1.0% of the gross sale price received by usTerra Property Trust from the disposition of each loan, but not upon the maturity, prepayment, workout, modification or extension of a loan unless there is a corresponding fee paid by the borrower, in which case the disposition fee will be the lesser of (i) 1.0% of the principal amount of the loan and (ii) the amount of the fee paid by the borrower in connection with such transaction. If Terra Property Trust takes ownership of a property as a result of a workout or foreclosure of a loan, Terra Property Trust will pay a disposition fee upon the sale of such property equal to 1.0% of the sales price. In the event that the term of any real estate-related loan is extended, Terra REIT Advisors 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 by the borrower in connection with such extension.

Transaction Breakup Fee. In the event that Terra Property Trust receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, ~~the Manager~~Terra REIT Advisors 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~~Terra REIT Advisors with respect to its evaluation and pursuit of such transactions.

In addition to the fees described above, Terra Property Trust reimburses ~~the Manager~~Terra REIT Advisors for operating expenses incurred in connection with services provided to the operations of Terra Property Trust, including Terra Property Trust’s allocable share of ~~the Manager’s~~Terra REIT Advisors’ overhead, such as rent, employee costs, utilities, and technology costs.

The following table presents a summary of fees paid and costs reimbursed to the ~~Manager~~predecessor to Terra REIT Advisors and Terra REIT Advisors in the aggregate in connection with providing services to Terra Property Trust:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Origination fee expense ⁽¹⁾	$	624,255	$	734,706	$	2,381,562	$	2,396,149	$	270,036	$	271,964	$	1,070,588	$	983,075
Asset management fee	785,748		948,372		2,397,595		2,482,315		942,548		762,470		2,779,888		2,285,610
Asset servicing fee	152,047		227,101		529,535		602,662		220,881		184,655		652,122		529,403
Operating expenses reimbursed to Manager	725,197		838,287		2,425,699		2,516,849		1,308,453		1,016,040		3,636,971		2,663,562
Disposition fee ⁽²⁾	197,614		44,879		798,333		451,980
Disposition and extension fee ⁽²⁾									721,612		348,211		1,358,636		1,103,993
Total	$	2,484,861	$	2,793,345	$	8,532,724	$	8,449,955	$	3,463,530	$	2,583,340	$	9,498,205	$	7,565,643

_______________


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


(2)	Disposition and extension fee isare generally offset with exit and extension fee income and included in interest income on the consolidated statements of operations. ~~Any excess is deferred~~

~~and amortized to interest income over the term of the investment.~~

Off-Balance Sheet Arrangements

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

~~Recent Accounting Pronouncements~~

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The core principle of the revenue model is that an entity recognizes revenue 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 the goods or services. We will adopt this standard on January 1, 2018 using the cumulative effect transition method. We are evaluating the impact of ASU 2014-09 but do not currently believe that the adoption of ASU 2014-09 will have a material impact on our consolidated financial statements and disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 retains many current requirements for the classification and measurement of financial instruments; however, it significantly revises an entity’s accounting related to (i) the classification and measurement of investments in equity securities and (ii) the presentation of certain fair value changes for financial liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance is effective for us beginning on January 1, 2018. We are currently evaluating the impact these changes will have on our consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 outlines a new model for accounting by lessees, whereby their rights and obligations under substantially all leases, existing and new, would be capitalized and recorded on the balance sheet. For lessors, however, the accounting remains largely unchanged from the current model, with the distinction between operating and financing leases retained, but updated to align with certain changes to the lessee model and the new revenue recognition standard. The new standard also replaces existing sale-leaseback guidance with a new model applicable to both lessees and lessors. Additionally, the new standard requires extensive quantitative and qualitative disclosures. ASU 2016-02 is effective for U.S. GAAP public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application will be permitted for all entities. The new standard must be adopted using a modified retrospective transition of the new guidance and provides for certain practical expedients. Transition will require application of the new model at the beginning of the earliest comparative period presented. This ASU is not expected to have any impact on our consolidated financial statements and disclosures as we do not have any lease arrangements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, a Consensus of the FASB’s Emerging Issues Task Force (“ASU 2016-15”). ASU 2016-15 provides guidance on how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for annual and interim periods beginning after December 15, 2017. The guidance requires application using a retrospective transition method. We do not expect the adoption of ASU 2016-15 to have a material impact on our consolidated financial statements and disclosure.

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended rules (together, “final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X was August 1, 2017. We adopted the amendments to Regulation S-X on August 1, 2017. The adoption did not have a material impact on our consolidated financial statements and disclosures.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 intends to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business: inputs, processes, and outputs. While an integrated set of assets and activities, collectively referred to as a “set,” that is a business usually has outputs, outputs are not required to be present. ASU 2017-01 provides a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. ASU 2017-01 will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact these changes will have on our consolidated financial statements and disclosures.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

As of September 30, ~~2017,~~2019, Terra Property Trust had ~~one investment~~13 investments with aan aggregate principal balance of ~~approximately $53.0~~$183.4 million, net of obligations under participation agreements, that ~~provides~~provide for interest income ~~indexed~~at an annual rate of LIBOR plus a spread, 11 of which are subject to ~~LIBOR, with~~ a LIBOR ~~floor~~floor. A decrease of ~~0.5%.~~100 basis points in LIBOR would decrease our annual interest income, net of interest expense on participation agreements, by approximately $0.5 million, and an increase of 100 basis points in LIBOR would increase Terra Property Trust’s annual interest income, net of interest expense on participation agreements, by approximately $1.3 million. Additionally, Terra Property Trust had ~~approximately $34.0~~$44.7 million of borrowings outstanding under a mortgage loan payable that bear interest at an annual rate of LIBOR plus ~~5.25%.~~3.85% with a LIBOR floor of 2.23%, that is collateralized by an office building; and $51.3 million of borrowings outstanding under a repurchase agreement that bear interest at an annual rate of LIBOR plus a spread ranging from 2.25% to 2.35% with a LIBOR floor ranging from no floor to 2.49% and collateralized by $73.2 million of first mortgages. A decrease of 1%100 basis points in LIBOR would decrease ~~our~~Terra Property Trust’s total annual ~~net~~ interest expense by approximately ~~$0.03~~$0.2 million and an increase of 1%100 basis points in LIBOR would increase ~~our~~Terra Property Trust’s annual ~~net~~ interest ~~income~~expense by approximately ~~$0.2~~$0.8 million.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is unclear if at that time whether or not LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. In addition, in April 2018, the Federal Reserve System, in conjunction with the Alternative Reference Rates Committee, announced the replacement of LIBOR with a new index, calculated by short-term repurchase agreements collateralized by U.S. Treasury securities, called the Secured Overnight Financing Rate, or the “SOFR.” At this time, it is not possible to predict whether SOFR will attain market traction as a LIBOR replacement. Additionally, the future of LIBOR at this time is uncertain. Potential changes, or uncertainty related to such potential changes, may adversely affect the market for LIBOR-based securities, including Terra Property Trust’s portfolio of LIBOR-indexed, floating-rate debt securities, or the cost of its borrowings. In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities, including the value of the LIBOR-indexed, floating-rate debt securities in Terra Property Trust’s portfolio, or the cost of its borrowings. The potential effect of the phase-out or replacement of LIBOR on Terra Property Trust’s cost of capital and net investment income cannot yet be determined.

We may hedge against interest ~~rate and currency exchange~~ rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts, subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. For the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, we did not engage in interest rate hedging activities.

In addition, we may have risks regarding portfolio valuation. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Fair Value ~~Measurements.”~~Measurements” in this quarterly report on Form 10-Q.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including ~~our~~the chief executive officer and chief financial officer of our Manager (performing functions equivalent to those a principal executive officer and principal financial officer of our company would perform if we had any officers), of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, ~~2017.~~2019. Based on that evaluation, ~~our~~the chief executive officer and chief financial officer of our Manager concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute assurance that it will detect or uncover failures within our company to disclose material information otherwise required to be set forth in our periodic reports.

Changes in Internal Control Over Financial Reporting

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

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

3834

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the ~~amendment no. 2 to Form 10 filed on July 24, 2017.~~year ended December 31, 2018.

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

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~Not applicable.~~None.

Item 6. Exhibits.

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



Exhibit No.		Description and Method of Filing
2.1		Agreement and Plan of Merger by and among the registrant, Terra Capital Advisors, LLC, Terra Secured Income Fund Merger Sub, LLC, and Terra Secured Income Fund, dated January 1, 2016 (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form 10 (File No. 000-55780) filed with the SEC on April 28, 2017).

2.2		Agreement and Plan of Merger by and among the registrant, Terra Capital Advisors, LLC, Terra Secured Income Fund Merger Sub 2, LLC, and Terra Secured Income Fund 2, LLC, dated January 1, 2016 (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form 10 (File No. 000-55780) filed with the SEC on April 28, 2017).

2.3		Agreement and Plan of Merger by and among the registrant, Terra Capital Advisors, LLC, Terra Secured Income Fund Merger Sub 3, LLC, and Terra Secured Income Fund 3, LLC, dated January 1, 2016 (incorporated by reference to Exhibit 2.3 to the Registration Statement on Form 10 (File No. 000-55780) filed with the SEC on April 28, 2017).

2.4		Agreement and Plan of Merger by and among the registrant, Terra Capital Advisors, Terra Capital Advisors 2, Terra Secured Income Fund 4, LLC, and Terra Secured Income Fund 4, LLC, dated January 1, 2016 (incorporated by reference to Exhibit 2.4 to the Registration Statement on Form 10 (File No. 000-55780) filed with the SEC on April 28, 2017).

2.5		Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated January 1, 2016 (incorporated by reference to Exhibit 2.5 to the Registration Statement on Form 10 (File No. 000-55780) filed with the SEC on April 28, 2017).



~~Exhibit No.~~		~~Description and Method of Filing~~

2.6		Amendment No. 1 to the Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated December 31, 2016 (incorporated by reference to Exhibit 2.6 to the Registration Statement on Form 10 (File No. 000-55780) filed with the SEC on April 28, 2017).



Exhibit No.		Description and Method of Filing
3.1		Amended and Restated Limited Liability Company Agreement of the registrant, dated January 1, 2016 (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10 (File No. 000-55780) filed with the SEC on April 28, 2017).
10.1*		Amended and Restated Contribution and Repurchase Agreement, dated, November 13, 2019, by and among Terra Property Trust, Inc., Terra International Fund 3, L.P. and Terra International Fund 3 REIT, LLC.
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**		XBRL Instance Document

101.SCH**		XBRL Taxonomy Extension Schema Document

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB**		XBRL Taxonomy Extension Label Linkbase Document

101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document

_______________

* Filed herewith.

** Furnished herewith.

4036

SIGNATURES

Pursuant to the requirements of ~~Section 13 or 15(d) of~~ the Securities Exchange Act of 1934, ~~as amended,~~ the registrant has duly caused this ~~Quarterly Report on Form10-Q~~report to be signed on its behalf by the undersigned in the capacities indicated* thereunto duly authorized.

Date: November 13, ~~2017~~2019



	TERRA SECURED INCOME FUND 5, LLC

	By:	/s/ ~~Bruce D. Batkin~~Vikram S. Uppal
		~~Bruce D. Batkin~~Vikram S. Uppal
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Gregory M. Pinkus
		Gregory M. Pinkus
		Chief Financial Officer and Chief Operating Officer,
		~~Treasurer and Secretary~~
		(Principal Financial and Accounting Officer)

___________

* The registrant is a limited liability company managed by Terra Fund Advisors, LLC, its sole and managing member and the persons are signing in their respective capacities as officers of Terra Fund Advisors, LLC.



Total Consideration:
Fair value of units issued	$	155,751,516
	155,751,516
Assets Acquired at Fair Value
Investments, at fair value	142,768,001
Investments through participation interests, at fair value	7,771,619
Equity investment in Terra Park Green Member, LLC, at fair value	16,900,000
Restricted cash	7,119,078
Interest receivable	1,412,840
Other assets	35,695
Liabilities Assumed at Fair Value
Obligations under participation agreements	(8,154,822		)
Interest reserve and other deposits held on loans	(7,119,078		)
Accounts payable and accrued expenses	(3,113,022		)
Redemption liability	(3,426,983		)
Due to Manager	(1,343,020		)
Taxes payable	(232,040		)
Interest payable	(80,807		)
Other liabilities	(266,926		)
Net assets acquired excluding cash	152,270,535
Cash acquired in the Merger	$	3,480,981



Total Consideration:
Fair value of common stock of Terra Property Trust received	$	288,259,804
	288,259,804
Assets Contributed at Fair Value
Investments, at fair value	276,746,475
Investments through participation interests, at fair value	13,789,884
Equity investment in Terra Park Green Member, LLC, at fair value	16,900,000
Restricted cash	21,421,501
Interest receivable	2,382,546
Due from related parties	438,249
Other assets	35,695
Liabilities Transferred at Fair Value
Obligations under participation agreements	(24,147,097		)
Interest reserve and other deposits held on loans	(21,421,501		)
Due to Manager	(2,011,003		)
Other liabilities	(909,516		)
Net assets transferred excluding cash	283,225,233
Cash transferred to Terra Property Trust	$	5,034,571



Collateral Location	Portfolio Company	Structure	Property Type	Coupon Rate		Acquisition Date	Maturity Date	Principal Amount		Amortized Cost		Fair Value ⁽¹⁾		% of Net Assets⁽²⁾
	Loans held for investment — non-controlled:
US - AL	ASA Mgt. Holdings, LLC	Preferred equity investment	Multifamily	16.0	%	4/7/2012	8/1/2022	$	2,100,000	$	2,141,204	$	2,124,927	0.8	%
	SVA Mgt. Holdings, LLC	Preferred equity investment	Multifamily	16.0	%	4/7/2012	8/1/2022	1,600,000		1,633,817		1,619,625		0.6	%
	Total US - AL							3,700,000		3,775,021		3,744,552		1.4	%
US - CA	Palmer City-Core Stockton Street, LLC	Preferred equity investment	Hotel	12.0	%	1/17/2014	12/17/2017	4,325,000		4,368,250		4,367,145		1.6	%
	Maguire Partners-1733 Ocean, LLC	First mortgage	Office	LIBOR+8.5%		3/7/2016	3/9/2018	52,986,912		53,494,280		53,637,569		19.3	%
	L.A. Warner Hotel Partners, LLC ^(3)(4)(5)	Preferred equity investment	Hotel	12.0	%	7/25/2014	8/4/2018	32,100,000		32,669,975		32,417,458		11.7	%
	TSG-Parcel 1, LLC ^(3)(5)(6)(7)	First mortgage	Land	12.0	%	7/10/2015	10/10/2017	18,000,000		18,180,000		18,174,048		6.6	%
	SparQ Mezz Borrower, LLC ⁽⁸⁾	Mezzanine loan	Multifamily	12.0	%	9/29/2017	10/1/2020	—		—		—		—	%
	Total US - CA							107,411,912		108,712,505		108,596,220		39.2	%
US - DE	BPG Office Partners III/IV LLC ^(3)(4)(5)	Mezzanine loan	Office	13.5	%	6/5/2015	6/5/2018	10,000,000		10,091,154		10,096,628		3.6	%
US - FL	1100 Biscayne Management Holdco, LLC ^(3)(5)(7)	Mezzanine loan	Hotel	12.0% current 3.0% PIK		4/24/2015	10/9/2017	15,809,601		15,954,054		15,952,786		5.8	%
	37 Gables Member LLC ⁽⁴⁾⁽⁵⁾	Mezzanine loan	Multifamily	13.0	%	6/16/2016	6/16/2019	5,750,000		5,795,947		5,800,317		2.1	%
	Greystone Gables Holdings Member LLC ⁽⁴⁾⁽⁵⁾	Preferred equity investment	Multifamily	13.0	%	6/16/2016	6/16/2019	500,000		503,995		504,375		0.2	%
	RS JZ 2700 NW2, LLC ⁽³⁾⁽⁵⁾	First mortgage	Land	12.0	%	9/1/2016	12/1/2017	21,360,000		21,569,263		21,575,419		7.8	%
	Total US - FL							43,419,601		43,823,259		43,832,897		15.9	%
US - GA	YMP Georgia Portfolio Mezzanine, LLC	Mezzanine loan	Multifamily	14.0	%	12/19/2013	1/6/2019	4,250,000		4,487,398		4,286,112		1.5	%
	OHM Atlanta Owner, LLC ^(5)(6)(9)	First mortgage	Land	12.0	%	6/20/2017	6/20/2018	24,500,000		24,724,490		24,724,490		8.9	%
	Total US - GA							28,750,000		29,211,888		29,010,602		10.4	%
US - IN	Muncie Mezz, LLC	Mezzanine loan	Student housing	13.0	%	8/29/2013	9/6/2023	2,700,000		2,688,171		3,059,033		1.1	%
US - MA	150 Blackstone River Road, LLC	Mezzanine loan	Industrial	8.5	%	9/21/2017	9/6/2027	7,000,000		7,000,000		7,000,000		2.5	%
US - NC	Milestone Greensboro Holdings, LLC ⁽⁴⁾⁽⁵⁾	Mezzanine loan	Hotel	14.0	%	3/1/2013	3/1/2018	3,500,000		3,540,614		3,534,591		1.3	%



	Three Months Ended September 30, 2017				Three Months Ended September 30, 2016
	Weighted Average Principal Amount			Weighted Average Coupon Rate	Weighted Average Principal Amount			Weighted Average Coupon Rate
Gross loans	$	314,920,884		12.1%	$	318,263,084		12.5%
Obligations under participation agreements	(68,234,833		)	12.5%	(24,792,000		)	13.2%
Mortgage loan payable	(34,000,000		)	5.7%	(34,000,000		)	5.8%
Net loans	$	212,686,051		13.0% ⁽¹⁾	$	259,471,084		13.3% ⁽¹⁾