Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2023 | Nov. 14, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-40496 | |
Entity Registrant Name | Terra Property Trust, Inc. | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 81-0963486 | |
Entity Address, Address Line One | 205 West 28th Street | |
Entity Address, Address Line Two | 12th Floor | |
Entity Address, City or Town | New York | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 10001 | |
City Area Code | 212 | |
Local Phone Number | 753-5100 | |
Title of 12(b) Security | 6.00% Notes due 2026 | |
Trading Symbol | TPTA | |
Security Exchange Name | NYSE | |
Title of 12(g) Security | Class B Common Stock, $0.01 par value per share | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 24,335,779 | |
Entity Central Index Key | 0001674356 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Assets | ||
Cash and cash equivalents | $ 19,242,370 | $ 28,567,825 |
Restricted cash | 5,418,932 | 4,633,204 |
Cash held in escrow by lender | 4,894,546 | 3,268,563 |
Marketable securities | 7,054,491 | 147,960 |
Total, net of allowance for credit losses | 470,682,291 | 626,490,767 |
Equity investment in unconsolidated investments | 32,513,920 | 62,498,340 |
Real estate owned, net (Note 6) | ||
Land, building and building improvements, net | 161,077,440 | 46,660,226 |
Lease intangible assets, net | 12,692,194 | 2,568,461 |
Operating lease right-of-use asset | 27,365,847 | 27,378,786 |
Deal deposit | 0 | 4,241,892 |
Interest receivable | 4,304,303 | 4,100,501 |
Other assets | 11,124,846 | 2,780,367 |
Total assets | 756,371,180 | 813,336,892 |
Liabilities: | ||
Unsecured notes payable, net of debt issuance cost | 117,901,452 | 116,530,673 |
Repurchase agreements payable, net of deferred financing fees | 112,392,727 | 169,304,710 |
Mortgage loans payable, net of deferred financing fees and other | 99,434,309 | 29,488,326 |
Revolving line of credit payable, net of deferred financing fees | 50,251,912 | 89,807,448 |
Note payable, net of deferred financing costs | 36,562,785 | 0 |
Term loan payable, net of deferred financing costs | 14,898,434 | 25,000,000 |
Obligations under participation agreements (Note 8 ) | 0 | 12,680,594 |
Interest reserve and other deposits held on investments | 5,418,932 | 4,633,204 |
Operating lease liability | 27,365,847 | 27,378,786 |
Lease intangible liabilities, net (Note 6) | 16,014,692 | 8,646,840 |
Interest payable | 2,047,555 | 1,058,001 |
Accounts payable and accrued expenses | 2,091,796 | 1,452,236 |
Unearned income | 720,785 | 378,018 |
Total liabilities | 489,351,881 | 491,454,718 |
Commitments and contingencies (Note 10) | ||
Equity: | ||
Additional paid-in capital | 444,454,373 | 444,449,813 |
Accumulated deficit | (177,678,431) | (122,935,993) |
Total equity | 267,019,299 | 321,882,174 |
Total liabilities and equity | 756,371,180 | 813,336,892 |
Preferred Stock | ||
Equity: | ||
Preferred stock | 0 | 0 |
12.5% Series A Cumulative Non-Voting Preferred Stock | ||
Equity: | ||
Preferred stock | 0 | 125,000 |
Class A Common Stock | ||
Equity: | ||
Common stock | 0 | 0 |
Class B Common Stock | ||
Equity: | ||
Common stock | 243,357 | 243,354 |
Related Party | ||
Liabilities: | ||
Other liabilities | 3,200,568 | 3,935,997 |
Nonrelated Party | ||
Liabilities: | ||
Other liabilities | 1,050,087 | 1,159,885 |
Loans Held For Investment | ||
Assets | ||
Total, net of allowance for credit losses | 432,327,832 | 584,417,939 |
Loans Held For Investment Acquired Through Participation | ||
Assets | ||
Total, net of allowance for credit losses | $ 38,354,459 | $ 42,072,828 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 | Dec. 31, 2022 | Oct. 01, 2022 | Mar. 02, 2020 | |
Loans held for investment, net of allowance for credit losses | $ 60,578,587 | $ 25,471,890 | ||
Preferred stock, par value (in usd per share) | $ 0.01 | $ 0.01 | ||
Preferred stock, authorized (in shares) | 50,000,000 | 50,000,000 | ||
Common stock, shares authorized (in shares) | 950,000,000 | |||
Common stock, shares, issued (in shares) | 4,574,470.35 | |||
Loans Held For Investment | ||||
Loans held for investment, net of allowance for credit losses | $ 60,163,319 | $ 25,471,890 | ||
Loans Held For Investment Acquired Through Participation | ||||
Loans held for investment, net of allowance for credit losses | $ 415,268 | $ 0 | ||
Preferred Stock | ||||
Preferred stock, par value (in usd per share) | $ 0.01 | $ 0.01 | ||
Preferred stock, authorized (in shares) | 50,000,000 | 50,000,000 | ||
Preferred stock, issued (in shares) | 0 | 0 | ||
12.5% Series A Cumulative Non-Voting Preferred Stock | ||||
Preferred stock, authorized (in shares) | 125 | 125 | ||
Preferred stock, issued (in shares) | 0 | 125 | ||
Preferred stock, dividend rate, percentage | 12.50% | 12.50% | ||
Preferred stock outstanding (in shares) | 0 | 125 | ||
Class A Common Stock | ||||
Common stock, par or stated value per share (in usd per share) | $ 0.01 | $ 0.01 | $ 0.01 | |
Common stock, shares authorized (in shares) | 450,000,000 | 450,000,000 | 450,000,000 | |
Common stock, shares, issued (in shares) | 0 | 0 | ||
Class B Common Stock | ||||
Common stock, par or stated value per share (in usd per share) | $ 0.01 | $ 0.01 | ||
Common stock, shares authorized (in shares) | 450,000,000 | 450,000,000 | 450,000,000 | |
Common stock, shares, issued (in shares) | 24,335,711 | 24,335,370 | ||
Common stock, shares, outstanding (in shares) | 24,335,711 | 24,335,370 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Revenues | ||||
Interest income | $ 12,712,587 | $ 9,839,007 | $ 44,206,847 | $ 28,995,209 |
Real estate operating revenue | 4,121,040 | 2,962,812 | 8,257,943 | 8,933,587 |
Prepayment fee income | 0 | 809,301 | 0 | 1,984,061 |
Other operating income | 275,944 | 52,046 | 429,407 | 550,692 |
Total revenues | 17,109,571 | 13,663,166 | 52,894,197 | 40,463,549 |
Operating expenses | ||||
Operating expenses reimbursed to Manager | 2,407,757 | 2,013,135 | 6,704,790 | 6,082,333 |
Asset management fee | 2,049,916 | 1,611,934 | 6,152,392 | 4,740,657 |
Asset servicing fee | 487,210 | 379,712 | 1,454,109 | 1,124,759 |
Provision for credit losses | 27,096,841 | 9,188,129 | 30,899,434 | 9,264,058 |
Real estate operating expenses | 1,912,322 | 1,274,849 | 4,986,446 | 3,740,140 |
Depreciation and amortization | 2,551,323 | 1,718,374 | 4,989,800 | 5,155,119 |
Impairment charges | 0 | 0 | 11,765,540 | 1,604,989 |
Professional fees | 1,081,803 | 594,318 | 2,849,125 | 2,348,190 |
Directors’ fees | 83,750 | 36,249 | 263,964 | 108,748 |
Other | 92,112 | 49,016 | 495,987 | 506,640 |
Operating expenses | 37,763,034 | 16,865,716 | 70,561,587 | 34,675,633 |
Operating (loss) income | (20,653,463) | (3,202,550) | (17,667,390) | 5,787,916 |
Other income and expenses | ||||
Interest expense from obligations under participation agreements | (243,945) | (562,182) | (1,353,006) | (2,875,946) |
Interest expense on repurchase agreements payable | (2,502,623) | (2,394,754) | (8,505,926) | (4,815,863) |
Interest expense on mortgage loans payable | (2,133,874) | (534,617) | (4,520,974) | (1,574,063) |
Interest expense on revolving line of credit | (1,968,212) | (647,473) | (6,473,793) | (1,872,504) |
Interest expense on term loan payable | (532,387) | 0 | (1,239,418) | (164,969) |
Interest expense on unsecured notes payable | (2,416,518) | (1,436,107) | (7,216,091) | (4,299,167) |
Interest expense on note payable | (107,702) | 0 | (107,702) | |
Interest expense on secured borrowing | 0 | (397,932) | 0 | (1,507,572) |
Gain on extinguishment of debt | 14,079,379 | 0 | 14,079,379 | 0 |
Unrealized (losses) gains | (1,040,192) | 0 | (982,384) | (133,994) |
Income (loss) from equity investment in unconsolidated investments | 41,839 | 1,483,846 | (2,154,955) | 4,267,513 |
Gain on sale of interests in unconsolidated investments | 0 | 799,827 | 0 | 799,827 |
Loss on sale of real estate | 0 | 0 | 0 | (51,984) |
Realized (losses) gains on investments, net | 0 | 0 | (25,024) | 83,411 |
Total other income and expense | 3,175,765 | (3,689,392) | (18,499,894) | (12,145,311) |
Net loss | (17,477,698) | (6,891,942) | (36,167,284) | (6,357,395) |
Series A preferred stock dividend declared | 0 | (3,906) | (3,907) | (11,718) |
Net loss allocable to common stock | $ (17,477,698) | $ (6,895,848) | $ (36,171,191) | $ (6,369,113) |
Loss per share — basic (in usd per share) | $ (0.72) | $ (0.35) | $ (1.49) | $ (0.33) |
Loss per share — diluted (in usd per share) | $ (0.72) | $ (0.35) | $ (1.49) | $ (0.33) |
Weighted-average shares — basic (in shares) | 24,335,576 | 19,487,460 | 24,335,460 | 19,487,460 |
Weighted-average shares — diluted (in shares) | 24,335,576 | 19,487,460 | 24,335,460 | 19,487,460 |
Distributions declared per common share (in usd per share) | $ 0.19 | $ 0.19 | $ 0.57 | $ 0.58 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Equity - USD ($) | Total | Cumulative Effect, Period of Adoption, Adjustment | 12.5% Series A Cumulative Non-Voting Preferred Stock | Class B Common Stock | Preferred Stock Preferred Stock | Preferred Stock 12.5% Series A Cumulative Non-Voting Preferred Stock | Common Stock | Common Stock Class A Common Stock | Common Stock Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment |
Beginning balance at Dec. 31, 2021 | $ 273,843,578 | $ 0 | $ 125,000 | $ 194,875 | $ 373,443,672 | $ (99,919,969) | ||||||
Preferred stock, beginning balance (in shares) at Dec. 31, 2021 | 125 | |||||||||||
Common stock, beginning balance (in shares) at Dec. 31, 2021 | 19,487,460 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Distributions declared on common shares | (3,893,595) | (3,893,595) | ||||||||||
Distributions declared on preferred shares | (3,906) | (3,906) | ||||||||||
Net income (loss) | (757,887) | (757,887) | ||||||||||
Ending balance at Mar. 31, 2022 | 269,188,190 | 0 | $ 125,000 | $ 194,875 | 373,443,672 | (104,575,357) | ||||||
Preferred stock, ending balance (in shares) at Mar. 31, 2022 | 125 | |||||||||||
Common stock, ending balance (in shares) at Mar. 31, 2022 | 19,487,460 | |||||||||||
Beginning balance at Dec. 31, 2021 | 273,843,578 | 0 | $ 125,000 | $ 194,875 | 373,443,672 | (99,919,969) | ||||||
Preferred stock, beginning balance (in shares) at Dec. 31, 2021 | 125 | |||||||||||
Common stock, beginning balance (in shares) at Dec. 31, 2021 | 19,487,460 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Distributions declared on common shares | (11,400,000) | |||||||||||
Net income (loss) | (6,357,395) | |||||||||||
Ending balance at Sep. 30, 2022 | $ 256,076,249 | 0 | $ 125,000 | $ 194,875 | 373,443,672 | (117,687,298) | ||||||
Preferred stock, ending balance (in shares) at Sep. 30, 2022 | 125 | |||||||||||
Common stock, ending balance (in shares) at Sep. 30, 2022 | 19,487,460 | |||||||||||
Accounting Standards Update [Extensible Enumeration] | Accounting Standards Update 2016-13 | |||||||||||
Beginning balance at Dec. 31, 2021 | $ 273,843,578 | 0 | $ 125,000 | $ 194,875 | 373,443,672 | (99,919,969) | ||||||
Preferred stock, beginning balance (in shares) at Dec. 31, 2021 | 125 | |||||||||||
Common stock, beginning balance (in shares) at Dec. 31, 2021 | 19,487,460 | |||||||||||
Ending balance at Dec. 31, 2022 | 321,882,174 | $ (4,619,723) | 0 | $ 125,000 | $ 0 | $ 243,354 | 444,449,813 | (122,935,993) | $ (4,619,723) | |||
Preferred stock, ending balance (in shares) at Dec. 31, 2022 | 125 | 125 | ||||||||||
Common stock, ending balance (in shares) at Dec. 31, 2022 | 24,335,370 | 0 | 24,335,370 | |||||||||
Beginning balance at Mar. 31, 2022 | 269,188,190 | 0 | $ 125,000 | $ 194,875 | 373,443,672 | (104,575,357) | ||||||
Preferred stock, beginning balance (in shares) at Mar. 31, 2022 | 125 | |||||||||||
Common stock, beginning balance (in shares) at Mar. 31, 2022 | 19,487,460 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Distributions declared on common shares | (3,780,568) | (3,780,568) | ||||||||||
Distributions declared on preferred shares | (3,906) | (3,906) | ||||||||||
Net income (loss) | 1,292,434 | 1,292,434 | ||||||||||
Ending balance at Jun. 30, 2022 | 266,696,150 | 0 | $ 125,000 | $ 194,875 | 373,443,672 | (107,067,397) | ||||||
Preferred stock, ending balance (in shares) at Jun. 30, 2022 | 125 | |||||||||||
Common stock, ending balance (in shares) at Jun. 30, 2022 | 19,487,460 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Distributions declared on common shares | (3,724,053) | (3,724,053) | ||||||||||
Distributions declared on preferred shares | (3,906) | (3,906) | ||||||||||
Net income (loss) | (6,891,942) | (6,891,942) | ||||||||||
Ending balance at Sep. 30, 2022 | 256,076,249 | 0 | $ 125,000 | $ 194,875 | 373,443,672 | (117,687,298) | ||||||
Preferred stock, ending balance (in shares) at Sep. 30, 2022 | 125 | |||||||||||
Common stock, ending balance (in shares) at Sep. 30, 2022 | 19,487,460 | |||||||||||
Beginning balance at Dec. 31, 2022 | 321,882,174 | (4,619,723) | 0 | $ 125,000 | $ 0 | $ 243,354 | 444,449,813 | (122,935,993) | (4,619,723) | |||
Preferred stock, beginning balance (in shares) at Dec. 31, 2022 | 125 | 125 | ||||||||||
Common stock, beginning balance (in shares) at Dec. 31, 2022 | 24,335,370 | 0 | 24,335,370 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Shares issued from reinvestment of shareholder distributions (in shares) | 34 | |||||||||||
Shares issued from reinvestment of shareholder distributions | 478 | 478 | ||||||||||
Redemption of Series A Preferred Stock (in shares) | (125) | |||||||||||
Redemption of Series A Preferred Stock | (125,000) | $ (125,000) | ||||||||||
Distributions declared on common shares | (4,650,492) | (4,650,492) | ||||||||||
Distributions declared on preferred shares | (3,907) | (3,907) | ||||||||||
Net income (loss) | 547,479 | 547,479 | ||||||||||
Ending balance at Mar. 31, 2023 | 313,031,009 | 0 | $ 0 | $ 0 | $ 243,354 | 444,450,291 | (131,662,636) | |||||
Preferred stock, ending balance (in shares) at Mar. 31, 2023 | 0 | |||||||||||
Common stock, ending balance (in shares) at Mar. 31, 2023 | 0 | 24,335,404 | ||||||||||
Beginning balance at Dec. 31, 2022 | $ 321,882,174 | $ (4,619,723) | 0 | $ 125,000 | $ 0 | $ 243,354 | 444,449,813 | (122,935,993) | $ (4,619,723) | |||
Preferred stock, beginning balance (in shares) at Dec. 31, 2022 | 125 | 125 | ||||||||||
Common stock, beginning balance (in shares) at Dec. 31, 2022 | 24,335,370 | 0 | 24,335,370 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Shares issued from reinvestment of shareholder distributions (in shares) | 341 | |||||||||||
Distributions declared on common shares | $ (14,000,000) | |||||||||||
Net income (loss) | (36,167,284) | |||||||||||
Ending balance at Sep. 30, 2023 | 267,019,299 | 0 | $ 0 | $ 0 | $ 243,357 | 444,454,373 | (177,678,431) | |||||
Preferred stock, ending balance (in shares) at Sep. 30, 2023 | 0 | 0 | ||||||||||
Common stock, ending balance (in shares) at Sep. 30, 2023 | 24,335,711 | 0 | 24,335,711 | |||||||||
Beginning balance at Mar. 31, 2023 | 313,031,009 | 0 | $ 0 | $ 0 | $ 243,354 | 444,450,291 | (131,662,636) | |||||
Preferred stock, beginning balance (in shares) at Mar. 31, 2023 | 0 | |||||||||||
Common stock, beginning balance (in shares) at Mar. 31, 2023 | 0 | 24,335,404 | ||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Shares issued from reinvestment of shareholder distributions (in shares) | 109 | |||||||||||
Shares issued from reinvestment of shareholder distributions | 1,510 | 1,510 | ||||||||||
Distributions declared on preferred shares | (4,650,501) | (4,650,501) | ||||||||||
Net income (loss) | (19,237,065) | (19,237,065) | ||||||||||
Ending balance at Jun. 30, 2023 | 289,144,953 | 0 | $ 0 | $ 0 | $ 243,354 | 444,451,801 | (155,550,202) | |||||
Preferred stock, ending balance (in shares) at Jun. 30, 2023 | 0 | |||||||||||
Common stock, ending balance (in shares) at Jun. 30, 2023 | 0 | 24,335,513 | ||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Shares issued from reinvestment of shareholder distributions (in shares) | 198 | |||||||||||
Shares issued from reinvestment of shareholder distributions | 2,575 | $ 3 | 2,572 | |||||||||
Distributions declared on common shares | (4,650,531) | (4,650,531) | ||||||||||
Net income (loss) | (17,477,698) | (17,477,698) | ||||||||||
Ending balance at Sep. 30, 2023 | $ 267,019,299 | $ 0 | $ 0 | $ 0 | $ 243,357 | $ 444,454,373 | $ (177,678,431) | |||||
Preferred stock, ending balance (in shares) at Sep. 30, 2023 | 0 | 0 | ||||||||||
Common stock, ending balance (in shares) at Sep. 30, 2023 | 24,335,711 | 0 | 24,335,711 |
Consolidated Statements of Ch_2
Consolidated Statements of Changes in Equity (Parentheticals) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | Oct. 01, 2022 | |
Distributions declared per common share (in usd per share) | $ 0.19 | $ 0.19 | $ 0.19 | $ 0.19 | $ 0.19 | $ 0.20 | $ 0.57 | $ 0.58 | ||
Shares issued from reinvestment of shareholder distributions | $ 2,575 | $ 1,510 | $ 478 | |||||||
12.5% Series A Cumulative Non-Voting Preferred Stock | ||||||||||
Preferred stock, dividend rate, percentage | 12.50% | 12.50% | ||||||||
Class A Common Stock | ||||||||||
Common stock, par or stated value per share (in usd per share) | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Cash flows from operating activities: | ||
Net loss | $ (36,167,284) | $ (6,357,395) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 4,989,800 | 5,155,119 |
Provision for credit losses | 30,899,434 | 9,264,058 |
Impairment charges | 11,765,540 | 1,604,989 |
Amortization of net purchase premiums on loans | 1,023,275 | 122,783 |
Straight-line rent adjustments | (10,364) | 1,087,257 |
Amortization of deferred financing costs | 1,752,299 | 1,821,543 |
Amortization of discount on unsecured notes payable | 1,238,461 | 345,801 |
Amortization of above- and below-market rent intangibles | (1,385,358) | (739,127) |
Amortization and accretion of investment-related fees, net | (1,016,972) | (739,886) |
Amortization of above-market rent ground lease | (97,761) | (97,761) |
Gain on extinguishment of debt | (14,079,379) | 0 |
Gain on sale of interests in unconsolidated investments | 0 | (799,827) |
Realized loss (gain) on investments, net | 25,024 | (83,411) |
Unrealized losses on investments, net | 982,384 | 133,994 |
Loss on sale of real estate | 0 | 51,984 |
Distributions received from equity investment in unconsolidated investments | 5,805,494 | 180,549 |
Loss (income) from equity investment in unconsolidated investments | 3,959,892 | (2,961,929) |
Changes in operating assets and liabilities: | ||
Deal deposits | 4,241,892 | (8,600,000) |
Interest receivable | (660,452) | 270,169 |
Due from related party | (453,597) | 2,605,639 |
Other assets | (7,580,704) | (2,183,835) |
Due to Manager | 189,486 | 0 |
Unearned income | 342,767 | 19,515 |
Interest payable | 989,554 | (1,212,597) |
Accounts payable and accrued expenses | (273,220) | 600,808 |
Other liabilities | (522,258) | (3,221,639) |
Net cash provided by (used in) operating activities | 5,957,953 | (3,733,199) |
Cash flows from investing activities: | ||
Origination and purchase of loans | (73,104,166) | (187,878,643) |
Proceeds from repayments of loans | 123,364,974 | 158,765,183 |
Purchase of real estate properties | (52,508,252) | 0 |
Purchase of held-to-maturity securities | (20,025,024) | 0 |
Proceeds from redemption of held-to-maturity securities | 20,000,000 | 0 |
Purchase of marketable securities | (7,905,211) | 0 |
Proceeds from sale of marketable securities | 0 | 1,259,417 |
Return of capital on equity interests in unconsolidated investments | 11,287,839 | 0 |
Cash acquired in purchase of real estate | 712,608 | 0 |
Proceeds from sale of interests in unconsolidated investments | 0 | 33,688,430 |
Purchase of equity interests in unconsolidated investments | (1,218,449) | (18,207,679) |
Proceeds from sale of real estate | 0 | 8,585,500 |
Distributions in excess equity income | 0 | 742,651 |
Net cash provided by (used in) investing activities | 604,319 | (3,045,141) |
Cash flows from financing activities: | ||
Proceeds from mortgage loan payable | 73,249,135 | 0 |
Repayments of borrowings under repurchase agreements | (72,160,282) | 0 |
Repayments of borrowings under revolving line of credit | (96,798,815) | (55,609,325) |
Proceeds from borrowings under revolving line of credit | 57,032,155 | 41,169,295 |
Proceeds from borrowing under note payable | 36,556,125 | 0 |
Proceeds from borrowings under repurchase agreements | 14,189,300 | 150,706,606 |
Distributions paid | (13,950,868) | (11,406,028) |
Repayment of borrowings under the term loan | (10,000,000) | (93,763,471) |
Payment of financing costs | (2,098,725) | (989,032) |
Repayment of mortgage principal | (1,649,191) | (624,342) |
Proceeds from obligations under participation agreements | 1,494,422 | 17,023,011 |
Change in interest reserve and other deposits held on investments | 785,728 | (1,890,731) |
Redemption of Series A Preferred Stock | (125,000) | 0 |
Repayment of secured borrowing | 0 | (38,672,291) |
Repayments of obligations under participation agreements | 0 | (22,239,670) |
Proceeds from secured borrowing | 0 | 4,151,186 |
Net cash used in financing activities | (13,476,016) | (12,144,792) |
Net decrease in cash, cash equivalents and restricted cash | (6,913,744) | (18,923,132) |
Cash, cash equivalents and restricted cash at beginning of period | 36,469,592 | 51,098,647 |
Cash, cash equivalents and restricted cash at end of period (Note 2) | 29,555,848 | 32,175,515 |
Supplemental Disclosure of Cash Flows Information: | ||
Cash paid for interest | 25,436,596 | 16,451,586 |
Supplemental non-cash information: | ||
Reinvestment of stockholder distributions | $ 4,563 | $ 0 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows (Parenthetical) | 1 Months Ended |
May 31, 2023 USD ($) building loan | |
Industrial Buildings | |
Number of industrial buildings | building | 5 |
Cash payment for industrial buildings | $ 3,500,000 |
Number of senior loans | loan | 5 |
Total Consideration | |
Cash and cash equivalents | $ 3,515,466 |
Total, net of allowance for credit losses | 68,737,877 |
Equity investment in unconsolidated investments | 10,149,642 |
Interest receivable | 456,650 |
Other assets | 429,326 |
Total assets | 83,288,961 |
Net Assets Acquired | |
Cash and cash equivalents | 712,608 |
Other assets | 33,802 |
In-please lease | 8,403,667 |
Below-market rent | (4,770,870) |
Accounts payable and accrued expenses | (912,771) |
Net assets acquired | 83,288,961 |
Industrial Buildings | Land | |
Net Assets Acquired | |
Land, building and building improvements, net | 14,457,149 |
Industrial Buildings | Building and building improvements | |
Net Assets Acquired | |
Land, building and building improvements, net | $ 65,365,376 |
Business
Business | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business | Business Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) was incorporated under the Maryland General Corporation Law on December 31, 2015. Terra Property Trust is a real estate credit focused company that originates, structures, funds and manages commercial real estate investments, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments. The Company’s loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. The Company focuses on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties in primary and secondary markets. On January 1, 2016, Terra Secured Income Fund 5, LLC (“Terra Fund 5”), the Company’s then parent, contributed its consolidated portfolio of net assets to the Company pursuant to a contribution agreement in exchange for shares of the Company’s common stock. Upon receipt of the contribution of the consolidated portfolio of net assets from Terra Fund 5, the Company commenced its operations on January 1, 2016. On March 2, 2020, the Company engaged in a series of transactions pursuant to which the Company issued an aggregate of 4,574,470.35 shares of its common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by the Company, cash of $25.5 million and other working capital. The Company has elected to be taxed, and to qualify annually thereafter, as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with the taxable year ended December 31, 2016. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. The Company also operates its business in a manner that permits it to maintain its exemption from registration as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s investment activities are externally managed by Terra REIT Advisors, LLC (“Terra REIT Advisors” or the “Manager”), a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC (“Terra Capital Partners”), pursuant to a management agreement (the “Management Agreement”), under the oversight of the Company’s board of directors (the “Board”) ( Note 8 ). The Company does not currently have any employees and does not expect to have any employees. Services necessary for the Company’s business are provided by individuals who are employees of the Manager or by individuals who were contracted by the Company or by the Manager to work on behalf of the Company pursuant to the terms of the Management Agreement. On October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Merger Agreement”), Terra Income Fund 6, Inc. (“Terra BDC”), merged with and into Terra Income Fund 6, LLC (“Terra LLC”), a wholly owned subsidiary of the Company, with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as a wholly owned subsidiary of the Company ( Note 3 ). As of September 30, 2023, Terra JV, LLC (“Terra JV”), former shareholders of Terra BDC and Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”) held 70.0%, 19.9% and 10.1% of the issued and outstanding shares of the Company’s common stock, respectively. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include all of the Company’s accounts and those of its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation. The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or voting interest model. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Company consolidates an entity when it holds a majority voting interest in an entity. The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting (see Note 5 ). VIE Model An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. Under the VIE model, limited partnerships are considered VIEs unless a limited partner holds substantive kick-out or participating rights over a general partner. The Company consolidates entities that are VIEs when the Company determines it is the primary beneficiary. Generally, the primary beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Loans Held for Investment The Company originates, acquires, and structures, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”). Loans held for investment are carried at the principal amount outstanding, adjusted for the accretion of discounts on investments and exit fees, and the amortization of premiums on investments and origination fees. The Company’s preferred equity investments, which are economically similar to mezzanine loans and subordinate to any loans but senior to common equity, are accounted for as loans held for investment. Loans are carried at amortized cost less allowance for credit losses. Current Expected Credit Losses Reserve Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses , became effective for the Company on January 1, 2023. ASC 326 mandates the use of a current expected credit loss (“CECL”) model for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” credit model previously required under United States generally accepted accounting principles (“U.S. GAAP”). The CECL model requires the consideration of possible credit losses over the life of an instrument as opposed to only estimating credit losses upon the occurrence of a discrete loss event under the previous “incurred loss” methodology. The CECL model applies to the Company’s loan portfolio and the held-to-maturity debt securities which are carried at amortized cost, including future funding commitments for which the Company does not have the unconditional right to cancel. Amortized cost is defined as the principal amount outstanding, adjusted for the accretion of purchase discounts and disposition fees, and amortization of purchase premiums and origination fees, and includes accrued interest receivable related to these loans and securities. As permitted by ASC 326, the Company elected not to measure an allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheet), but rather write off in a timely manner by reversing interest income that would likely be uncollectible. The Company’s adoption of the CECL model resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to accumulated deficit as of January 1, 2023. Subsequent to the adoption of the CECL model, any increase or decrease to the CECL reserve is recorded in earnings on the consolidated statements of operations. The Company utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio. The Company does not have a meaningful history of realized credit losses on its loan portfolio so it has subscribed to a third-party database service to provide the Company with industry losses for its loans. The Company utilizes a loan loss model that is widely used among banks and commercial mortgage REITs and is marketed by a leading commercial mortgage-based security data analytics provider. It employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. The Company provides specific loan-level inputs which include loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. The Company selects from a group of independent five-year macroeconomic forecasts included in the model that are updated regularly based on current economic trends. Because the Company’s loan portfolio is comprised of a small number of loans, the Company measures the CECL reserve based on an evaluation of each loan as its own segregated asset. Based on the inputs, the loan loss model determines a loan loss rate through the generation of probability of defaults (PD) and loss given defaults (LGD) for each loan. The CECL reserve is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect the expected credit losses. The calculation of the estimate of expected credit loss considers historical experience and current conditions for each loan and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy, current portfolio composition, level of historical loss forecast estimates, material changes in growth and credit strategy and other factors that may affect its loss experience. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed. Beyond the Company’s reasonable and supportable forecast period, the Company generally reverts to historical loss information, pooled by asset type and investment structure, over the remaining loan period, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. The Company generally expects to use an average historical loss for reversion, utilizing an immediate or straight-line method for the remaining life of the loans. The Company also performs a qualitative assessment beyond model estimates and applies qualitative adjustments as necessary. The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the Company to determine the amount of the expected loss more accurately and reasonably for these investments. The Company also evaluates the contractual life of its loans to determine if changes are needed for contractual extension options, renewals, modifications, and prepayments. During the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, the Company considers that loan non-performing. For all non-performing loans, such as those in default, collateral-dependent or modified loans, including historical troubled debt restructurings, the Company removes these loans from the industry loss rate approach described above and analyzes them separately. The credit loss reserve for these loans is calculated as any excess of the amortized cost of the loan over (i) the present value of expected future cash flows discounted at the appropriate discount rate or (ii) the fair value of collateral, if repayment is expected solely from the collateral. Some of the Company’s loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL model because the Company does not have an unconditional right to cancel such commitments. The CECL reserve related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets. This CECL reserve is estimated using the same method outlined above for the Company’s outstanding loan balances, and increases or decreases in the CECL reserve relating to unfunded commitments are also recorded in earnings on the consolidated statements of operations. As discussed below in Recent Accounting Pronouncements, the Company adopted the provisions of Accounting Standards Update (“ASU”) 2022-02 Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) concurrently with the adoption of CECL on January 1, 2023, prospectively. Equity Investment in Unconsolidated Investments The Company accounts for its equity interests in unconsolidated investments under the equity method of accounting, i.e., at cost, increased or decreased by its share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting. The Company evaluates its equity investment unconsolidated investments on a periodic basis to determine if there are any indicators that the value of its equity investments may be impaired and whether or not that impairment is other-than-temporary. To the extent an impairment has occurred and is determined to be other-than-temporary, the Company measures the charge as the excess of the carrying value of its investment over its estimated fair value, which is determined by calculating its share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint venture agreements. Marketable Securities The Company from time to time invests in short term debt and equity securities. These securities are classified as available-for-sale and are carried at fair value. Changes in the fair value of equity securities are recognized in earnings. Changes in the fair value of debt securities are reported in other comprehensive income until a gain or loss on the securities is realized. Held-to-Maturity Debt Securities The Company classifies debt securities for which it has both the positive intent and ability to hold until maturity of the security as held-to-maturity debt securities. These securities are recorded at amortized cost with changes in amortized cost recognized in earnings until realized. Held-to-maturity debt securities are subject to the CECL reserve described above. Real Estate Owned, Net Real estate acquired is recorded at its estimated fair value at acquisition and is shown net of accumulated depreciation and impairment charges. Acquisition of properties generally are accounted for as asset acquisitions. Under asset acquisition accounting, the costs to acquire real estate, including transaction costs, are accumulated and then allocated to individual assets and liabilities acquired based upon their relative fair value. The Company allocates the purchase price of its real estate acquisitions to land, building, tenant improvements, acquired in-place leases, intangibles for the value of any above or below market leases at fair value and to any other identified intangible assets or liabilities. The Company amortizes the value allocated to in-place leases over the remaining lease term, which is reported in depreciation and amortization expense on its consolidated statements of operations. The value allocated to above or below market leases are amortized over the remaining lease term as an adjustment to rental income. Real estate assets are depreciated using the straight-line method over their estimated useful lives: buildings and improvements - not to exceed 40 years, and tenant improvements - shorter of the lease term or life of the asset. Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful life. Management reviews the Company’s real estate for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate assets. If impaired, the real estate asset will be written down to its estimated fair value. Leases The Company determines if an arrangement is a lease at inception. Operating leases in which the Company is the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s lease typically does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made in advance and excludes lease incentives if there were any. The Company’s lease term may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. Revenue Recognition Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Interest Income: Interest income is accrued based upon the outstanding principal amount and contractual terms of the loans and preferred equity investments that the Company expects to collect, and it is accrued and recorded on a daily basis. Discounts and premiums on investments purchased are accreted or amortized over the expected life of the respective loan using the effective yield method, and are included in interest income in the consolidated statements of operations. Loan origination fees and exit fees, net of portions attributable to obligations under participation agreements, are capitalized and amortized or accreted to interest income over the life of the investment using the effective yield method. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of income and principal becomes doubtful. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. The Company holds loans in its portfolio that may contain paid-in-kind (“PIK”) interest provisions. The PIK interest, which represents contractually deferred interest that is added to the principal balance that is due at maturity, is recorded on the accrual basis. Real Estate Operating Revenues: Real estate operating revenue is derived from leasing of space to various types of tenants. The leases are for fixed terms of varying length and generally provide for annual rent increases and expense reimbursements to be paid in monthly installments. Lease revenue, or rental income from leases, is recognized on a straight-line basis over the term of the respective leases. Additionally, the Company recorded above- and below-market lease intangibles, which are included in real estate owned, net, in connection with the acquisition of the real estate properties. These intangible assets and liabilities are amortized to lease revenue over the remaining contractual lease term. Other Revenues: Prepayment fee income is recognized as prepayments occur. All other income is recognized when earned. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments, with original maturities of ninety days or less when purchased, as cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains all of its cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation. Restricted cash represents cash held as additional collateral by the Company on behalf of the borrowers related to the investments in loans or preferred equity instruments for the purpose of such borrowers making interest and property-related operating payments. Restricted cash is not available for general corporate purposes. The related liability is recorded in “ Interest reserve and other deposits held on investments ” on the consolidated balance sheets. Cash held in escrow by lender represents amounts funded to an escrow account for debt services and tenant improvements. Cash held in escrow is restricted and is not available for general corporate purposes. The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s consolidated balance sheets to the total amount shown in its consolidated statements of cash flows as of: September 30, 2023 2022 Cash and cash equivalents $ 19,242,370 $ 21,957,216 Restricted cash 5,418,932 5,521,080 Cash held in escrow by lender 4,894,546 4,697,219 Total cash, cash equivalents and restricted cash shown in the consolidated $ 29,555,848 $ 32,175,515 Participation Interests Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. For the investments for which participation has been granted, the interest earned on the entire loan balance is recorded within “ Interest income ” and the interest related to the participation interest is recorded within “ Interest expense from obligations under participation agreements ” in the consolidated statements of operations. Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes doubtful. See “ Obligations under Participation Agreements ” in Note 9 for additional information. Term Loan The Company previously financed certain of its senior loans through borrowings under an indenture and credit agreement. The Company accounted for the borrowings as a term loan, which was carried at the contractual amount (cost), net of unamortized deferred financing fees. On February 18, 2022, the Company refinanced the Term Loan (as defined below) with a new repurchase agreement. See “Goldman Master Purchase Agreement” in Note 9 for additional information. In connection with the BDC Merger, the Company assumed a $25.0 million term loan. In June 2023, the Company made a repayment of $10.0 million on the Term Loan. The Company classified this Term Loan as term loan payable on the consolidated balance sheets. Repurchase Agreements The Company finances certain of its senior loans held for investment through repurchase transactions under master repurchase agreements. The Company accounts for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. See “Repurchase Agreements” in Note 9 for additional information. Fair Value Measurements U.S. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, unsecured notes, mortgage loan payable, term loan payable, repurchase agreement payment and revolving line of credit. Such financial instruments are carried at amortized cost, less impairment, where applicable. Marketable securities are financial instruments that are reported at fair value. Deferred Financing Costs Deferred financing costs represent fees and expenses incurred in connection with obtaining financing for investments. These costs are presented in the consolidated balance sheets as a direct deduction of the debt liability to which the costs pertain. These costs are amortized using the effective interest method and are included in interest expense on the applicable borrowings in the consolidated statements of operations over the life of the borrowings. Income Taxes The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2016. In order to qualify as a REIT, the Company is required, among other things, to distribute dividends equal to at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax) beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. Any gains from the sale of foreclosed properties within two years are subject to U.S. federal and state income taxes at regular corporate rates. As of September 30, 2023, the Company has satisfied all the requirements for a REIT. The Company did not have any uncertain tax positions that met the recognition or measurement criteria of Accounting Standards Codification (“ASC”) 740-10-25, Income Taxes , nor did the Company have any unrecognized tax benefits as of the periods presented herein. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its consolidated statements of operations. For the three and nine months ended September 30, 2023 and 2022, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s 2020-2022 federal tax returns remain subject to examination by the Internal Revenue Service. Earnings Per Share The Company has a simple equity capital structure with only common stock outstanding as of September 30, 2023 and common stock and preferred stock outstanding as of December 31, 2022. As a result, earnings per share, as presented, represent both basic and dilutive per-share amounts for the periods presented in the consolidated financial statements. Income per basic share of common stock is calculated by dividing net income allocable to common stock by the weighted-average number of shares of common stock issued and outstanding during such period. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates, and those differences could be material. Segment Information The Company’s primary business is originating, acquiring and structuring real estate-related loans related to high quality commercial real estate. From time to time, the Company may acquire real estate encumbering the senior loans through foreclosure, may invest in real estate related joint ventures and may directly acquire real estate properties. The Company operates in a single segment focused on mezzanine loans, other loans and preferred equity investments, and to a lesser extent, owning and managing real estate. Recent Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. In April 2019, the FASB issued additional amendments to clarify the scope of ASU 2016-13 and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. In May 2019, the FASB issued ASU 2019-05 — Targeted Transition Relief, which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In October 2019, the FASB decided that for smaller reporting companies, ASU 2016-13 and related amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company meets the definition of a smaller reporting company under the regulation of the Securities and Exchange Commission. The Company adopted this ASU and related amendments on January 1, 2023. The adoption of ASU 2016-13 resulted in an incremental reserve of approximately $4.6 million, which included a reserve on future loan funding commitments. The Company recorded the cumulative effect of initially applying this guidance as an adjustment to Accumulated deficit using the modified retrospective method of adoption. London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. In July 2017, the U.K. Financial Conduct Authority, which regulates the LIBOR administrator, ICE Benchmark Administration Limited (“IBA”), announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021, which was subsequently delayed to June 30, 2023. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition (“ASU 2021-01”). As of September 30, 2023, all of the Company’s floating rate loans and related |
Mergers
Mergers | 9 Months Ended |
Sep. 30, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Mergers | Mergers BDC Merger On October 1, 2022 (the “Closing Date”), pursuant to the Merger Agreement, Terra BDC merged with and into Terra LLC, with Terra LLC surviving as a wholly owned subsidiary of the Company. The Certificate of Merger and Articles of Merger with respect to the BDC Merger were filed with the Secretary of State of the State of Delaware and State Department of Assessments and Taxation of Maryland (the “SDAT”), respectively, with an effective time and date of 12:02 a.m., Eastern Time, on the Closing Date (the “Effective Time”). At the Effective Time, except for any shares of common stock, par value $0.001 per share, of Terra BDC (“Terra BDC Common Stock”) held by the Company or any wholly owned subsidiary of the Company or Terra BDC, which shares were automatically retired and ceased to exist with no consideration paid therefor, each issued and outstanding share of Terra BDC Common Stock was automatically cancelled and retired and converted into the right to receive (i) 0.595 shares of the newly designated Class B Common Stock, par value $0.01 per share (“Class B Common Stock”) and (ii) cash, without interest, in lieu of any fractional shares of Class B Common Stock otherwise issuable in an amount, rounded to the nearest whole cent, determined by multiplying (x) the fraction of a share of Class B Common Stock to which such holder would otherwise be entitled by (y) $14.38. Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of the Closing Date. Following the consummation of the BDC Merger, former Terra BDC stockholders owned approximately 19.9% of the common equity of the Company. The Company and Terra BDC prepared their respective financial statements in accordance with generally accepted accounting principles in the United States. The BDC Merger is accounted for using the acquisition method of accounting, with the Company being treated as the accounting acquirer. In identifying the Company as the acquiring entity for accounting purposes, the Company and Terra BDC took into account a number of factors, including the relative size of the merging companies, which entity issues additional shares in conjunction with the BDC Merger, the relative voting interests of the respective stockholders after consummation of the BDC Merger, and the composition of the Board and senior management of the combined company after consummation of the BDC Merger. The Company, as the acquirer, accounted for the BDC Merger as an asset acquisition and all direct acquisition-related costs are capitalized to the total cost of the assets acquired and liabilities assumed. Pursuant to Accounting Standard Codification Topic 805, Business Combination , total cost is allocated to the assets acquired and liabilities assumed on a relative fair value basis. The following table summarizes the total consideration and the fair values of assets acquired and liabilities assumed in the BDC Merger: Total Consideration Fair value of Terra Property Trust shares of common stock issued $ 71,054,620 Cash paid for fractional shares 12,920 Transaction costs 2,283,785 $ 73,351,325 Assets Acquired and Liabilities Assumed at Fair Value Cash and cash equivalents $ 24,321,951 Restricted cash 260,614 Loans held for investment 77,562,528 Loans held for investment acquired through participation 36,793,313 Interest receivable 1,367,044 Other assets 55,465 Term loan payable (25,000,000) Unsecured notes payable (33,770,000) Obligations under participation agreements (6,114,979) Interest reserve and other deposits held on investments (260,614) Due to manager (682,541) Interest payable (53,186) Accounts payable and accrued expenses (740,824) Other liabilities (387,446) Net assets acquired $ 73,351,325 The fair value of the 4,847,910 shares of the Class B Common Stock was determined based on the Company’s net asset value per share of $14.66 as of October 1, 2022. Net Gain on Extinguishment of Obligations Under Participation Agreements As discussed in Note 8 , in the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties. As a result of the BDC Merger, the obligations under participation agreements with Terra BDC totaling $37.0 million were effectively extinguished and the Company recognized a net gain of $3.4 million, representing the difference between the carrying value of the Company’s obligations under participation agreements and the fair value of Terra BDC’s investments acquired through participation agreements. Appointment of Directors As of the Effective Time and in accordance with the Merger Agreement, the size of the Board was increased by three members and each of Spencer Goldenberg, Adrienne Everett and Gaurav Misra (each a “Terra BDC Designee”, and collectively, the “Terra BDC Designees”) were elected to the Board to fill the vacancies created by such increase, with each Terra BDC Designee to serve until the Company’s next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Each of the other members of the Board immediately prior to the Effective Time continued as members following the Effective Time. Voting Support Agreement On the Closing Date, the Company, Terra JV and Terra Offshore REIT entered into a Voting Support Agreement (the “2022 Voting Agreement”). Pursuant to the 2022 Voting Agreement, effective as of the Closing Date, Terra JV and Terra Offshore REIT have agreed to, at any meeting of the Company’s stockholders called for the purpose of electing directors (or by any consent in writing or by electronic transmission in lieu of any such meeting), cast all votes entitled to be cast by each of them in favor of the election of the Terra BDC Designees until the earlier of (i) the first anniversary of the Closing Date, (ii) the TPT Class B Common Stock Distributions (as defined in the 2022 Voting Agreement) or (iii) an amendment and restatement of the amended and restated management agreement between the Company and Terra REIT Advisors approved by the Company’s Board, including the Terra BDC Designees. Indemnification Agreements The Company has entered into customary indemnification agreements with each member of the Board (including each Terra BDC Designee). These agreements, among other things, require the Company to indemnify each director to the maximum extent permitted by Maryland law, including indemnification of expenses such as attorney’s fees, judgments, fines and settlement amounts incurred in any action or proceeding, including any action or proceeding by or in right of the Company, arising out of his or her service as a director. WMC Merger Agreement On June 28, 2023, the Company announced it entered into an Agreement and Plan of Merger, dated as of June 27, 2023 (the “WMC Merger Agreement”), with Western Asset Mortgage Capital Corporation, a Delaware corporation (“WMC”). On July 27, 2023, WMC notified the Company that its board of directors determined that a proposal from AG Mortgage Investment Trust, Inc. (“MITT”) to acquire WMC was a “Parent Superior Proposal” under the WMC Merger Agreement and that WMC’s board of directors intended to terminate the WMC Merger Agreement unless WMC received a revised proposal from the Company by a specified deadline such that WMC’s board of directors determined that MITT’s proposal was no longer a “Parent Superior Proposal.” On July 25, 2023, the Company disclosed that it acquired approximately 5.2% of the outstanding shares of common stock of MITT as of July 24, 2023. On August 8, 2023, WMC terminated the WMC Merger Agreement pursuant to its terms (the “Termination”), and the Company was paid a termination fee of $3.0 million. The termination fee was used to pay the professional fees incurred in connection with contemplated merger. |
Loans Held for Investment
Loans Held for Investment | 9 Months Ended |
Sep. 30, 2023 | |
Receivables [Abstract] | |
Loans Held for Investment | Loans Held for Investment The Company elected the practical expedient under ASC 326 to exclude accrued interest from amortized cost. As of September 30, 2023 and December 31, 2022, accrued interest receivable of $4.3 million and $4.1 million, respectively, is included in interest receivable on the consolidated balance sheets, and is excluded from the amortized cost of loans held for investment. Portfolio Summary The following table provides a summary of the Company’s loan portfolio as of: September 30, 2023 December 31, 2022 Fixed Rate Floating (1)(2)(3) Total Fixed Rate Floating (1)(2)(3) Total Number of loans 5 17 22 8 23 31 Principal balance $ 53,349,208 $ 473,447,562 $ 526,796,770 $ 90,990,183 $ 554,805,276 $ 645,795,459 Carrying value $ 53,449,024 $ 417,233,267 $ 470,682,291 $ 92,274,998 $ 534,215,769 $ 626,490,767 Fair value $ 52,771,702 $ 419,101,684 $ 471,873,386 $ 90,729,098 $ 532,416,656 $ 623,145,754 Weighted-average coupon rate 12.94 % 13.05 % 13.04 % 13.82 % 11.23 % 11.59 % Weighted-average remaining 1.30 0.48 0.57 1.35 1.10 1.14 _______________ (1) These loans pay a coupon rate of LIBOR, Secured Overnight Financing Rate (“SOFR”), or forward-looking term rate based on SOFR (“Term SOFR”), as applicable, plus a fixed spread. Coupon rates shown were determined using LIBOR of 5.43%, average SOFR of 5.32% and Term SOFR of 5.32% as of September 30, 2023 and LIBOR of 4.39%, average SOFR of 4.06% and Term SOFR of 4.36% as of December 31, 2022. (2) As of September 30, 2023 and December 31, 2022, amount included $339.9 million and $413.1 million of senior mortgages used as collateral for $200.3 million and $261.0 million of borrowings under credit facilities, respectively ( Note 9 ). (3) As of September 30, 2023 and December 31, 2022, fifteen and twenty-one loans, respectively, were subject to a LIBOR, SOFR or Term SOFR floor, as applicable. Lending Activities The following tables present the activities of the Company’s loan portfolio: Loans Held for Investment Loans Held for Investment through Participation Interests Total Balance, January 1, 2023 $ 584,417,939 $ 42,072,828 $ 626,490,767 Cumulative effect of credit loss accounting standard effective January 1, 2023 ( Note 2 ) (4,123,143) (126,909) (4,250,052) New loans made 73,104,166 — 73,104,166 Principal repayments received (120,082,766) (3,282,208) (123,364,974) Net amortization of premiums on loans (1,023,275) — (1,023,275) Settlement of loans in exchange for real estate properties ( Note 6 ) (68,737,877) — (68,737,877) Accrual, payment and accretion of investment-related fees and other, (658,926) (20,893) (679,819) Provision for credit losses (30,568,286) (288,359) (30,856,645) Balance, September 30, 2023 $ 432,327,832 $ 38,354,459 $ 470,682,291 Loans Held for Investment Loans Held for Investment through Participation Interests Total Balance, January 1, 2022 $ 457,329,582 $ 12,343,732 $ 469,673,314 New loans made 155,653,368 32,225,275 187,878,643 Principal repayments received (158,765,183) — (158,765,183) Net amortization of premiums on loans (122,783) — (122,783) Accrual, payment and accretion of investment-related fees and other, 489,352 289,958 779,310 Provision for credit losses (9,264,058) — (9,264,058) Balance, September 30, 2022 $ 445,320,278 $ 44,858,965 $ 490,179,243 Portfolio Information The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of: September 30, 2023 December 31, 2022 Loan Structure Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total First mortgages $ 362,563,401 $ 366,424,572 77.9 % $ 456,408,889 $ 461,299,182 73.7 % Preferred equity investments 125,951,529 126,578,253 26.9 % 121,231,434 122,132,177 19.5 % Mezzanine loans 38,281,840 38,258,053 8.1 % 39,352,303 39,451,115 6.3 % Credit facility — — — % 28,802,833 29,080,183 4.6 % Allowance for credit losses — (60,578,587) (12.9) % — (25,471,890) (4.1) % Total $ 526,796,770 $ 470,682,291 100.0 % $ 645,795,459 $ 626,490,767 100.0 % September 30, 2023 December 31, 2022 Property Type Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total Office $ 167,559,588 $ 167,607,063 35.5 % $ 184,196,708 $ 184,722,657 29.4 % Multifamily 82,183,385 82,707,320 17.6 % 104,589,464 105,570,432 16.9 % Industrial 66,571,495 67,125,625 14.3 % 147,796,164 148,891,742 23.8 % Mixed-use 63,096,365 63,559,577 13.5 % 64,880,450 65,838,965 10.5 % Infill land 51,913,555 53,168,879 11.3 % 48,860,291 49,565,437 7.9 % Hotel - full/select service 43,222,382 43,861,312 9.3 % 43,222,382 43,758,804 7.0 % Student housing 31,000,000 31,794,386 6.8 % 31,000,000 31,774,261 5.1 % Infrastructure 21,250,000 21,436,716 4.6 % 21,250,000 21,840,359 3.5 % Allowance for credit losses — (60,578,587) (12.9) % — (25,471,890) (4.1) % Total $ 526,796,770 $ 470,682,291 100.0 % $ 645,795,459 $ 626,490,767 100.0 % September 30, 2023 December 31, 2022 Geographic Location Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total United States California $ 139,930,729 $ 141,243,492 30.1 % $ 164,253,345 $ 165,839,561 26.5 % New York 90,447,055 90,447,055 19.2 % 91,845,479 91,877,084 14.7 % New Jersey 80,485,050 82,011,372 17.4 % 62,228,622 62,958,482 10.0 % Georgia 75,632,491 75,938,028 16.1 % 72,401,718 73,101,964 11.7 % Utah 49,250,000 50,300,532 10.7 % 49,250,000 50,698,251 8.1 % Washington 31,224,966 31,111,001 6.6 % 56,671,267 57,027,639 9.1 % Arizona 31,000,000 31,283,132 6.6 % 31,000,000 31,276,468 5.0 % North Carolina 21,826,479 21,926,266 4.7 % 43,520,028 44,041,162 7.0 % Massachusetts 7,000,000 7,000,000 1.5 % 7,000,000 7,000,000 1.1 % Texas — — — % 67,625,000 68,142,046 10.9 % Allowance for credit losses — (60,578,587) (12.9) % — (25,471,890) (4.1) % Total $ 526,796,770 $ 470,682,291 100.0 % $ 645,795,459 $ 626,490,767 100.0 % Current Expected Credit Losses Reserve As described in Note 2 , on January 1, 2023, the Company adopted the provisions of ASU 2016-13, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses. The adoption of ASU 2016-13 resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to accumulated deficits as of January 1, 2023. The following table presents the activity in allowance for credit loss for funded loans: Nine Months Ended September 30, 2023 2022 Allowance for credit losses, beginning of period $ 25,471,890 $ 13,658,481 Cumulative effect of credit loss accounting standard effective January 1, 2023 ( Note 2 ) 4,250,052 — Provision for credit losses (1) 30,856,645 9,264,058 Charge-offs — — Recoveries — — Allowance for credit losses, end of period $ 60,578,587 $ 22,922,539 _______________ (1) Prior to the adoption of the CECL model on January 1, 2023, the Company recorded an allowance for credit losses equal to (i) 1.5% of the aggregate carrying amount of loans rated as a “4”, plus (ii) 5% of the aggregate carrying amount of loans rated as a “5”, plus (iii) non-performing loan reserves, if any. Certain of the Company’s loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These unfunded commitments amounted to approximately $44.4 million and $47.3 million as of September 30, 2023 and December 31, 2022, respectively. The following table presents the activity in the liability for credit losses on unfunded commitments: Nine Months Ended September 30, 2023 Liability for credit losses on unfunded commitments, beginning of period $ — Cumulative effect of credit loss accounting standard effective January 1, 2023 ( Note 2 ) 369,671 Provision for credit losses 42,789 Liability for credit losses on unfunded commitments, end of period $ 412,460 The liability for credit losses on unfunded commitments is included in other liabilities on the consolidated balance sheets. Accrued Interest Receivable The Company elected not to measure a CECL reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely matter. If the Company determines it has uncollectible accrued interest receivable, it generally would reverse the accrued and unpaid interest against interest income and no longer accrues for interest. For the three and nine months ended September 30, 2023 and 2022, the Company did not reverse any interest income accrual because all accrued interest income was deemed collectible. As of September 30, 2023 and 2022, the Company had five and three loans that were in default, and suspended interest income accrual of $5.4 million and $2.8 million for the three months ended September 30, 2023 and 2022, respectively, because recovery of such income was doubtful. For the nine months ended September 30, 2023 and 2022, the Company suspended interest income accrual of $12.6 million and $5.1 million on three and three loans, respectively, because recovery of such income was doubtful. As of September 30, 2023 and December 31, 2022, there was no interest receivable recognized on these loans. Non-Performing Loans As discussed in Note 2 , for loans that are considered non-performing, the Company removes them from the industry loss rate approach and analyzes them separately. As of September 30, 2023 and December 31, 2022, the Company had six and four non-performing loans with total carrying value of $171.3 million and $89.9 million, respectively. The allowance for credit losses for these non-performing loans were $58.9 million and $25.5 million as of September 30, 2023 and December 31, 2022, respectively. Loan Risk Rating The Company assesses the risk factors of each loan and assigns each loan a risk rating between 1 and 5, which is an average of the numerical ratings in the following categories: (i) sponsor capability and financial condition; (ii) loan and collateral performance relative to underwriting; (iii) quality and stability of collateral cash flows and/or reserve balances; and (iv) loan to value. Based on a 5-point scale, the Company’s loans are rated “1” through “5”, from less risk to greater risk, as follows: Risk Rating Description 1 Very low risk 2 Low risk 3 Moderate/average risk 4 Higher risk 5 Highest risk The following table presents the amortized cost of the Company’s loan portfolio by year of origination and loan risk rating as of September 30, 2023: September 30, 2023 Loan Risk Rating Number of Loans Amortized Cost % of Total Amortized Cost by Year Originated 2023 2022 2021 2020 2019 Prior 1 — $ — — % $ — $ — $ — $ — $ — $ — 2 2 25,044,070 4.7 % — — — — 18,044,070 7,000,000 3 14 334,868,607 63.0 % 7,904,530 155,389,458 96,956,107 27,826,630 43,861,312 2,930,570 4 — — — % — — — — — — 5 — — — % — — — — — — Non-performing 6 171,348,201 32.3 % — 20,840,888 — — 60,060,257 90,447,056 22 531,260,878 100.0 % $ 7,904,530 $ 176,230,346 $ 96,956,107 $ 27,826,630 $ 121,965,639 $ 100,377,626 Allowance for credit losses (60,578,587) Total, net of allowance for credit losses $ 470,682,291 The following table presents the principal balance and the amortized cost of the Company’s loans based on the loan risk rating as of December 31, 2022: December 31, 2022 Loan Risk Rating Number of Loans Principal Balance Amortized Cost % of Total 1 — $ — $ — — % 2 2 25,000,000 25,041,782 3.8 % 3 25 530,867,244 536,992,660 82.4 % 4 — — — — % 5 — — — — % Non-performing (1) 4 89,928,215 89,928,215 13.8 % 31 $ 645,795,459 651,962,657 100.0 % Allowance for credit losses (25,471,890) Total, net of allowance for credit losses $ 626,490,767 _______________ (1) Because these loans have an event of default, they were removed from the pool of loans on which a general allowance was calculated and were evaluated for collectability individually. As of December 31, 2022, the specific allowance for credit losses on these loans were $25.5 million, as a result of a decline in the fair value of the respective collateral. Troubled Debt Restructuring As of December 31, 2022, there was one investment that qualified as troubled debt restructuring. In December 2022, the borrower of a $40.1 million senior loan experienced financial difficulty and offered to repay the loan for $38.7 million. The remaining $1.4 million was converted to subordinated equity that accrues dividends at 8.0% and the Company is entitled to receive waterfall profit upon a sale. The Company does not anticipate a full recovery of the equity position and does not expect to receive any additional income. As a result, the remaining $1.4 million is reflected as a loan receivable and it is fully reserved for as of September 30, 2023 and December 31, 2022. The Company classified this loan modification as a TDR as it met all the conditions to be considered a TDR pursuant to ASC 310-40. The following table summarizes the recorded investment of TDR as of the date of restructuring: Number of loans modified 1 Pre-modified recorded carrying value $ 40,072,138 Post-modified recorded carrying value (1) $ 1,364,944 _______________ (1) As of September 30, 2023 and December 31, 2022, the principal balance of this loan was the same as the carrying value. The Company recorded an allowance for credit losses of $1.4 million to fully reserve for the unpaid principal balance. There was no income from this investment from the date of modification on December 28, 2022 through September 30, 2023. |
Equity Investment in Unconsolid
Equity Investment in Unconsolidated Investments | 9 Months Ended |
Sep. 30, 2023 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity Investment in Unconsolidated Investments | Equity Investment in Unconsolidated Investments The Company owns interests in a limited partnership and three joint ventures. The Company accounts for its interests in these investments under the equity method of accounting ( Note 2 ). The Company classifies distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities. Equity Investment in a Limited Partnership On August 3, 2020, the Company entered into a subscription agreement with Mavik Real Estate Special Opportunities Fund, LP (“RESOF”) whereby the Company committed to fund up to $50.0 million to purchase a limited partnership interest in RESOF. RESOF ’s primary investment objective is to generate attractive risk-adjusted returns by purchasing performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). The general partner of RESOF is Mavik Real Estate Special Opportunities Fund GP, LLC , which is a subsidiary of the Company’s sponsor, Terra Capital Partners . As of September 30, 2023 and December 31, 2022, the unfunded commitment was $37.4 million and $22.4 million, respectively. The Company evaluated its equity interest in RESOF and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in RESOF is accounted for as an equity method investment. As of September 30, 2023 and December 31, 2022, the Company owned 14.9% and 27.9% of the equity interest in RESOF, respectively. As of September 30, 2023 and December 31, 2022, the carrying value of the Company ’ s investment in RESOF was $18.3 million and $36.8 million, respectively. For the three and nine months ended September 30, 2023, the Company recorded equity income from RESOF of $0.9 million and $0.05 million, respectively. The equity income for the nine months ended September 30, 2023 included the negative adjustments made due to the dilution in the Company’s ownership interest in RESOF as new investors were admitted in 2022 and 2023. For the three and nine months ended September 30, 2023, the Company received distributions from RESOF of $0.7 million and $5.4 million, respectively. For the three and nine months ended September 30, 2022, the Company recorded equity income from RESOF of $2.1 million and $5.0 million, respectively, and received no distributions from RESOF. In connection with the equity investment in RESOF, the Company paid origination fees to the Manager totaling $0.5 million, to be amortized to equity income on a straight-line basis over the life of RESOF. The following tables present summarized financial information of the Company’s equity investment in RESOF. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share: As of September 30, 2023 December 31, 2022 Investments at fair value (cost of $166,181,966 and $176,035,290, respectively) $ 174,083,602 $ 178,283,703 Other assets 34,383,022 23,918,841 Total assets 208,466,624 202,202,544 Revolving line of credit, net of financing costs 38,190,052 14,795,985 Obligations under participation agreement (proceeds of $38,444,357 and $41,726,565, respectively) 38,868,663 41,962,861 Other liabilities 11,019,371 17,120,804 Total liabilities 88,078,086 73,879,650 Partners’ capital $ 120,388,538 $ 128,322,894 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Total investment income $ 8,504,140 $ 12,581,277 $ 24,880,051 $ 23,317,312 Total expenses 2,981,365 3,434,548 9,975,744 6,489,678 Net investment income 5,522,775 9,146,729 14,904,307 16,827,634 Unrealized appreciation (depreciation) 533,266 (644,446) (350,676) 917,745 Provision for income tax — — (138,944) — Net increase in partners’ capital resulting $ 6,056,041 $ 8,502,283 $ 14,414,687 $ 17,745,379 Equity Investment in Joint Ventures As of September 30, 2023 and December 31, 2022, the Company beneficially owned equity interests in three joint ventures that invest in real estate properties. The Company evaluated its equity interests in the joint ventures and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interests in the joint ventures are accounted for as equity method investments. In September 2022, the Company sold a 53% effective interest in two joint ventures and 59% effective interest in another joint venture for a total of $33.7 million and recognized a gain on sale of $0.8 million. In December 2022, the Company originated a $10.0 million mezzanine loan to a borrower to finance the acquisition of a real estate portfolio. In connection with this mezzanine loan, the Company entered into a residual profit sharing agreement with the borrower where the borrower would pay the Company an additional amount of 35.0% of remaining net cash flow from the sale of the real estate portfolio. The Company accounted for this arrangement using the equity method of accounting. In May 2023, the Company purchased the underlying asset ( Note 8 ) and the $10.0 million mezzanine loan was settled in connection with the purchase. The following table presents a summary of the Company’s equity investment in unconsolidated investments as of: September 30, 2023 December 31, 2022 Entity Co-owner (1) Beneficial Ownership Interest Carrying Value Beneficial Ownership Interest Carrying Value LEL Arlington JV LLC (1) Affiliate/Third party 27.2% $ 6,431,784 27.2% $ 7,271,603 LEL NW 49th JV LLC (1) Affiliate/Third party 27.2% 1,653,527 27.2% 1,521,556 TCG Corinthian FL Portfolio JV LLV (1)(2) Affiliate/Third Party 30.6% 6,108,226 30.6% 6,896,816 SF-Dallas Industrial, LLC (3) N/A N/A — N/A 10,013,691 $ 14,193,537 $ 25,703,666 _______________ (1) The Company sold a portion of the interest in this investment to an affiliate in September 2022. (2) This investment was purchased from a third party in March 2022. (3) This investment that meets the definition of an equity investment was entered into in December 2022. As discussed above, this investment was settled in May 2023. The following tables present estimated combined summarized financial information of the Company’s equity investment in the joint ventures. Amounts provided are the total amounts attributable to the joint ventures and do not represent the Company’s proportionate share: As of September 30, 2023 December 31, 2022 Net investments in real estate $ 191,498,145 $ 192,616,298 Other assets 12,614,486 12,817,388 Total assets 204,112,631 205,433,686 Mortgage loan payable 149,120,780 147,740,645 Other liabilities 5,288,108 3,104,624 Total liabilities 154,408,888 150,845,269 Members’ capital $ 49,703,743 $ 54,588,417 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues $ 4,369,642 $ 3,830,398 $ 12,537,910 $ 9,961,868 Operating expenses (1,902,828) (1,960,888) (6,227,802) (4,984,553) Depreciation and amortization expense (1,706,127) (1,296,079) (5,399,378) (3,051,976) Interest expense (2,638,961) (2,269,662) (7,794,759) (5,099,449) Unrealized (losses) gains (995,658) 1,617,548 (2,245,640) 3,023,925 Net loss $ (2,873,932) $ (78,683) $ (9,129,669) $ (150,185) For the three and nine months ended September 30, 2023, the Company recorded net equity loss from the joint ventures and the mezzanine loan of $0.9 million and $2.2 million, respectively, and did not receive any distributions from the joint ventures. For the three and nine months ended September 30, 2022, the Company recorded net equity loss from the joint ventures of $0.6 million and $0.7 million, respectively, and received distributions from the joint ventures of $0.2 million and $0.9 million, respectively. In connection with these investments, the Company paid origination fee to the Manager totaling $0.5 million, to be amortized to equity income over the life of the respective joint venture. |
Real Estate Owned, Net
Real Estate Owned, Net | 9 Months Ended |
Sep. 30, 2023 | |
Real Estate [Abstract] | |
Real Estate Owned, Net | Real Estate Owned, Net Real Estate Activities 2023 — During the nine months ended September 30, 2023, the Company recorded an impairment charge of $11.8 million on the multi-tenant office building located in California in order to reduce the carrying value of the building to its estimated fair value. In October 2023, the Company conveyed its interest in the office building to the lender by deed-in-lieu of foreclosure. Accordingly, the Company no longer owns the multi-tenant office building. Additionally, during the nine months ended September 30, 2023, the Company entered into the following investments: Property Number of Date of Property Type Total Capitalized Texas, United States 3 3/24/2023 Industrial $ 48,798,273 Texas, United States 5 5/25/2023 Industrial 83,288,961 $ 132,087,234 These acquisitions were deemed to be real estate asset acquisitions, and therefore total transaction costs were capitalized to the cost basis of the assets. The following table presents an allocation of the total capitalized costs: Total Capitalized Costs: Cash and cash equivalents $ 52,313,739 Loans held for investment 68,737,877 Equity investment in unconsolidated investment 10,149,642 Interest receivable 456,650 Other assets 429,326 $ 132,087,234 Net Assets Acquired Cash and cash equivalents $ 712,608 Other assets 33,802 Land 23,785,004 Buildings and Improvements 104,613,728 Intangible assets and liabilities: In-place lease (weighted-average expected life of 3.95 years) 12,719,000 Below-market rent (weighted-average expected life of 3.98 years) (8,864,137) Accounts payable and accrued expenses (912,771) $ 132,087,234 2022 — In June 2022, the Company sold the 4.9 acres of land it owned in Pennsylvania for net proceeds of $8.6 million, and recognized a net loss on sale of $0.1 million excluding impairment charges of $1.6 million and $3.4 million recognized in March 2022 and December 2021, respectively. Real Estate Owned, Net Real estate owned is comprised of eight industrial buildings located in Texas and a multi-tenant office building located in California, with lease intangible assets and liabilities. The following table presents the components of real estate owned, net as of: September 30, 2023 December 31, 2022 Cost Accumulated Depreciation/Amortization Net Cost Accumulated Depreciation/Amortization Net Real estate: Land $ 23,785,004 $ — $ 23,785,004 $ — $ — $ — Building and building 144,743,638 (7,892,321) 136,851,317 51,725,969 (5,711,468) 46,014,501 Tenant improvements 1,879,672 (1,438,553) 441,119 1,854,640 (1,224,648) 629,992 Furniture and fixtures 236,000 (236,000) — 236,000 (220,267) 15,733 Total real estate 170,644,314 (9,566,874) 161,077,440 53,816,609 (7,156,383) 46,660,226 Lease intangible assets: In-place lease 27,701,537 (15,075,179) 12,626,358 14,982,538 (12,493,079) 2,489,459 Above-market rent 156,542 (90,706) 65,836 156,542 (77,540) 79,002 Total intangible assets 27,858,079 (15,165,885) 12,692,194 15,139,080 (12,570,619) 2,568,461 Lease intangible liabilities: Below-market rent (11,619,059) 3,827,171 (7,791,888) (2,754,922) 2,428,647 (326,275) Above-market ground lease (8,896,270) 673,466 (8,222,804) (8,896,270) 575,705 (8,320,565) Total intangible liabilities (20,515,329) 4,500,637 (16,014,692) (11,651,192) 3,004,352 (8,646,840) Total real estate $ 177,987,064 $ (20,232,122) $ 157,754,942 $ 57,304,497 $ (16,722,650) $ 40,581,847 Real Estate Operating Revenues and Expenses The following table presents the components of real estate operating revenues and expenses that are included in the consolidated statements of operations: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Real estate operating revenues: Lease revenue $ 3,114,212 $ 1,752,594 $ 6,482,943 $ 5,251,417 Other operating income 1,006,828 1,210,218 1,775,000 3,682,170 Total $ 4,121,040 $ 2,962,812 $ 8,257,943 $ 8,933,587 Real estate operating expenses: Utilities $ 111,755 $ 84,769 $ 218,088 $ 186,274 Real estate taxes 590,894 353,361 1,483,255 1,044,520 Repairs and maintenances 230,701 171,085 694,253 498,318 Management fees 104,036 68,867 230,334 206,954 Lease expense, including amortization of above-market ground lease 487,163 487,163 1,461,489 1,461,489 Other operating expenses 387,773 109,604 899,027 342,585 Total $ 1,912,322 $ 1,274,849 $ 4,986,446 $ 3,740,140 Leases As of September 30, 2023, the Company owned eight industrial buildings that were leased to ten tenants and a multi-tenant office building that was leased to three tenants. As of December 31, 2022, the Company owned a multi-tenant office building that was leased to three tenants. In addition, the office building is subject to a ground lease whereby the Company was the lessee (or a tenant) to the ground lease. The ground lease had a remaining lease term of 63.1 years as of September 30, 2023, and provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9% of the fair market value of the land. The next rent reset on the ground lease is scheduled for November 1, 2025. The Company is currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v. Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No. 20STCV34217. The Company believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. The Company’s position has prevailed in all three of the prior arbitrations to reset the ground rent. Since future rent reset determinations under the ground lease cannot be known at this time, the Company did not include any potential future rent increases in calculating the present value of future rent payments. On October 19, 2023, the Company conveyed its interest in the property to a subsidiary of Centennial Bank by deed in lieu of foreclosure. Accordingly, the Company is no longer a party to the ground lease and will promptly take the technical steps necessary to terminate its involvement in the litigation. Scheduled Future Minimum Rent Income Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at September 30, 2023 are as follows: Years Ending December 31, Total 2023 (October 1 through December 31) $ 2,338,114 2024 9,456,610 2025 4,940,447 2026 4,600,139 2027 3,162,610 Thereafter 5,821,613 Total $ 30,319,533 Scheduled Annual Net Amortization of Intangibles Based on the intangible assets and liabilities recorded at September 30, 2023, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows: Years Ending December 31, Net Decrease in Real Estate Operating Revenue (1) Increase in Depreciation and Amortization (1) Decrease in Rent Expense (1) Total 2023 (October 1 through December 31) $ (783,637) $ 1,378,786 $ (65,174) $ 529,975 2024 (3,090,247) 5,423,504 (130,348) 2,202,909 2025 (1,532,194) 2,139,932 (130,348) 477,390 2026 (1,158,162) 1,780,528 (130,348) 492,018 2027 (393,640) 768,252 (130,348) 244,264 Thereafter (768,172) 1,135,356 (7,636,238) (7,269,054) Total $ (7,726,052) $ 12,626,358 $ (8,222,804) $ (3,322,498) _______________ (1) Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to lease revenues; amortization of in-place lease intangibles is included in depreciation and amortization; and amortization of above-market ground lease is recorded as a reduction to rent expense. Supplemental Ground Lease Disclosures Supplemental balance sheet information related to the ground lease was as follows as of: September 30, 2023 December 31, 2022 Operating lease Operating lease right-of-use asset $ 27,365,847 $ 27,378,786 Operating lease liability $ 27,365,847 $ 27,378,786 Weighted average remaining lease term — operating lease (years) 63.1 63.8 Weighted average discount rate — operating lease 7.6 % 7.6 % The component of lease expense for the ground lease was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Operating lease cost $ 519,750 $ 519,750 $ 1,559,250 $ 1,559,250 Supplemental non-cash information related to the ground lease was as follows: Nine Months Ended September 30, 2023 2022 Amounts included in the measurement of lease liability: Operating cash flows from an operating lease $ 1,559,250 $ 1,559,250 Right-of-use asset obtained in exchange for lease obligations: Operating lease $ 1,559,250 $ 1,559,250 Maturities of operating lease liability as of September 30, 2023 was as follows: Years Ending December 31, Operating Lease 2023 (October 1 through December 31) $ 519,750 2024 2,079,000 2025 2,079,000 2026 2,079,000 2027 2,079,000 Thereafter 122,227,875 Total lease payments 131,063,625 Less: Imputed interest (103,697,778) Total $ 27,365,847 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The Company follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows: Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access. Level 2 — Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, 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 is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. As of September 30, 2023 and December 31, 2022, the Company had not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, held-to-maturity debt securities, obligations under participation agreements, term loan payable, repurchase agreement payable, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities and derivatives are financial instruments that are reported at fair value. Financial Instruments Carried at Fair Value on a Recurring Basis From time to time, the Company may invest in short-term debt and equity securities which are classified as available-for-sale securities, which are presented at fair value and included in Other assets in the consolidated balance sheet. Changes in the fair value of equity securities are recognized in earnings. Changes in the fair value of debt securities are reported in other comprehensive income until the securities are realized. As discussed in Note 9 , in March 2023, the Company entered into a loan agreement with a lender to provide financing for the acquisition of real estate properties ( Note 6 ). In connection with the financing, the Company purchased an interest rate cap for $258,500 to effectively cap the related index rate at 5.0%. The interest rate cap met all the criteria of a derivative under ASC 815, but it did not meet the criteria under ASC 815-20-25 to qualify for hedging accounting. As such, the interest rate cap is reported at fair value and is included in other assets in the consolidated balance sheet, and the change in the fair value of the interest rate cap is reported in income. The following tables present fair value measurements of marketable securities and derivatives, by major class according to the fair value hierarchy as of: September 30, 2023 Fair Value Measurements Level 1 Level 2 Level 3 Total Money market fund (1) $ 3,199,919 $ — $ — $ 3,199,919 Marketable securities - debt securities 1,241,993 — — 1,241,993 Marketable securities - equity securities 5,812,498 — — 5,812,498 Derivative - interest rate cap (2) — — 212,754 212,754 Total $ 10,254,410 $ — $ 212,754 $ 10,467,164 _______________ (1) Amount is included in cash and cash equivalents on the consolidated balance sheets. (2) Amount is included in other assets on the consolidated balance sheets. December 31, 2022 Fair Value Measurements Level 1 Level 2 Level 3 Total Marketable Securities: Debt securities $ 147,960 $ — $ — $ 147,960 Total $ 147,960 $ — $ — $ 147,960 The following table presents the activities of the marketable securities and derivatives: Nine Months Ended September 30, 2023 2022 Marketable Securities Derivatives Marketable Securities Beginning balance $ 147,960 $ — $ 1,310,000 Purchases (1) 7,905,211 258,500 — Proceeds from sale — — (1,259,417) Reclassification of net realized gains on marketable securities — — 83,411 Unrealized losses on marketable securities and derivatives (998,680) (45,746) (133,994) Ending balance $ 7,054,491 $ 212,754 $ — _______________ (1) On July 25, 2023, the Company disclosed that it acquired approximately 5.2% of the outstanding shares of common stock of MITT as of July 24, 2023. Financial Instruments Not Carried at Fair Value In the first quarter of 2023, the Company purchased $20.0 million of corporate bonds with a coupon rate of 6.125% with a maturity date of May 15, 2023. The Company classified these bonds as held-to-maturity debt securities, as it had the intent and ability to hold these securities until maturity. These securities were recorded at amortized cost and were fully redeemed at par on May 15, 2023. The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of: September 30, 2023 December 31, 2022 Level Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value Loans: Loans held for investment 3 $ 488,352,413 $ 492,491,151 $ 433,004,722 $ 604,068,894 $ 609,889,829 $ 581,182,892 Loans held for investment 3 38,444,357 38,769,727 38,868,664 41,726,565 42,072,828 41,962,862 Allowance for loan losses — (60,578,587) — — (25,471,890) — Total loans $ 526,796,770 $ 470,682,291 $ 471,873,386 $ 645,795,459 $ 626,490,767 $ 623,145,754 Liabilities: Term loan payable 3 $ 15,000,000 $ 14,898,434 $ 15,000,000 $ 25,000,000 $ 25,000,000 $ 25,000,000 Unsecured notes payable 1 123,500,000 117,901,452 102,979,350 123,500,000 116,530,673 103,481,748 Repurchase agreement 3 112,905,625 112,392,727 112,905,625 170,876,606 169,304,710 170,876,606 Obligations under participation 3 — — — 12,584,958 12,680,594 12,680,595 Mortgage loan payable 3 100,852,253 99,434,309 101,118,741 29,252,308 29,488,326 29,394,870 Revolving line of credit 3 50,369,205 50,251,912 50,369,205 90,135,865 89,807,448 90,135,865 Note payable 3 37,000,000 36,562,785 37,000,000 — — — Total liabilities $ 439,627,083 $ 431,441,619 $ 419,372,921 $ 451,349,737 $ 442,811,751 $ 431,569,684 The Company estimated that its other financial assets and liabilities, not included in the tables above, had fair values that approximated their carrying values at both September 30, 2023 and December 31, 2022 due to their short-term nature. Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges) The Company periodically assesses whether there are any indicators that the value of its real estate investments may be impaired or that their carrying value may not be recoverable ( Note 2 ). There were no impairment charges for the three months ended September 30, 2023 and 2022. The following table presents information about assets for which the Company recorded impairment charges and that were measured at fair value on a non-recurring basis for the nine months ended September 30, 2023 and 2022: Nine Months Ended September 30, 2023 2022 Fair Value Impairment Charges Fair Value Impairment Charges Impairment Charges Real estate and intangibles $ 27,004,389 $ 11,765,540 $ 8,395,011 $ 1,604,989 $ 11,765,540 $ 1,604,989 Impairment charges, and their related triggering events and fair value measurements were as follows: Real Estate and Intangibles The impairment charges described below are reflected within Impairment charges in the consolidated statements of operations. For the nine months ended September 30, 2023, the Company recorded an impairment charge of $11.8 million on the multi-tenant office building located in California in order to reduce the carrying value of the building to its estimated fair value. The fair value measurement was determined by estimating discounted cash flows using two significant unobservable inputs, which were the cash flow discount rate (8.50%) and terminal capitalization rate (7.50%). In October 2023, the Company conveyed its interest in the office building to the lender by deed in lieu of foreclosure. Accordingly, the Company no longer owns the multi-tenant office building. For the nine months September 30, 2022, the Company recorded an impairment charge of $1.6 million on the 4.9 acres of land located in Pennsylvania to reduce the carrying value of the land to its estimated fair value, which was based on the selling price in the purchase and sale agreement. The land was sold in June 2022. Valuation Process for Fair Value Measurement The fair value of the Company’s investment in equity securities, held-to-maturity debt securities and its unsecured notes payable is determined based on quoted prices in an active market and is classified as Level 1 of the fair value hierarchy. Market quotations are not readily available for the Company’s real estate-related loan investments, all of which are included in Level 3 of the fair value hierarchy, and therefore these investments are valued utilizing a yield approach, i.e., a discounted cash flow methodology to arrive at an estimate of the fair value of each respective investment in the portfolio using an estimated market yield. In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, which may include available current market data on applicable yields of comparable debt/preferred equity instruments; market credit spreads and yield curves; the investment’s yield; covenants of the investment, including prepayment provisions; the portfolio company’s ability to make payments, net operating income and debt-service coverage ratio; construction progress reports and construction budget analysis; the nature, quality and realizable value of any collateral (and loan-to-value ratio); the forces that influence the local markets in which the asset (the collateral) is purchased and sold, such as capitalization rates, occupancy rates, rental rates and replacement costs; and the anticipated duration of each real estate-related loan investment. The Manager designates a valuation committee to oversee the entire valuation process of the Company’s Level 3 loans. The valuation committee is comprised of members of the Manager’s senior management, deal and portfolio management teams, who meet on a quarterly basis, or more frequently as needed, to review the Company investments being valued as well as the inputs used in the proprietary valuation model. Valuations determined by the valuation committee are supported by pertinent data and, in addition to a proprietary valuation model, are based on market data, industry accepted third-party valuation models and discount rates or other methods the valuation committee deems to be appropriate. Because there is no readily available market for these investments, the fair values of these investments are approved in good faith by the Company’s board of directors (which is made up exclusively of independent directors). The fair values of the Company’s mortgage loan payable, secured borrowing, term loan payable and revolving line of credit are determined by discounting the contractual cash flows at the interest rate the Company estimates such arrangements would bear if executed in the current market. The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of September 30, 2023 and December 31, 2022. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values. Fair Value at September 30, 2023 Primary Valuation Technique Unobservable Inputs September 30, 2023 Asset Category Minimum Maximum Weighted Average Assets: Loans held for investment, net $ 433,004,722 Discounted cash flow Discount rate 9.03 % 16.55 % 12.23 % Loans held for investment acquired through 38,868,664 Discounted cash flow Discount rate 15.30 % 18.32 % 17.74 % Total Level 3 Assets $ 471,873,386 Liabilities: Repurchase agreement payable 112,905,625 Discounted cash flow Discount rate 6.18 % 10.32 % 7.38 % Mortgage loan payable 101,118,741 Discounted cash flow Discount rate 6.25 % 9.17 % 7.89 % Term loan payable 15,000,000 Discounted cash flow Discount rate 12.71 % 12.71 % 12.71 % Revolving line of credit 50,369,205 Discounted cash flow Discount rate 8.67 % 8.67 % 8.67 % Note payable 37,000,000 Discounted cash flow Discount rate 10.92 % 10.92 % 10.92 % Total Level 3 Liabilities $ 316,393,571 Fair Value at December 31, 2022 Primary Valuation Technique Unobservable Inputs December 31, 2022 Asset Category Minimum Maximum Weighted Average Assets: Loans held for investment, net $ 581,182,892 Discounted cash flow Discount rate 8.71 % 19.36 % 11.46 % Loans held for investment acquired through 41,962,862 Discounted cash flow Discount rate 15.25 % 17.06 % 16.67 % Total Level 3 Assets $ 623,145,754 Liabilities: Repurchase agreement payable 170,876,606 Discounted cash flow Discount rate 5.22 % 6.17 % 6.82 % Obligations under participation agreements 12,680,595 Discounted cash flow Discount rate 16.36 % 16.36 % 16.36 % Mortgage loan payable 29,394,870 Discounted cash flow Discount rate 8.24 % 8.24 % 8.24 % Term loan payable 25,000,000 Discounted cash flow Discount rate 5.63 % 5.63 % 5.63 % Revolving line of credit 90,135,865 Discounted cash flow Discount rate 7.64 % 7.64 % 7.64 % Total Level 3 Liabilities $ 328,087,936 |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2023 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Management Agreement The Company entered into the Management Agreement with the Manager whereby the Manager is responsible for its day-to-day operations. The Management Agreement runs co-terminus with the amended and restated operating agreement for Terra Fund 5, which is scheduled to terminate on December 31, 2023 unless Terra Fund 5 is dissolved earlier. The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Origination and extension fee expense (1)(2) $ 488,219 $ 737,903 $ 1,302,826 $ 1,806,215 Asset management fee 2,049,916 1,611,934 6,152,392 4,740,657 Asset servicing fee 487,210 379,712 1,454,109 1,124,759 Operating expenses reimbursed to Manager 2,407,757 2,013,135 6,704,790 6,082,333 Disposition fee (3) 242,500 410,694 1,451,063 890,194 Total $ 5,675,602 $ 5,153,378 $ 17,065,180 $ 14,644,158 _______________ (1) Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan. (2) Amount for the nine months ended September 30, 2023 excluded $0.5 million of origination fee paid to the Manager in connection with the acquisition of the industrial buildings in 2023. Amount for the nine months ended September 30, 2022 excluded $0.2 million of origination fee paid to the Manager in connection with the Company’s equity investment in an unconsolidated investment. This origination fee was capitalized to the carrying value of the unconsolidated investment as a transaction cost. (3) Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations. Origination and Extension Fee Expense Pursuant to the Management Agreement, the Manager or its affiliates receives an origination fee in the amount of 1% of the amount used to originate, fund, acquire or structure real estate-related investments, including any third-party expenses related to such loans. In the event that the term of any real estate-related loan held by the Company is extended, the Manager also receives an extension fee equal to the lesser of (i) 1% of the principal amount of the loan being extended or (ii) the amount of fee paid to the Company by the borrower in connection with such extension. Asset Management Fee Under the terms of the Management Agreement, the Manager or its affiliates provides the Company with certain investment management services in return for a management fee. The Company pays a monthly asset management fee at an annual rate of 1% of the aggregate funds under management, which includes the loan origination price or aggregate gross acquisition price, as defined in the Management Agreement, for each real estate related loan and cash held by the Company. Asset Servicing Fee The Manager or its affiliates receives from the Company a monthly servicing fee at an annual rate of 0.25% of the aggregate gross origination price or acquisition price, as defined in the Management Agreement, for each real estate-related loan held by the Company. Transaction Breakup Fee In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of September 30, 2023 and December 31, 2022, the Company had not received any breakup fees. Operating Expenses The Company reimburses the Manager for operating expenses incurred in connection with services provided to the operations of the Company, including the Company’s allocable share of the Manager’s overhead, such as rent, employee costs, utilities, and technology costs. Disposition Fee Pursuant to the Management Agreement, the Manager or its affiliates receives a disposition fee in the amount of 1% of the gross sale price received by the Company from the disposition of any real estate-related loan, or any portion of, or interest in, any real estate-related loan. The disposition fee is paid concurrently with the closing of any such disposition of all or any portion of any real estate-related loan or any interest therein, which is the lesser of (i) 1% of the principal amount of the loan or debt-related loan prior to such transaction or (ii) the amount of the fee paid by the borrower in connection with such transaction. If the Company takes ownership of a property as a result of a workout or foreclosure of a loan, the Company will pay a disposition fee upon the sale of such property equal to 1% of the sales price. Cost Sharing and Reimbursement Agreement The Company and Terra LLC have entered into a cost sharing and reimbursement agreement effective October 1, 2022, pursuant to which Terra LLC is responsible for its allocable share of the Company’s expenses, including fees paid by the Company to the Manager based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on the Company’s consolidated financial statements. Distributions Paid For the three months ended September 30, 2023 and 2022, the Company made distributions to investors totaling $4.7 million and $3.7 million, respectively, of which $4.7 million and none were returns of capital, respectively. For the nine months ended September 30, 2023 and 2022, the Company made distributions to investors totaling $14.0 million and $11.4 million, respectively, of which $13.5 million and $5.4 million were returns of capital, respectively ( Note 11 ). Due to Manager As of September 30, 2023 and December 31, 2022, approximately $3.2 million and $3.9 million, respectively, was due to the Manager, as reflected on the consolidated balance sheets, primarily related to the present value of the disposition fees on individual loans due to the Manager. Mavik Real Estate Special Opportunities Fund, LP On August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. For more information on this investment, please see Note 5 . Participation Agreements In the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the “Participants”). The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity. ASC 860, Transfers and Servicing (“ASC 860”) , establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (See “ Participation interests ” in Note 2 and “ Obligations under Participation Agreements a nd Secured Borrowing ” in ( Note 9 ). Participation Interests Purchased by the Company From time to time, the Company may purchase investments from affiliates pursuant to participation agreements. In accordance with the terms of each participation agreement, each Participant’s rights and obligations, as well as the proceeds received from the related borrower/issuer of the loan, are based upon their respective pro rata participation interest in the loan. The table below lists the participation interests purchased by the Company pursuant to participation agreements as of: September 30, 2023 Participating Interests Principal Balance Carrying Value Mesa AZ Industrial Owner, LLC (1) 38.27% $ 31,000,000 $ 31,283,132 UNJ Sole Member, LLC (1) 40.80% 7,444,357 7,486,595 Allowance for credit losses — (415,268) $ 38,444,357 $ 38,354,459 December 31, 2022 Participating Interests Principal Balance Carrying Value Havemeyer TSM LLC (1)(2) 23.00% $ 3,282,208 $ 3,313,813 Mesa AZ Industrial Owner, LLC (1) 38.27% 31,000,000 31,276,468 UNJ Sole Member, LLC (1) 40.80% 7,444,357 7,482,547 $ 41,726,565 $ 42,072,828 ________________ (1) The loan is held in the name of Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager. (2) This loan was repaid in February 2023. Transfers of Participation Interest by the Company The following tables summarize the loans that were subject to participation agreements with affiliated entities and third-parties as of: Transfers Treated as Obligations Under Participation Agreements as of Principal Balance Carrying Value % Transferred Principal Balance Carrying Value 610 Walnut Investors LLC (1) $ 18,625,738 $ 18,738,386 67.57 % $ 12,584,958 $ 12,680,594 $ 18,625,738 $ 18,738,386 $ 12,584,958 $ 12,680,594 ________________ (1) Participant was a third party. In September 2023, the participant conveyed its interest in the obligation under participation agreements to the Company and the Company recognized a gain on debt extinguishment of $14.1 million. These investments are held in the name of the Company, but each of the Participant’s rights and obligations, including interest income and other income ( e.g. , exit fee, prepayment income) and related fees/expenses ( e.g. , disposition fees, asset management and asset servicing fees), are based upon their respective pro rata participation interest in such participated investments, as specified in the respective participation agreement. The Participants’ share of the investments is repayable only from the proceeds received from the related borrower/issuer of the investments and, therefore, the Participants also are subject to credit risk ( i.e. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Debt | Debt Unsecured Notes Payable The 6.00% Senior Notes Due 2026 On June 10, 2021, the Company issued $78.5 million in aggregate principal amount of its 6.00% notes due 2026 (the “initial note”), for net proceeds of $76.0 million after deducting underwriting commissions of $2.5 million, but before offering expenses payable by the Company. On June 25, 2021, the underwriters partially exercised their option to purchase an additional $6.6 million of the notes for net proceeds of $6.4 million (the “additional notes” and, together with the initial notes, the “6.00% Senior Notes Due 2026”), after deducting underwriting commissions of $0.2 million, but before offering expenses payable by us, which closed on June 29, 2021. Interest on the 6.00% Senior Notes Due 2026 is paid quarterly in arrears every March 30, June 30, September 30 and December 30, at a fixed rate of 6.00% per year, beginning September 30, 2021. The 6.00% Senior Notes Due 2026 mature on June 30, 2026, unless redeemed earlier by the Company, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after June 10, 2023. In connection with the issuance of the 6.00% Senior Notes Due 2026, the Company entered into (i) an Indenture, dated June 10, 2021 (the “Base Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”), and (ii) the First Supplemental Indenture thereto, dated June 10, 2021 (the “Supplemental Indenture” and, collectively with the Base Indenture, the “Indenture”), by and between the Company and the Trustee. The Indenture contains certain covenants that, among other things, limit the ability of the Company, subject to exceptions, to make distributions in excess of 90% of the Company’s taxable income, incur indebtedness (as defined in the Indenture) or purchase shares of the Company’s capital stock unless the Company has an asset coverage ratio (as defined in the Indenture) of at least 150% after giving effect to such transaction. The Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the notes to become or to be declared due and payable. As of September 30, 2023 and December 31, 2022, the Company was in compliance with the covenants included in the Indenture. The 7.00% Senior Notes Due 2026 As previously reported by Terra BDC, on February 10, 2021, Terra BDC issued $34.8 million in aggregate principal amount of 7.00% fixed-rate notes due 2026, for net proceeds of $33.7 million after deducting underwriting commissions of $1.1 million and on February 26, 2021, the underwriters exercised the option to purchase an additional $3.6 million of the notes for net proceeds of $3.5 million, after deducting underwriting commissions of $0.1 million (collectively the “7.00% Senior Notes Due 2026”). Pursuant to the Merger Agreement, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the 7.00% Senior Notes Due 2026 outstanding as of the Effective Time and the performance of every covenant of the Indenture, dated February 10, 2021 (the “TIF6 Indenture”), between Terra BDC and the Trustee, as supplemented by the First Supplemental Indenture, dated February 10, 2021, by and between Terra BDC and the Trustee (the “First Supplemental Indenture”), to be performed or observed by Terra BDC, including, without limitation, the execution and delivery to the Trustee of a supplement to the TIF6 Indenture in form satisfactory to the Trustee. On the Closing Date, Terra BDC, Terra LLC and the Trustee entered into a Second Supplemental Indenture pursuant to which Terra LLC assumed the payment of the 7.00% Senior Notes Due 2026 and the performance of every covenant of the TIF6 Indenture, as supplemented by the First Supplemental Indenture, to be performed or observed by Terra BDC. The 7.00% Senior Notes Due 2026 will mature on March 31, 2026, unless earlier repurchased or redeemed. The 7.00% Senior Notes Due 2026 bear interest at a rate of 7.00% per annum, payable on March 30, June 30, September 30 and December 30 of each year. The 7.00% Senior Notes Due 2026 are Terra LLC’s direct unsecured obligations and rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by Terra LLC; effectively subordinated in right of payment to any of Terra LLC’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of Terra LLC’s subsidiaries and financing vehicles. Terra LLC may redeem the 7.00% Senior Notes Due 2026 in whole or in part at any time on or after February 10, 2023, at a redemption price equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest. The TIF6 Indenture contains certain covenants that, among other things, limit the ability of Terra LLC, subject to exceptions, to incur indebtedness in violation of the 1940 Act, and to make distributions, incur indebtedness or repurchase shares of Terra LLC’s capital stock unless it satisfies asset coverage requirements set forth in the First Supplemental Indenture after giving effect to such transaction. The TIF6 Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the 7.00% Senior Notes Due 2026 to become or to be declared due and payable. Summarized Information The table below presents detailed information regarding the unsecured notes payable as of: September 30, 2023 December 31, 2022 Principal Balance Carrying Value Fair Value Principal Balance Carrying Value Fair Value 6.00% Senior Notes Due 2026 (1) $ 85,125,000 $ 82,992,867 $ 66,738,000 $ 85,125,000 $ 82,487,769 $ 68,100,000 7.00% Senior Notes Due 2026 (2) 38,375,000 34,908,585 36,241,350 38,375,000 34,042,904 35,381,748 $ 123,500,000 $ 117,901,452 $ 102,979,350 $ 123,500,000 $ 116,530,673 $ 103,481,748 _______________ (1) Carrying value is net of unamortized issue discount of $1.6 million and $1.9 million, and unamortized deferred financing costs of $0.6 million and $0.7 million as of September 30, 2023 and December 31, 2022, respectively. (2) Carrying value is net of unamortized purchase discount of $3.5 million and $4.3 million as of September 30, 2023 and December 31, 2022, respectively. Revolving Line of Credit On March 12, 2021, Terra Mortgage Portfolio II, LLC, an indirect wholly-owned subsidiary of the Company, entered into a Business Loan and Security Agreement (the “Revolving Line of Credit”) with Western Alliance Bank (“WAB”) to provide for advances up to the lesser of $75.0 million or the amount determined by the borrowing base, which is based on the eligible assets pledged to the lender. Prior to March 31, 2023 borrowings under the Revolving Line of Credit bore interest at an annual rate of LIBOR + 3.25% with a combined floor of 4.0%. In connection with the transition of LIBOR, on March 31, 2023, the Revolving Line of Credit was amended and the interest rate was changed to Term SOFR + 3.35% with a combined floor of 6.0%. The Revolving Line of Credit was scheduled to mature on March 12, 2023. On January 4, 2022, the Company amended the Revolving Line of Credit to increase the maximum amount available to $125.0 million and extended the maturity date of the facility to March 12, 2024 with an annual 12-month extension available at the Company’s option, which are subject to certain conditions. On August 3, 2022, the Company further amended the Revolving Line of Credit to increase the borrowing sub-limit in New York City and to allow for loans acquired through participation agreements as eligible assets. In connection with the Revolving Line of Credit, the Company entered into a limited guaranty (the “Guaranty”) in favor of WAB, pursuant to which the Company guarantees the payment of up to 25% of the amount outstanding under the Revolving Line of Credit. Under the Revolving Line of Credit and the Guaranty, the Company is required to maintain (i) a minimum total net worth of $250.0 million; (ii) a $3.5 million quarterly operating profit, as defined within the agreement; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00. As of September 30, 2023 and December 31, 2022, the Company was in compliance with these covenants. The Revolving Line of Credit contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature. The Revolving Line of Credit contains various affirmative and negative covenants, including maintenance of a debt to total net worth ratio and limitations on the incurrence of liens and indebtedness, loans, distributions, change of management and ownership, changes in the nature of business and transactions with affiliates. The Revolving Line of Credit also includes customary events of default, including a cross-default provision applicable to debt obligations of Terra Mortgage Portfolio II, LLC or the Company. The occurrence of an event of default may result in termination of the Revolving Line of Credit and acceleration of amounts due under the Revolving Line of Credit. In connection with the closing of the Revolving Line of Credit, the Company also incurred financing fees of $0.6 million, to be amortized to interest expense over the life of the Revolving Line of Credit. As of September 30, 2023 and December 31, 2022, borrowings under the Revolving Line of Credit were $50.4 million and $90.1 million, respectively, collateralized by $87.5 million and $177.4 million of eligible assets, respectively. For the nine months ended September 30, 2023 and 2022, the Company received proceeds from the Revolving Line of Credit of $57.0 million and $41.2 million, respectively, and made repayments of $96.8 million and $55.6 million, respectively. Repurchase Agreements UBS Master Repurchase Agreement On November 8, 2021, Terra Mortgage Capital III, LLC (the “Seller”), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Uncommitted Master Repurchase Agreement (the “UBS Master Repurchase Agreement”) with UBS AG ( the “Buyer”). The UBS Master Repurchase Agreement provides for advances of up to $195 million in the aggregate, which the Company expects to use to finance certain secured performing commercial real estate loans, including senior mortgage loans, where the underlying mortgaged properties consist of value-added assets with loan-to-value ratio between 65% and 80% that are typically yielding between 2.5% and 5.0%. Advances under the UBS Master Repurchase Agreement accrue interest at a per annum pricing rate equal to the sum of (i) the 30-day LIBOR or Term SOFR if LIBOR is not available and (ii) the applicable spread, which ranges from 1.60% to 2.25%, and have a maturity date of November 7, 2024. The actual terms of financing for each asset will be determined at the time of financing in accordance with the UBS Master Repurchase Agreement. Subject to satisfaction of certain conditions, the Seller may extend the maturity date of the UBS Master Repurchase Agreement annually thereafter on mutually agreeable terms. In connection with the UBS Master Repurchase Agreement, the Company incurred deferred financing costs of $0.6 million, which are being amortized to interest expense over the term of the facility. The UBS Master Repurchase Agreement contains margin call provisions that provide the Buyer with certain rights in the event of a decline in the credit of the underlying assets purchased under the UBS Master Repurchase Agreement. Upon the occurrence of a margin deficit event, the Buyer may require the Seller to make a payment to reduce the purchase price to eliminate any margin deficit. In connection with the UBS Master Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of the Buyer (as amended, the “UBS Guarantee Agreement”), pursuant to which the Company will guarantee the payment of up to 25% of the amount outstanding under the UBS Master Repurchase Agreement. The UBS Master Repurchase Agreement and the UBS Guarantee Agreement contain various representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types. In addition, the UBS Guarantee Agreement contains financial covenants, which require the Company to maintain: (i) cash liquidity of at least the greater of $5 million or 5% of the then-current outstanding amount under the UBS Master Repurchase Agreement; (ii) total liquidity of at least the greater of $15 million or 10% of the then-current outstanding amount under the UBS Master Repurchase Agreement (iii) tangible net worth at an amount equal to or greater than $215.7 million plus 75% of new capital contributions thereafter; (iv) an EBITDA to interest expense ratio (the “interest coverage ratio”) of not less than 1.25 to 1.00; and (v) a total indebtedness to tangible net worth ratio of not more than 3.50 to 1.00. As of December 31, 2022, the Company was in compliance with these covenants. As of September 30, 2023, the Company obtained a modification from the Buyer reducing the minimum interest coverage ratio to 1.10 to 1.00 (from 1.25 to 1.00) for the quarter ending September 30, 2023. Absent any further modifications or waivers from the Buyer after September 30, 2023, the interest coverage ratio threshold will revert to 1.25 to 1.00 for the quarters ending December 31, 2023 and thereafter. The modification also reduces the minimum tangible net worth to $225 million plus 75% of new capital contributions thereafter (from $269 million plus 75% of new capital contributions) for the quarter ending September 30, 2023 and all subsequent quarters. Accordingly, the Company was in compliance with all the financial covenants (as so modified) for the quarter ending September 30, 2023. The following tables present detailed information with respect to each borrowing under the UBS Master Repurchase Agreement as of: September 30, 2023 Collateral Borrowings Under Master Repurchase Agreement Principal Amount Carrying Value Fair Borrowing Date Principal Amount Interest NB Factory TIC 1, LLC $ 28,000,000 $ 28,863,816 $ 28,918,363 11/8/2021 $ 18,970,000 Term SOFR+1.75% Grandview’s Remington Place, 23,100,000 23,206,471 23,235,030 5/6/2022 18,480,000 Term SOFR + 1.965% $ 51,100,000 $ 52,070,287 $ 52,153,393 $ 37,450,000 December 31, 2022 Collateral Borrowings Under Master Repurchase Agreement Principal Amount Carrying Value Fair Borrowing Date Principal Amount Interest NB Factory TIC 1, LLC $ 28,000,000 $ 28,857,892 $ 28,902,234 11/8/2021 $ 18,970,000 LIBOR+1.74% (LIBOR floor of 0.1%) Grandview’s Madison Place, LLC 17,000,000 17,105,928 17,105,928 3/7/2022 13,600,000 Term SOFR + 1.965% Grandview’s Remington Place, 23,100,000 23,199,620 23,203,343 5/6/2022 18,480,000 Term SOFR + 1.965% $ 68,100,000 $ 69,163,440 $ 69,211,505 $ 51,050,000 For the nine months ended September 30, 2023, the Company had no additional borrowings and made a repayment of $13.6 million under the UBS Master Repurchase Agreement. For the nine months ended September 30, 2022, the Company borrowed $30.9 million and did not make any repayments under the UBS Master Repurchase Agreement. Goldman Master Repurchase Agreement The Company entered into a credit agreement with Goldman Sachs Banks to provide for a term loan of up to $103.0 million. On February 18, 2022, Terra Mortgage Capital I, LLC (the “GS Seller”), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Uncommitted Master Repurchase and Securities Contract Agreement (the “Repurchase Agreement”) with Goldman Sachs Bank USA ( the “GS Buyer”). The Repurchase Agreement provides for advances of up to $200.0 million in the aggregate, which the Company expects to use to finance the originations of certain secured performing commercial real estate loans and the acquisitions of certain secured non-performing commercial real estate loans. The Repurchase Agreement replaced the term loan, at which time all mortgage assets under the term loan were assigned as purchased assets under the Repurchase Agreement. Advances under the Repurchase Agreement accrue interest at a per annum pricing rate equal to the sum of (i) Term SOFR (subject to underlying loan floors on a case-by-case basis) and (ii) the applicable spread, which ranges from 1.75% to 3.00%, and have a maturity date of February 18, 2024. The actual terms of financing for each asset will be determined at the time of financing in accordance with the Repurchase Agreement. Subject to satisfaction of certain conditions, the GS Seller may extend the maturity date of the Repurchase Agreement for another 12-month term. In connection with the Repurchase Agreement, the Company incurred financing costs of $0.6 million, which are being amortized to interest expense over the term of the facility. Additionally, because the Repurchase Agreement was accounted for as a loan modification of the term loan, the remaining unamortized deferred financing fees of $1.7 million under the term loan were carried over to the Repurchase Agreement to be amortized over the life of the Repurchase Agreement. The Repurchase Agreement contains margin call provisions that provide the GS Buyer with certain rights in the event of a decline in debt yield, loan-to-value ratio, and value of the underlying loans purchased under the Repurchase Agreement. Upon the occurrence of a margin deficit event, the GS Buyer may require the GS Seller to make a payment to reduce the purchase price to eliminate any margin deficit. In connection with the Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of the GS Buyer (the “Guarantee Agreement”), pursuant to which the Company will guarantee the obligations of the GS Seller under the Repurchase Agreement. Subject to certain exceptions, the maximum liability under the Repurchase Agreement will not exceed 25% of the then currently outstanding repurchase obligations for performing loans and 50% of the then currently outstanding repurchase obligations for non-performing loans under the Repurchase Agreement. The Repurchase Agreement and the Guarantee Agreement contain various representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types. In addition, the Guarantee Agreement contains financial covenants, which require the Company to maintain: (i) cash liquidity of at least the greater of $5 million or 5% of the then-current outstanding amount under the Repurchase Agreement; (ii) total liquidity in an amount equal to or greater than the lesser of $15 million or 10% of the then-current outstanding amount under the Repurchase Agreement (iii) tangible net worth at an amount no less than 75% of that at closing; (iv) an EBITDA to adjusted interest expense ratio of not less than 1.50 to 1.00; and (v) a total indebtedness to tangible net worth ratio of not more than 3.00 to 1.00. As of September 30, 2023 and December 31, 2022, the Company was in compliance with these covenants. Based on current projections, it appears likely that the Company will not satisfy the interest coverage ratio as of December 31, 2023 (all other financial covenants are currently projected to be satisfied). The Company has had discussions with the GS Buyer about this situation, and the GS Buyer has preliminarily indicated its willingness to modify the interest coverage ratio prospectively to a lower threshold (from 1.50 to 1.00) for the quarter ending December 31, 2023 and all subsequent quarters (consistent with analogous modifications the GS Buyer has made with other borrowers under similar repurchase facilities), so that no default would currently be expected to arise thereunder for the quarter ending December 31, 2023 or subsequent quarters. The Company expects to modify the Guarantee Agreement prior to December 31, 2023. However, in the event such modification does not occur, the GS Buyer would have remedies under the Repurchase Agreement including, among others, the right to accelerate all amounts due to the GS Buyer under the Repurchase Agreement, to charge interest at a default rate (equal to 5.0% per annum above the non-default rate), to retain all cash flow from the loans originated by the Company which are subject to the Repurchase Agreement, and/or sell such loans in a private sale on terms possibly unfavorable to the Company. The consequences of an exercise of such remedies could be materially adverse to the Company resulting in a potential loss in net asset value equal to the difference between the carrying value of collateral and the carrying value of borrowings under the Repurchase Agreement as well as maximum recourse exposure of up to 25% of the total principal amount outstanding under the Repurchase Agreement. The following tables present detailed information with respect to each borrowing under the Repurchase Agreement as of: September 30, 2023 Collateral Borrowings Under Repurchase Agreement Principal Amount Carrying Value Fair Borrowing Date Principal Amount Interest 1389 Peachtree St, LP; 1401 Peachtree St, LP; and $ 58,695,313 $ 58,695,313 $ 50,900,000 2/18/2022 $ 20,072,636 Term SOFR + 2.465% AGRE DCP Palm Springs, LLC 43,222,382 43,861,312 43,549,187 2/18/2022 28,094,548 Term SOFR + 1.315% (1.8% floor) Patrick Henry Recovery Acquisition, 18,000,000 18,044,070 17,980,843 2/18/2022 14,400,000 Term SOFR + 0.865% (1.5% floor) Hillsborough Owners LLC 21,826,479 21,926,266 21,977,570 7/14/2023 12,888,441 Term SOFR + 5% (0.25% Floor) $ 141,744,174 $ 142,526,961 $ 134,407,600 $ 75,455,625 December 31, 2022 Collateral Borrowings Under Repurchase Agreement Principal Amount Carrying Value Fair Borrowing Date Principal Amount Interest 330 Tryon DE LLC $ 22,800,000 $ 22,902,215 $ 22,687,235 2/18/2022 $ 18,240,000 Term SOFR + 2.015% (0.01% floor) 1389 Peachtree St, LP; 1401 57,184,178 57,453,482 56,844,322 2/18/2022 41,587,275 Term SOFR + 2.465% AGRE DCP Palm Springs, LLC 43,222,382 43,758,804 43,062,933 2/18/2022 28,094,548 Term SOFR + 1.315% (1.8% floor) Patrick Henry Recovery 18,000,000 18,041,782 17,824,300 2/18/2022 14,400,000 Term SOFR + 0.865% (1.5% floor) University Park Berkeley, LLC 26,342,468 26,536,122 26,472,938 2/18/2022 17,504,783 Term SOFR + 1.365% ( 1.50% floor) $ 167,549,028 $ 168,692,405 $ 166,891,728 $ 119,826,606 For the nine months ended September 30, 2023 and 2022 the Company borrowed $14.2 million and $119.8 million, respectively, under the Repurchase Agreement and made repayments of $58.6 million and zero, respectively. Term Loan As previously reported by Terra BDC, on April 9, 2021, Terra BDC, as borrower, entered into a credit agreement (the “Credit Agreement”) with Eagle Point Credit Management LLC, as the administrative agent and collateral agent (“Eagle Point”), and certain funds and accounts managed by Eagle Point, as lenders (in such capacity, collectively, the “Lenders”). The Credit Agreement provides for (i) a delayed draw term loan of $25.0 million and (ii) additional incremental loans in a minimum amount of $1.0 million and multiples of $0.5 million in excess thereof, which may be approved by a Lender in its sole discretion (the “Term Loan”). The scheduled maturity date of the Term Loan was April 9, 2025. The Term Loan bore interest on the outstanding principal amount thereof at a rate equal to 5.625% per annum; provided that if at any time Terra BDC was rated below investment grade, the interest rate would increase to 6.625% until the rating is no longer below investment grade. In connection with the entry into the Credit Agreement, Terra BDC also agreed to pay Eagle Point an upfront fee in an amount equal to 2.50% of the loan commitment amount on the initial borrowing date as described in the Credit Agreement. Terra BDC also paid, with respect to any unused portion of the Term Loan, a commitment fee of 0.75% per annum. Terra BDC could prepay any loan, in whole or in part, together with all accrued but unpaid interest thereon, upon at least 30 but not more than 60 days’ prior notice to the Agent. If Terra BDC elected to make such prepayments prior to October 9, 2023, Terra BDC would also be required to pay a make whole premium, being the present value at such date of (1) the principal amount being prepaid of such loan, plus (2) all remaining required interest payments due on the principal amount being prepaid of such loan through the maturity date (excluding accrued but unpaid interest to the date on which the make whole premium becomes owed), computed using a discount rate equal to the applicable U.S. Treasury rate (as set forth in the Credit Agreement) plus 50 basis points, over (B) the principal amount being prepaid of such loan; provided that the make whole premium may in no event be less than zero. In connection with its entry into the Credit Agreement, Terra BDC also entered into a security agreement (the “Security Agreement”), by and among Terra BDC, as grantor, and Eagle Point, as administrative agent, for the benefit of the Lenders, their affiliates and Eagle Point as the secured parties thereunder. Pursuant to the Security Agreement, Terra BDC pledged substantially all of its then owned and thereafter acquired property as security for the obligations of Terra BDC under the Credit Agreement, subject to certain limitations and restrictions set forth in the Security Agreements. On September 27, 2022, Terra BDC, Terra LLC, Eagle Point and the Lenders entered into a Consent Letter and Amendment (the “Credit Facility Amendment”) effective October 1, 2022. Pursuant to the Credit Facility Amendment (i) Eagle Point and the Lenders consented to the consummation of the BDC Merger and the assumption by Terra LLC of all of the obligations of Terra BDC under the Credit Agreement, (ii) and the Credit Agreement was amended to, among other things, change the scheduled maturity date to July 1, 2023, and remove the make whole premium on voluntary prepayments of the loans. On June 30, 2023, the Company, Eagle Point and the Lenders entered into an amendment to the Credit Agreement, pursuant to which the Credit Agreement was amended to, among other things, (i) extend the scheduled maturity date to March 31, 2024, and (ii) increase the rate on which the loans bear interest from a fixed rate of 5.625% per annum to a floating rate based on SOFR plus 7.375% with a SOFR floor of 5.0%. In connection with the amendment, the Company paid Eagle Point a loan origination fee of $150,000, to be amortized to interest expense over the remaining term of the Term Loan. As of September 30, 2023 and December 31, 2022, the principal amount outstanding under the Term Loan was $15.0 million and $25.0 million, respectively. The Credit Agreement contains customary representations, warranties, reporting requirements, borrowing conditions and affirmative, negative and financial covenants. As of September 30, 2023 and December 31, 2022, Terra LLC was in compliance with these covenants. Mortgage Loans Payable Mortgage Loan Financing Activities 2023 — During the nine months ended September 30, 2023, the Company entered into the following financing arrangements: • A mortgage loan with total commitment of $37.0 million for the acquisition of three industrial buildings in March 2023. As of September 30, 2023, total amount funded was $33.0 million; and • A mortgage loan of $40.3 million to finance the acquisition of five industrial buildings in May 2023. The following table presents certain information about mortgage loans payable as of: September 30, 2023 December 31, 2022 Lender Current Maturity Principal Amount Carrying Value Carrying Value of Principal Amount Carrying Value Carrying Value of Centennial Bank (1) Term SOFR + 3.85% (Term SOFR Floor of 2.23%) May 31, 2023 $ 27,603,118 $ 27,869,606 $ 27,004,389 $ 29,252,308 $ 29,488,326 $ 40,581,847 TPG RE Finance 24, LTD (2) Term SOFR +3.5% (Term SOFR Floor of 3.75% April 9, 2027 32,999,135 32,285,757 48,387,162 — — — GSF Lender, LLC (3) 6.254% June 6, 2028 40,250,000 39,278,946 82,363,391 — — — $ 100,852,253 $ 99,434,309 $ 157,754,942 $ 29,252,308 $ 29,488,326 $ 40,581,847 ___________________ (1) This loan was collateralized by a multi-tenant office building that the Company acquired through foreclosure. In October 2023, the Company conveyed its interest in the office building to the lender by deed-in-lieu of foreclosure and the mortgage loan payable is effectively extinguished. (2) This loan is collateralized by three industrial buildings that the Company acquired in March 2023. (3) This loan is collateralized by five industrial buildings that the Company acquired in May 2023. Note Payable In September 2023, the Company borrowed $37.0 million under a promissory note that is collateralized by the underlying property of a $59.6 million senior loan. The promissory note bears interest at an annual rate of Term SOFR plus 5.6% with a combined floor of 10.9% and matures on March 22, 2025. Scheduled Debt Principal Payments Scheduled debt principal payments for each of the five calendar years following September 30, 2023 are as follows: Years Ending December 31, Total 2023 (October 1 through December 31) $ 27,603,118 2024 178,274,831 2025 37,000,000 2026 123,500,000 2027 32,999,136 Thereafter 40,250,000 439,627,085 Unamortized deferred financing costs (8,185,466) Total $ 431,441,619 At September 30, 2023 and December 31, 2022, the unamortized deferred debt issuance costs were $8.2 million and $8.6 million, respectively. Obligations Under Participation Agreements As discussed in Note 2 , the Company follows the guidance in ASC 860 when accounting for loan participations. Such guidance requires the transferred interests meet certain criteria in order for the transaction to be recorded as a sale. Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. As of September 30, 2023, there were no obligations under participation agreements. As of December 31, 2022, obligations under participation agreements had a carrying value of $12.7 million, and the carrying value of the loans that are associated with these obligations under participation agreements was $18.7 million, (see “ Participation Agreements ” in Note 8 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Unfunded Commitments on Loans Held for Investment Certain of the Company’s loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These fundings amounted to approximately $44.4 million and $47.3 million as of September 30, 2023 and December 31, 2022, respectively. The Company expects to maintain sufficient cash on hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on credit facilities. Unfunded Investment Commitment As discussed in Note 5 , on August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. As of September 30, 2023 and December 31, 2022, the unfunded investment commitment was $37.4 million and $22.4 million, respectively. Other The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. The Manager has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote. From time to time, the Company and the Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. Additionally, as described above under “ Note 6 . Real Estate Owned, Net—Real Estate Operating Revenue and Expenses,” as of September 30, 2023 and December 31, 2022, the Company owned a multi-tenant office building that is subject to a ground lease. The ground lease provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9% of the fair market value of the land. The next rent reset on the ground lease is scheduled for November 1, 2025. The Company is currently litigating with the landlord with respect to the appropriate method for determining the fair value of the land for purposes of setting the ground rent – Terra Ocean Ave., LLC v. Ocean Avenue Santa Monica Realty LLC, Superior Court of California, Los Angeles County, Case No. 20STCV34217. The Company believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. The Company’s position has prevailed in all three of the prior arbitrations to reset the ground rent. Since future rent reset determinations under the ground lease cannot be known at this time, the Company did not include any potential future rent increases in calculating the present value of future rent payments. On October 19, 2023, the Company conveyed its interest in the property to a subsidiary of Centennial Bank by deed-in-lieu of foreclosure. Accordingly, the Company is no longer a party to the ground lease and will promptly take the technical steps necessary to terminate its involvement in the litigation. On July 7, 2023, Centennial Bank filed a complaint for breach of guaranty against the Company in the United States District Court, Southern District of New York (SDNY). The complaint was related to a loan made by Centennial Bank to Terra Ocean Ave., LLC (“Terra Ocean”), and alleged that Centennial Bank allegedly made a mistake in July 2021, in demanding a prepayment of $11.3 million instead of $28.5 million with respect to the loan, and that the Company, as guarantor in certain limited respects, must now pay the difference (i.e. $17.2 million) plus interest and attorneys’ fees and costs. Centennial Bank’s now alleges that its mistake in determining the prepayment amount was caused by the wrongful failure to disclose the then-current status of the Lease Litigation by Terra Ocean and/or the Company. On July 24, 2023, the Company, through counsel appeared in the action. Also on July 17, 2023, Centennial Bank filed a complaint against Terra Ocean for: (i) Breach of Contract; (ii) Judicial Foreclosure and Deficiency Judgment; and (iii) Specific Performance and Appointment of Receiver in the Superior Court of the State of California, County of Los Angeles. Centennial Bank sought to foreclose on the deed of trust encumbering the tenant’s interest in the above-mentioned multi-tenant office building and ground lease. In the complaint, Centennial Bank alleged that its loan to Terra Ocean was in default and the outstanding principal amount of the loan is $27.6 million as of the filing of the complaint. On October 19, 2023, Terra Ocean conveyed to Centennial Bank, by deed-in-lieu-of-foreclosure, the leasehold interest that is the subject of the Lease Litigation. In connection with that conveyance, the Company and Terra Ocean were released by Centennial Bank from all liability and obligations in connection with the loan originally made by Centennial Bank to Terra Ocean that was secured by its leasehold interest. Accordingly, the complaints described above have been irrevocably and permanently dismissed, and the Company and Terra Ocean have no further obligation or potential liability in connection therewith. See Note 8 for a discussion of the Company’s commitments to the Manager. |
Equity
Equity | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
Equity | Equity Earnings Per Share The following table presents earnings per share: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net loss $ (17,477,698) $ (6,891,942) $ (36,167,284) $ (6,357,395) Series A preferred stock dividend declared — (3,906) (3,907) (11,718) Net loss allocable to common stock $ (17,477,698) $ (6,895,848) $ (36,171,191) $ (6,369,113) Weighted-average shares outstanding - basic 24,335,576 19,487,460 24,335,460 19,487,460 Loss per share - basic and diluted $ (0.72) $ (0.35) $ (1.49) $ (0.33) Preferred Stock Classes Preferred Stock The Company’s charter gives it authority to issue 50,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”). The Board may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, into one or more classes or series of stock. As of September 30, 2023, there were no Preferred Stock issued or outstanding. As of December 31, 2022 there were 125 shares of Series A Preferred Stock (as defined below) issued and outstanding. Series A Preferred Stock On November 30, 2016, the Board classified and designated 125 shares of Preferred Stock as a separate class of Preferred Stock to be known as the 12.5% Series A Redeemable Cumulative Preferred Stock, $1,000 liquidation value per share (“Series A Preferred Stock”). In December 2016, the Company sold 125 shares of the Series A Preferred Stock for $125,000. The Series A Preferred Stock paid dividends at an annual rate of 12.5% of the liquidation preference. These dividends were cumulative and payable semi-annually in arrears on June 30 and December 31 of each year. The Series A Preferred Stock, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company, ranked senior to common stock. The Company, at its option, may redeem the shares, with written notice, at a redemption price of $1,000 per share, plus any accrued unpaid distribution through the date of the redemption. The Series A Preferred Stock carried a redemption premium of $50 per share if redeemed prior to January 1, 2019. The Series A Preferred Stock generally had no voting rights. However, the Series A Preferred Stockholders’ voting was required if (i) authorization or issuance of any securities senior to the Series A Preferred Stock; (ii) an amendment to the Company’s charter that has a material adverse effect on the rights and preference of the Series A Preferred Stock; and (iii) any reclassification of the Series A Preferred Stock. In March 2023, the Series A Preferred Stock was fully redeemed at par for a total of $125,000 plus accrued dividends. Common Stock On October 1, 2022, in connection with the BDC Merger, the Company amended its charter to increase the shares authorized from 500,000,000 to 950,000,000, consisting of 450,000,000 shares of Class A Common Stock, $0.01 par value per share (“Class A Common Stock”), 450,000,000 shares of Class B Common Stock, and 50,000,000 shares of Preferred Stock. Concurrently, 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders and each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the BDC Merger was automatically changed into one issued and outstanding share of Class B Common Stock. As of September 30, 2023, Terra JV, LLC, former shareholders of Terra BDC and Terra Offshore Funds REIT, LLC held 70.0%, 19.9% and 10.1% of the issued and outstanding shares of the Class B Common Stock, respectively. The Class B Common Stock rank equally with and have identical preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as each other share of the Company’s common stock, except as set forth below with respect to conversion. On the date that is 180 calendar days (or, if such date is not a business day, the next business day) after the date (the “First Conversion Date”) of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date as approved by the Board, one-third of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. On the date that is 365 calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date following the First Conversion Date as approved by the Board (the “Second Conversion Date”), one-half of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. On the date that is 545 calendar days (or, if such date is not a business day, the next business day) after the date of initial listing of shares of Class A Common Stock for trading on a national securities exchange or such earlier date following the Second Conversion Date as approved by the Board, all of the issued and outstanding shares of Class B Common Stock will automatically and without any action on the part of the holder thereof convert into an equal number of shares of Class A Common Stock. Distributions The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with U.S. GAAP, to its stockholders each year to comply with the REIT provisions of the Internal Revenue Code. All distributions will be made at the discretion of the Board and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors as the Board deems relevant. For the three months ended September 30, 2023 and 2022, the Company made distributions to investors totaling $4.7 million and $3.7 million, respectively, of which $4.7 million and none were returns of capital, respectively. For the nine months ended September 30, 2023 and 2022, the Company made distributions to investors totaling $14.0 million and $11.4 million, respectively, of which $13.5 million and $5.4 million were returns of capital, respectively. Additionally, for the three and nine months ended September 30, 2023 and 2022, the Company made distributions to preferred stockholders of none and $3,906, respectively, and $3,907 and $11,718, respectively. Dividend Reinvestment Plan On January 20, 2023, the Board adopted a distribution reinvestment plan (the “Plan”), pursuant to which the Company’s stockholders may elect to reinvest cash distributions payable by the Company in additional shares of Class A Common Stock and Class B Common Stock, at the price per share determined pursuant to the Plan. For the nine months ended September 30, 2023, the Company issued 341 shares of Class B Common Stock for a total of $4,563 pursuant to the Plan. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | 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 other than the deed-in-lieu of foreclosure transaction discussed in Note 6. Real Estate Owned, Net and Note 9. Debt |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include all of the Company’s accounts and those of its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation. The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or voting interest model. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Company consolidates an entity when it holds a majority voting interest in an entity. The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting (see Note 5 ). VIE Model An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. |
Loans Held for Investment | Loans Held for Investment The Company originates, acquires, and structures, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”). Loans held for investment are carried at the principal amount outstanding, adjusted for the accretion of discounts on investments and exit fees, and the amortization of premiums on investments and origination fees. The Company’s preferred equity investments, which are economically similar to mezzanine loans and subordinate to any loans but senior to common equity, are accounted for as loans held for investment. Loans are carried at amortized cost less allowance for credit losses. |
Current Expected Credit Losses Reserve | Current Expected Credit Losses Reserve Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses , became effective for the Company on January 1, 2023. ASC 326 mandates the use of a current expected credit loss (“CECL”) model for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” credit model previously required under United States generally accepted accounting principles (“U.S. GAAP”). The CECL model requires the consideration of possible credit losses over the life of an instrument as opposed to only estimating credit losses upon the occurrence of a discrete loss event under the previous “incurred loss” methodology. The CECL model applies to the Company’s loan portfolio and the held-to-maturity debt securities which are carried at amortized cost, including future funding commitments for which the Company does not have the unconditional right to cancel. Amortized cost is defined as the principal amount outstanding, adjusted for the accretion of purchase discounts and disposition fees, and amortization of purchase premiums and origination fees, and includes accrued interest receivable related to these loans and securities. As permitted by ASC 326, the Company elected not to measure an allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheet), but rather write off in a timely manner by reversing interest income that would likely be uncollectible. The Company’s adoption of the CECL model resulted in a $4.6 million increase to total reserve, including reserve on future funding commitments, which was recognized as a cumulative-effect adjustment to accumulated deficit as of January 1, 2023. Subsequent to the adoption of the CECL model, any increase or decrease to the CECL reserve is recorded in earnings on the consolidated statements of operations. The Company utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio. The Company does not have a meaningful history of realized credit losses on its loan portfolio so it has subscribed to a third-party database service to provide the Company with industry losses for its loans. The Company utilizes a loan loss model that is widely used among banks and commercial mortgage REITs and is marketed by a leading commercial mortgage-based security data analytics provider. It employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. The Company provides specific loan-level inputs which include loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. The Company selects from a group of independent five-year macroeconomic forecasts included in the model that are updated regularly based on current economic trends. Because the Company’s loan portfolio is comprised of a small number of loans, the Company measures the CECL reserve based on an evaluation of each loan as its own segregated asset. Based on the inputs, the loan loss model determines a loan loss rate through the generation of probability of defaults (PD) and loss given defaults (LGD) for each loan. The CECL reserve is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect the expected credit losses. The calculation of the estimate of expected credit loss considers historical experience and current conditions for each loan and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy, current portfolio composition, level of historical loss forecast estimates, material changes in growth and credit strategy and other factors that may affect its loss experience. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed. Beyond the Company’s reasonable and supportable forecast period, the Company generally reverts to historical loss information, pooled by asset type and investment structure, over the remaining loan period, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. The Company generally expects to use an average historical loss for reversion, utilizing an immediate or straight-line method for the remaining life of the loans. The Company also performs a qualitative assessment beyond model estimates and applies qualitative adjustments as necessary. The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the Company to determine the amount of the expected loss more accurately and reasonably for these investments. The Company also evaluates the contractual life of its loans to determine if changes are needed for contractual extension options, renewals, modifications, and prepayments. During the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, the Company considers that loan non-performing. For all non-performing loans, such as those in default, collateral-dependent or modified loans, including historical troubled debt restructurings, the Company removes these loans from the industry loss rate approach described above and analyzes them separately. The credit loss reserve for these loans is calculated as any excess of the amortized cost of the loan over (i) the present value of expected future cash flows discounted at the appropriate discount rate or (ii) the fair value of collateral, if repayment is expected solely from the collateral. Some of the Company’s loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL model because the Company does not have an unconditional right to cancel such commitments. The CECL reserve related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets. This CECL reserve is estimated using the same method outlined above for the Company’s outstanding loan balances, and increases or decreases in the CECL reserve relating to unfunded commitments are also recorded in earnings on the consolidated statements of operations. |
Equity Investment in Unconsolidated Investments | Equity Investment in Unconsolidated Investments The Company accounts for its equity interests in unconsolidated investments under the equity method of accounting, i.e., at cost, increased or decreased by its share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting. |
Marketable Securities and Held-to-Maturity Debt Securities | Marketable Securities The Company from time to time invests in short term debt and equity securities. These securities are classified as available-for-sale and are carried at fair value. Changes in the fair value of equity securities are recognized in earnings. Changes in the fair value of debt securities are reported in other comprehensive income until a gain or loss on the securities is realized. Held-to-Maturity Debt Securities The Company classifies debt securities for which it has both the positive intent and ability to hold until maturity of the security as held-to-maturity debt securities. These securities are recorded at amortized cost with changes in amortized cost recognized in earnings until realized. Held-to-maturity debt securities are subject to the CECL reserve described above. |
Real Estate Owned, Net | Real Estate Owned, Net Real estate acquired is recorded at its estimated fair value at acquisition and is shown net of accumulated depreciation and impairment charges. Acquisition of properties generally are accounted for as asset acquisitions. Under asset acquisition accounting, the costs to acquire real estate, including transaction costs, are accumulated and then allocated to individual assets and liabilities acquired based upon their relative fair value. The Company allocates the purchase price of its real estate acquisitions to land, building, tenant improvements, acquired in-place leases, intangibles for the value of any above or below market leases at fair value and to any other identified intangible assets or liabilities. The Company amortizes the value allocated to in-place leases over the remaining lease term, which is reported in depreciation and amortization expense on its consolidated statements of operations. The value allocated to above or below market leases are amortized over the remaining lease term as an adjustment to rental income. Real estate assets are depreciated using the straight-line method over their estimated useful lives: buildings and improvements - not to exceed 40 years, and tenant improvements - shorter of the lease term or life of the asset. Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful life. |
Leases | Leases The Company determines if an arrangement is a lease at inception. Operating leases in which the Company is the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s lease typically does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made in advance and excludes lease incentives if there were any. The Company’s lease term may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. |
Revenue Recognition | Revenue Recognition Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Interest Income: Interest income is accrued based upon the outstanding principal amount and contractual terms of the loans and preferred equity investments that the Company expects to collect, and it is accrued and recorded on a daily basis. Discounts and premiums on investments purchased are accreted or amortized over the expected life of the respective loan using the effective yield method, and are included in interest income in the consolidated statements of operations. Loan origination fees and exit fees, net of portions attributable to obligations under participation agreements, are capitalized and amortized or accreted to interest income over the life of the investment using the effective yield method. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of income and principal becomes doubtful. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. The Company holds loans in its portfolio that may contain paid-in-kind (“PIK”) interest provisions. The PIK interest, which represents contractually deferred interest that is added to the principal balance that is due at maturity, is recorded on the accrual basis. Real Estate Operating Revenues: Real estate operating revenue is derived from leasing of space to various types of tenants. The leases are for fixed terms of varying length and generally provide for annual rent increases and expense reimbursements to be paid in monthly installments. Lease revenue, or rental income from leases, is recognized on a straight-line basis over the term of the respective leases. Additionally, the Company recorded above- and below-market lease intangibles, which are included in real estate owned, net, in connection with the acquisition of the real estate properties. These intangible assets and liabilities are amortized to lease revenue over the remaining contractual lease term. Other Revenues: Prepayment fee income is recognized as prepayments occur. All other income is recognized when earned. |
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments, with original maturities of ninety days or less when purchased, as cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains all of its cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation. Restricted cash represents cash held as additional collateral by the Company on behalf of the borrowers related to the investments in loans or preferred equity instruments for the purpose of such borrowers making interest and property-related operating payments. Restricted cash is not available for general corporate purposes. The related liability is recorded in “ Interest reserve and other deposits held on investments ” on the consolidated balance sheets. |
Participation Interests | Participation Interests Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. For the investments for which participation has been granted, the interest earned on the entire loan balance is recorded within “ Interest income ” and the interest related to the participation interest is recorded within “ Interest expense from obligations under participation agreements ” in the consolidated statements of operations. Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes doubtful. See “ Obligations under Participation Agreements ” in Note 9 for additional information. |
Term Loan | Term Loan The Company previously financed certain of its senior loans through borrowings under an indenture and credit agreement. The Company accounted for the borrowings as a term loan, which was carried at the contractual amount (cost), net of unamortized deferred financing fees. On February 18, 2022, the Company refinanced the Term Loan (as defined below) with a new repurchase agreement. See “Goldman Master Purchase Agreement” in Note 9 |
Repurchase Agreements | Repurchase Agreements The Company finances certain of its senior loans held for investment through repurchase transactions under master repurchase agreements. The Company accounts for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. See “Repurchase Agreements” in Note 9 |
Fair Value Measurements | Fair Value Measurements U.S. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, unsecured notes, mortgage loan payable, term loan payable, repurchase agreement payment and revolving line of credit. Such financial instruments are carried at amortized cost, less impairment, where applicable. Marketable securities are financial instruments that are reported at fair value. 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 is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. As of September 30, 2023 and December 31, 2022, the Company had not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, held-to-maturity debt securities, obligations under participation agreements, term loan payable, repurchase agreement payable, mortgage loan payable and revolving line of credit. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities and derivatives are financial instruments that are reported at fair value. |
Deferred Financing Costs | Deferred Financing Costs Deferred financing costs represent fees and expenses incurred in connection with obtaining financing for investments. These costs are presented in the consolidated balance sheets as a direct deduction of the debt liability to which the costs pertain. These costs are amortized using the effective interest method and are included in interest expense on the applicable borrowings in the consolidated statements of operations over the life of the borrowings. |
Income Taxes | Income Taxes The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2016. In order to qualify as a REIT, the Company is required, among other things, to distribute dividends equal to at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax) beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. Any gains from the sale of foreclosed properties within two years are subject to U.S. federal and state income taxes at regular corporate rates. As of September 30, 2023, the Company has satisfied all the requirements for a REIT. The Company did not have any uncertain tax positions that met the recognition or measurement criteria of Accounting Standards Codification (“ASC”) 740-10-25, Income Taxes |
Earnings Per Share | Earnings Per Share The Company has a simple equity capital structure with only common stock outstanding as of September 30, 2023 and common stock and preferred stock outstanding as of December 31, 2022. As a result, earnings per share, as presented, represent both basic and dilutive per-share amounts for the periods presented in the consolidated financial statements. Income per basic share of common stock is calculated by dividing net income allocable to common stock by the weighted-average number of shares of common stock issued and outstanding during such period. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates, and those differences could be material. |
Segment Information | Segment Information The Company’s primary business is originating, acquiring and structuring real estate-related loans related to high quality commercial real estate. From time to time, the Company may acquire real estate encumbering the senior loans through foreclosure, may invest in real estate related joint ventures and may directly acquire real estate properties. The Company operates in a single segment focused on mezzanine loans, other loans and preferred equity investments, and to a lesser extent, owning and managing real estate. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. In April 2019, the FASB issued additional amendments to clarify the scope of ASU 2016-13 and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. In May 2019, the FASB issued ASU 2019-05 — Targeted Transition Relief, which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In October 2019, the FASB decided that for smaller reporting companies, ASU 2016-13 and related amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company meets the definition of a smaller reporting company under the regulation of the Securities and Exchange Commission. The Company adopted this ASU and related amendments on January 1, 2023. The adoption of ASU 2016-13 resulted in an incremental reserve of approximately $4.6 million, which included a reserve on future loan funding commitments. The Company recorded the cumulative effect of initially applying this guidance as an adjustment to Accumulated deficit using the modified retrospective method of adoption. London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. In July 2017, the U.K. Financial Conduct Authority, which regulates the LIBOR administrator, ICE Benchmark Administration Limited (“IBA”), announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021, which was subsequently delayed to June 30, 2023. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition (“ASU 2021-01”). As of September 30, 2023, all of the Company’s floating rate loans and related |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Schedule of Cash, Cash Equivalents and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s consolidated balance sheets to the total amount shown in its consolidated statements of cash flows as of: September 30, 2023 2022 Cash and cash equivalents $ 19,242,370 $ 21,957,216 Restricted cash 5,418,932 5,521,080 Cash held in escrow by lender 4,894,546 4,697,219 Total cash, cash equivalents and restricted cash shown in the consolidated $ 29,555,848 $ 32,175,515 |
Schedule of Restrictions on Cash and Cash Equivalents | The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s consolidated balance sheets to the total amount shown in its consolidated statements of cash flows as of: September 30, 2023 2022 Cash and cash equivalents $ 19,242,370 $ 21,957,216 Restricted cash 5,418,932 5,521,080 Cash held in escrow by lender 4,894,546 4,697,219 Total cash, cash equivalents and restricted cash shown in the consolidated $ 29,555,848 $ 32,175,515 |
Mergers (Tables)
Mergers (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the total consideration and the fair values of assets acquired and liabilities assumed in the BDC Merger: Total Consideration Fair value of Terra Property Trust shares of common stock issued $ 71,054,620 Cash paid for fractional shares 12,920 Transaction costs 2,283,785 $ 73,351,325 Assets Acquired and Liabilities Assumed at Fair Value Cash and cash equivalents $ 24,321,951 Restricted cash 260,614 Loans held for investment 77,562,528 Loans held for investment acquired through participation 36,793,313 Interest receivable 1,367,044 Other assets 55,465 Term loan payable (25,000,000) Unsecured notes payable (33,770,000) Obligations under participation agreements (6,114,979) Interest reserve and other deposits held on investments (260,614) Due to manager (682,541) Interest payable (53,186) Accounts payable and accrued expenses (740,824) Other liabilities (387,446) Net assets acquired $ 73,351,325 |
Loans Held for Investment (Tabl
Loans Held for Investment (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Receivables [Abstract] | |
Schedule of Company's Loan Portfolio | The following table provides a summary of the Company’s loan portfolio as of: September 30, 2023 December 31, 2022 Fixed Rate Floating (1)(2)(3) Total Fixed Rate Floating (1)(2)(3) Total Number of loans 5 17 22 8 23 31 Principal balance $ 53,349,208 $ 473,447,562 $ 526,796,770 $ 90,990,183 $ 554,805,276 $ 645,795,459 Carrying value $ 53,449,024 $ 417,233,267 $ 470,682,291 $ 92,274,998 $ 534,215,769 $ 626,490,767 Fair value $ 52,771,702 $ 419,101,684 $ 471,873,386 $ 90,729,098 $ 532,416,656 $ 623,145,754 Weighted-average coupon rate 12.94 % 13.05 % 13.04 % 13.82 % 11.23 % 11.59 % Weighted-average remaining 1.30 0.48 0.57 1.35 1.10 1.14 _______________ (1) These loans pay a coupon rate of LIBOR, Secured Overnight Financing Rate (“SOFR”), or forward-looking term rate based on SOFR (“Term SOFR”), as applicable, plus a fixed spread. Coupon rates shown were determined using LIBOR of 5.43%, average SOFR of 5.32% and Term SOFR of 5.32% as of September 30, 2023 and LIBOR of 4.39%, average SOFR of 4.06% and Term SOFR of 4.36% as of December 31, 2022. (2) As of September 30, 2023 and December 31, 2022, amount included $339.9 million and $413.1 million of senior mortgages used as collateral for $200.3 million and $261.0 million of borrowings under credit facilities, respectively ( Note 9 ). (3) As of September 30, 2023 and December 31, 2022, fifteen and twenty-one loans, respectively, were subject to a LIBOR, SOFR or Term SOFR floor, as applicable. |
Schedule of Lending Activities | The following tables present the activities of the Company’s loan portfolio: Loans Held for Investment Loans Held for Investment through Participation Interests Total Balance, January 1, 2023 $ 584,417,939 $ 42,072,828 $ 626,490,767 Cumulative effect of credit loss accounting standard effective January 1, 2023 ( Note 2 ) (4,123,143) (126,909) (4,250,052) New loans made 73,104,166 — 73,104,166 Principal repayments received (120,082,766) (3,282,208) (123,364,974) Net amortization of premiums on loans (1,023,275) — (1,023,275) Settlement of loans in exchange for real estate properties ( Note 6 ) (68,737,877) — (68,737,877) Accrual, payment and accretion of investment-related fees and other, (658,926) (20,893) (679,819) Provision for credit losses (30,568,286) (288,359) (30,856,645) Balance, September 30, 2023 $ 432,327,832 $ 38,354,459 $ 470,682,291 Loans Held for Investment Loans Held for Investment through Participation Interests Total Balance, January 1, 2022 $ 457,329,582 $ 12,343,732 $ 469,673,314 New loans made 155,653,368 32,225,275 187,878,643 Principal repayments received (158,765,183) — (158,765,183) Net amortization of premiums on loans (122,783) — (122,783) Accrual, payment and accretion of investment-related fees and other, 489,352 289,958 779,310 Provision for credit losses (9,264,058) — (9,264,058) Balance, September 30, 2022 $ 445,320,278 $ 44,858,965 $ 490,179,243 |
Schedule of Accounts, Loans and Financing Receivable | The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans as of: September 30, 2023 December 31, 2022 Loan Structure Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total First mortgages $ 362,563,401 $ 366,424,572 77.9 % $ 456,408,889 $ 461,299,182 73.7 % Preferred equity investments 125,951,529 126,578,253 26.9 % 121,231,434 122,132,177 19.5 % Mezzanine loans 38,281,840 38,258,053 8.1 % 39,352,303 39,451,115 6.3 % Credit facility — — — % 28,802,833 29,080,183 4.6 % Allowance for credit losses — (60,578,587) (12.9) % — (25,471,890) (4.1) % Total $ 526,796,770 $ 470,682,291 100.0 % $ 645,795,459 $ 626,490,767 100.0 % September 30, 2023 December 31, 2022 Property Type Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total Office $ 167,559,588 $ 167,607,063 35.5 % $ 184,196,708 $ 184,722,657 29.4 % Multifamily 82,183,385 82,707,320 17.6 % 104,589,464 105,570,432 16.9 % Industrial 66,571,495 67,125,625 14.3 % 147,796,164 148,891,742 23.8 % Mixed-use 63,096,365 63,559,577 13.5 % 64,880,450 65,838,965 10.5 % Infill land 51,913,555 53,168,879 11.3 % 48,860,291 49,565,437 7.9 % Hotel - full/select service 43,222,382 43,861,312 9.3 % 43,222,382 43,758,804 7.0 % Student housing 31,000,000 31,794,386 6.8 % 31,000,000 31,774,261 5.1 % Infrastructure 21,250,000 21,436,716 4.6 % 21,250,000 21,840,359 3.5 % Allowance for credit losses — (60,578,587) (12.9) % — (25,471,890) (4.1) % Total $ 526,796,770 $ 470,682,291 100.0 % $ 645,795,459 $ 626,490,767 100.0 % September 30, 2023 December 31, 2022 Geographic Location Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total United States California $ 139,930,729 $ 141,243,492 30.1 % $ 164,253,345 $ 165,839,561 26.5 % New York 90,447,055 90,447,055 19.2 % 91,845,479 91,877,084 14.7 % New Jersey 80,485,050 82,011,372 17.4 % 62,228,622 62,958,482 10.0 % Georgia 75,632,491 75,938,028 16.1 % 72,401,718 73,101,964 11.7 % Utah 49,250,000 50,300,532 10.7 % 49,250,000 50,698,251 8.1 % Washington 31,224,966 31,111,001 6.6 % 56,671,267 57,027,639 9.1 % Arizona 31,000,000 31,283,132 6.6 % 31,000,000 31,276,468 5.0 % North Carolina 21,826,479 21,926,266 4.7 % 43,520,028 44,041,162 7.0 % Massachusetts 7,000,000 7,000,000 1.5 % 7,000,000 7,000,000 1.1 % Texas — — — % 67,625,000 68,142,046 10.9 % Allowance for credit losses — (60,578,587) (12.9) % — (25,471,890) (4.1) % Total $ 526,796,770 $ 470,682,291 100.0 % $ 645,795,459 $ 626,490,767 100.0 % September 30, 2023 Loan Risk Rating Number of Loans Amortized Cost % of Total Amortized Cost by Year Originated 2023 2022 2021 2020 2019 Prior 1 — $ — — % $ — $ — $ — $ — $ — $ — 2 2 25,044,070 4.7 % — — — — 18,044,070 7,000,000 3 14 334,868,607 63.0 % 7,904,530 155,389,458 96,956,107 27,826,630 43,861,312 2,930,570 4 — — — % — — — — — — 5 — — — % — — — — — — Non-performing 6 171,348,201 32.3 % — 20,840,888 — — 60,060,257 90,447,056 22 531,260,878 100.0 % $ 7,904,530 $ 176,230,346 $ 96,956,107 $ 27,826,630 $ 121,965,639 $ 100,377,626 Allowance for credit losses (60,578,587) Total, net of allowance for credit losses $ 470,682,291 The following table presents the principal balance and the amortized cost of the Company’s loans based on the loan risk rating as of December 31, 2022: December 31, 2022 Loan Risk Rating Number of Loans Principal Balance Amortized Cost % of Total 1 — $ — $ — — % 2 2 25,000,000 25,041,782 3.8 % 3 25 530,867,244 536,992,660 82.4 % 4 — — — — % 5 — — — — % Non-performing (1) 4 89,928,215 89,928,215 13.8 % 31 $ 645,795,459 651,962,657 100.0 % Allowance for credit losses (25,471,890) Total, net of allowance for credit losses $ 626,490,767 _______________ |
Schedule of Allowance for Loan Losses | The following table presents the activity in allowance for credit loss for funded loans: Nine Months Ended September 30, 2023 2022 Allowance for credit losses, beginning of period $ 25,471,890 $ 13,658,481 Cumulative effect of credit loss accounting standard effective January 1, 2023 ( Note 2 ) 4,250,052 — Provision for credit losses (1) 30,856,645 9,264,058 Charge-offs — — Recoveries — — Allowance for credit losses, end of period $ 60,578,587 $ 22,922,539 _______________ (1) Prior to the adoption of the CECL model on January 1, 2023, the Company recorded an allowance for credit losses equal to (i) 1.5% of the aggregate carrying amount of loans rated as a “4”, plus (ii) 5% of the aggregate carrying amount of loans rated as a “5”, plus (iii) non-performing loan reserves, if any. Nine Months Ended September 30, 2023 Liability for credit losses on unfunded commitments, beginning of period $ — Cumulative effect of credit loss accounting standard effective January 1, 2023 ( Note 2 ) 369,671 Provision for credit losses 42,789 Liability for credit losses on unfunded commitments, end of period $ 412,460 |
Schedule of Financing Receivable Credit Quality Indicators | The Company assesses the risk factors of each loan and assigns each loan a risk rating between 1 and 5, which is an average of the numerical ratings in the following categories: (i) sponsor capability and financial condition; (ii) loan and collateral performance relative to underwriting; (iii) quality and stability of collateral cash flows and/or reserve balances; and (iv) loan to value. Based on a 5-point scale, the Company’s loans are rated “1” through “5”, from less risk to greater risk, as follows: Risk Rating Description 1 Very low risk 2 Low risk 3 Moderate/average risk 4 Higher risk 5 Highest risk |
Schedule of Recorded Investment of TDR | The following table summarizes the recorded investment of TDR as of the date of restructuring: Number of loans modified 1 Pre-modified recorded carrying value $ 40,072,138 Post-modified recorded carrying value (1) $ 1,364,944 _______________ (1) As of September 30, 2023 and December 31, 2022, the principal balance of this loan was the same as the carrying value. The Company recorded an allowance for credit losses of $1.4 million to fully reserve for the unpaid principal balance. There was no income from this investment from the date of modification on December 28, 2022 through September 30, 2023. |
Equity Investment in Unconsol_2
Equity Investment in Unconsolidated Investments (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Schedule of Equity Method Investments | The following tables present summarized financial information of the Company’s equity investment in RESOF. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share: As of September 30, 2023 December 31, 2022 Investments at fair value (cost of $166,181,966 and $176,035,290, respectively) $ 174,083,602 $ 178,283,703 Other assets 34,383,022 23,918,841 Total assets 208,466,624 202,202,544 Revolving line of credit, net of financing costs 38,190,052 14,795,985 Obligations under participation agreement (proceeds of $38,444,357 and $41,726,565, respectively) 38,868,663 41,962,861 Other liabilities 11,019,371 17,120,804 Total liabilities 88,078,086 73,879,650 Partners’ capital $ 120,388,538 $ 128,322,894 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Total investment income $ 8,504,140 $ 12,581,277 $ 24,880,051 $ 23,317,312 Total expenses 2,981,365 3,434,548 9,975,744 6,489,678 Net investment income 5,522,775 9,146,729 14,904,307 16,827,634 Unrealized appreciation (depreciation) 533,266 (644,446) (350,676) 917,745 Provision for income tax — — (138,944) — Net increase in partners’ capital resulting $ 6,056,041 $ 8,502,283 $ 14,414,687 $ 17,745,379 The following tables present estimated combined summarized financial information of the Company’s equity investment in the joint ventures. Amounts provided are the total amounts attributable to the joint ventures and do not represent the Company’s proportionate share: As of September 30, 2023 December 31, 2022 Net investments in real estate $ 191,498,145 $ 192,616,298 Other assets 12,614,486 12,817,388 Total assets 204,112,631 205,433,686 Mortgage loan payable 149,120,780 147,740,645 Other liabilities 5,288,108 3,104,624 Total liabilities 154,408,888 150,845,269 Members’ capital $ 49,703,743 $ 54,588,417 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues $ 4,369,642 $ 3,830,398 $ 12,537,910 $ 9,961,868 Operating expenses (1,902,828) (1,960,888) (6,227,802) (4,984,553) Depreciation and amortization expense (1,706,127) (1,296,079) (5,399,378) (3,051,976) Interest expense (2,638,961) (2,269,662) (7,794,759) (5,099,449) Unrealized (losses) gains (995,658) 1,617,548 (2,245,640) 3,023,925 Net loss $ (2,873,932) $ (78,683) $ (9,129,669) $ (150,185) |
Schedule of Joint Venture Ownership Interests | The following table presents a summary of the Company’s equity investment in unconsolidated investments as of: September 30, 2023 December 31, 2022 Entity Co-owner (1) Beneficial Ownership Interest Carrying Value Beneficial Ownership Interest Carrying Value LEL Arlington JV LLC (1) Affiliate/Third party 27.2% $ 6,431,784 27.2% $ 7,271,603 LEL NW 49th JV LLC (1) Affiliate/Third party 27.2% 1,653,527 27.2% 1,521,556 TCG Corinthian FL Portfolio JV LLV (1)(2) Affiliate/Third Party 30.6% 6,108,226 30.6% 6,896,816 SF-Dallas Industrial, LLC (3) N/A N/A — N/A 10,013,691 $ 14,193,537 $ 25,703,666 _______________ (1) The Company sold a portion of the interest in this investment to an affiliate in September 2022. (2) This investment was purchased from a third party in March 2022. (3) This investment that meets the definition of an equity investment was entered into in December 2022. As discussed above, this investment was settled in May 2023. |
Real Estate Owned, Net (Tables)
Real Estate Owned, Net (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Real Estate [Abstract] | |
Schedule of Real Estate Owned, Net | Additionally, during the nine months ended September 30, 2023, the Company entered into the following investments: Property Number of Date of Property Type Total Capitalized Texas, United States 3 3/24/2023 Industrial $ 48,798,273 Texas, United States 5 5/25/2023 Industrial 83,288,961 $ 132,087,234 Total Capitalized Costs: Cash and cash equivalents $ 52,313,739 Loans held for investment 68,737,877 Equity investment in unconsolidated investment 10,149,642 Interest receivable 456,650 Other assets 429,326 $ 132,087,234 Net Assets Acquired Cash and cash equivalents $ 712,608 Other assets 33,802 Land 23,785,004 Buildings and Improvements 104,613,728 Intangible assets and liabilities: In-place lease (weighted-average expected life of 3.95 years) 12,719,000 Below-market rent (weighted-average expected life of 3.98 years) (8,864,137) Accounts payable and accrued expenses (912,771) $ 132,087,234 September 30, 2023 December 31, 2022 Cost Accumulated Depreciation/Amortization Net Cost Accumulated Depreciation/Amortization Net Real estate: Land $ 23,785,004 $ — $ 23,785,004 $ — $ — $ — Building and building 144,743,638 (7,892,321) 136,851,317 51,725,969 (5,711,468) 46,014,501 Tenant improvements 1,879,672 (1,438,553) 441,119 1,854,640 (1,224,648) 629,992 Furniture and fixtures 236,000 (236,000) — 236,000 (220,267) 15,733 Total real estate 170,644,314 (9,566,874) 161,077,440 53,816,609 (7,156,383) 46,660,226 Lease intangible assets: In-place lease 27,701,537 (15,075,179) 12,626,358 14,982,538 (12,493,079) 2,489,459 Above-market rent 156,542 (90,706) 65,836 156,542 (77,540) 79,002 Total intangible assets 27,858,079 (15,165,885) 12,692,194 15,139,080 (12,570,619) 2,568,461 Lease intangible liabilities: Below-market rent (11,619,059) 3,827,171 (7,791,888) (2,754,922) 2,428,647 (326,275) Above-market ground lease (8,896,270) 673,466 (8,222,804) (8,896,270) 575,705 (8,320,565) Total intangible liabilities (20,515,329) 4,500,637 (16,014,692) (11,651,192) 3,004,352 (8,646,840) Total real estate $ 177,987,064 $ (20,232,122) $ 157,754,942 $ 57,304,497 $ (16,722,650) $ 40,581,847 Real Estate Operating Revenues and Expenses The following table presents the components of real estate operating revenues and expenses that are included in the consolidated statements of operations: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Real estate operating revenues: Lease revenue $ 3,114,212 $ 1,752,594 $ 6,482,943 $ 5,251,417 Other operating income 1,006,828 1,210,218 1,775,000 3,682,170 Total $ 4,121,040 $ 2,962,812 $ 8,257,943 $ 8,933,587 Real estate operating expenses: Utilities $ 111,755 $ 84,769 $ 218,088 $ 186,274 Real estate taxes 590,894 353,361 1,483,255 1,044,520 Repairs and maintenances 230,701 171,085 694,253 498,318 Management fees 104,036 68,867 230,334 206,954 Lease expense, including amortization of above-market ground lease 487,163 487,163 1,461,489 1,461,489 Other operating expenses 387,773 109,604 899,027 342,585 Total $ 1,912,322 $ 1,274,849 $ 4,986,446 $ 3,740,140 |
Scheduled of Future Minimum Rent Income | Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at September 30, 2023 are as follows: Years Ending December 31, Total 2023 (October 1 through December 31) $ 2,338,114 2024 9,456,610 2025 4,940,447 2026 4,600,139 2027 3,162,610 Thereafter 5,821,613 Total $ 30,319,533 |
Scheduled of Annual Net Amortization of Intangibles | Based on the intangible assets and liabilities recorded at September 30, 2023, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows: Years Ending December 31, Net Decrease in Real Estate Operating Revenue (1) Increase in Depreciation and Amortization (1) Decrease in Rent Expense (1) Total 2023 (October 1 through December 31) $ (783,637) $ 1,378,786 $ (65,174) $ 529,975 2024 (3,090,247) 5,423,504 (130,348) 2,202,909 2025 (1,532,194) 2,139,932 (130,348) 477,390 2026 (1,158,162) 1,780,528 (130,348) 492,018 2027 (393,640) 768,252 (130,348) 244,264 Thereafter (768,172) 1,135,356 (7,636,238) (7,269,054) Total $ (7,726,052) $ 12,626,358 $ (8,222,804) $ (3,322,498) _______________ (1) Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to lease revenues; amortization of in-place lease intangibles is included in depreciation and amortization; and amortization of above-market ground lease is recorded as a reduction to rent expense. |
Schedule of Ground Lease Disclosures | Supplemental balance sheet information related to the ground lease was as follows as of: September 30, 2023 December 31, 2022 Operating lease Operating lease right-of-use asset $ 27,365,847 $ 27,378,786 Operating lease liability $ 27,365,847 $ 27,378,786 Weighted average remaining lease term — operating lease (years) 63.1 63.8 Weighted average discount rate — operating lease 7.6 % 7.6 % |
Schedule of Lease Expense | The component of lease expense for the ground lease was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Operating lease cost $ 519,750 $ 519,750 $ 1,559,250 $ 1,559,250 |
Schedule of Non-cash Information | Supplemental non-cash information related to the ground lease was as follows: Nine Months Ended September 30, 2023 2022 Amounts included in the measurement of lease liability: Operating cash flows from an operating lease $ 1,559,250 $ 1,559,250 Right-of-use asset obtained in exchange for lease obligations: Operating lease $ 1,559,250 $ 1,559,250 |
Schedule of Maturities of Operating Lease Liabilities | Maturities of operating lease liability as of September 30, 2023 was as follows: Years Ending December 31, Operating Lease 2023 (October 1 through December 31) $ 519,750 2024 2,079,000 2025 2,079,000 2026 2,079,000 2027 2,079,000 Thereafter 122,227,875 Total lease payments 131,063,625 Less: Imputed interest (103,697,778) Total $ 27,365,847 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value Measurements of Marketable Securities, by Major Class | The following tables present fair value measurements of marketable securities and derivatives, by major class according to the fair value hierarchy as of: September 30, 2023 Fair Value Measurements Level 1 Level 2 Level 3 Total Money market fund (1) $ 3,199,919 $ — $ — $ 3,199,919 Marketable securities - debt securities 1,241,993 — — 1,241,993 Marketable securities - equity securities 5,812,498 — — 5,812,498 Derivative - interest rate cap (2) — — 212,754 212,754 Total $ 10,254,410 $ — $ 212,754 $ 10,467,164 _______________ (1) Amount is included in cash and cash equivalents on the consolidated balance sheets. (2) Amount is included in other assets on the consolidated balance sheets. December 31, 2022 Fair Value Measurements Level 1 Level 2 Level 3 Total Marketable Securities: Debt securities $ 147,960 $ — $ — $ 147,960 Total $ 147,960 $ — $ — $ 147,960 |
Schedule of Activities of the Marketable Securities | The following table presents the activities of the marketable securities and derivatives: Nine Months Ended September 30, 2023 2022 Marketable Securities Derivatives Marketable Securities Beginning balance $ 147,960 $ — $ 1,310,000 Purchases (1) 7,905,211 258,500 — Proceeds from sale — — (1,259,417) Reclassification of net realized gains on marketable securities — — 83,411 Unrealized losses on marketable securities and derivatives (998,680) (45,746) (133,994) Ending balance $ 7,054,491 $ 212,754 $ — _______________ (1) On July 25, 2023, the Company disclosed that it acquired approximately 5.2% of the outstanding shares of common stock of MITT as of July 24, 2023. |
Schedule of Fair Value Measurements, Nonrecurring | The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of: September 30, 2023 December 31, 2022 Level Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value Loans: Loans held for investment 3 $ 488,352,413 $ 492,491,151 $ 433,004,722 $ 604,068,894 $ 609,889,829 $ 581,182,892 Loans held for investment 3 38,444,357 38,769,727 38,868,664 41,726,565 42,072,828 41,962,862 Allowance for loan losses — (60,578,587) — — (25,471,890) — Total loans $ 526,796,770 $ 470,682,291 $ 471,873,386 $ 645,795,459 $ 626,490,767 $ 623,145,754 Liabilities: Term loan payable 3 $ 15,000,000 $ 14,898,434 $ 15,000,000 $ 25,000,000 $ 25,000,000 $ 25,000,000 Unsecured notes payable 1 123,500,000 117,901,452 102,979,350 123,500,000 116,530,673 103,481,748 Repurchase agreement 3 112,905,625 112,392,727 112,905,625 170,876,606 169,304,710 170,876,606 Obligations under participation 3 — — — 12,584,958 12,680,594 12,680,595 Mortgage loan payable 3 100,852,253 99,434,309 101,118,741 29,252,308 29,488,326 29,394,870 Revolving line of credit 3 50,369,205 50,251,912 50,369,205 90,135,865 89,807,448 90,135,865 Note payable 3 37,000,000 36,562,785 37,000,000 — — — Total liabilities $ 439,627,083 $ 431,441,619 $ 419,372,921 $ 451,349,737 $ 442,811,751 $ 431,569,684 |
Schedule of Fair Value, Assets Measured on Nonrecurring Basis and Assets Impairment Charges | The following table presents information about assets for which the Company recorded impairment charges and that were measured at fair value on a non-recurring basis for the nine months ended September 30, 2023 and 2022: Nine Months Ended September 30, 2023 2022 Fair Value Impairment Charges Fair Value Impairment Charges Impairment Charges Real estate and intangibles $ 27,004,389 $ 11,765,540 $ 8,395,011 $ 1,604,989 $ 11,765,540 $ 1,604,989 |
Schedule of Fair Value Measurement Inputs and Valuation Techniques | The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of September 30, 2023 and December 31, 2022. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values. Fair Value at September 30, 2023 Primary Valuation Technique Unobservable Inputs September 30, 2023 Asset Category Minimum Maximum Weighted Average Assets: Loans held for investment, net $ 433,004,722 Discounted cash flow Discount rate 9.03 % 16.55 % 12.23 % Loans held for investment acquired through 38,868,664 Discounted cash flow Discount rate 15.30 % 18.32 % 17.74 % Total Level 3 Assets $ 471,873,386 Liabilities: Repurchase agreement payable 112,905,625 Discounted cash flow Discount rate 6.18 % 10.32 % 7.38 % Mortgage loan payable 101,118,741 Discounted cash flow Discount rate 6.25 % 9.17 % 7.89 % Term loan payable 15,000,000 Discounted cash flow Discount rate 12.71 % 12.71 % 12.71 % Revolving line of credit 50,369,205 Discounted cash flow Discount rate 8.67 % 8.67 % 8.67 % Note payable 37,000,000 Discounted cash flow Discount rate 10.92 % 10.92 % 10.92 % Total Level 3 Liabilities $ 316,393,571 Fair Value at December 31, 2022 Primary Valuation Technique Unobservable Inputs December 31, 2022 Asset Category Minimum Maximum Weighted Average Assets: Loans held for investment, net $ 581,182,892 Discounted cash flow Discount rate 8.71 % 19.36 % 11.46 % Loans held for investment acquired through 41,962,862 Discounted cash flow Discount rate 15.25 % 17.06 % 16.67 % Total Level 3 Assets $ 623,145,754 Liabilities: Repurchase agreement payable 170,876,606 Discounted cash flow Discount rate 5.22 % 6.17 % 6.82 % Obligations under participation agreements 12,680,595 Discounted cash flow Discount rate 16.36 % 16.36 % 16.36 % Mortgage loan payable 29,394,870 Discounted cash flow Discount rate 8.24 % 8.24 % 8.24 % Term loan payable 25,000,000 Discounted cash flow Discount rate 5.63 % 5.63 % 5.63 % Revolving line of credit 90,135,865 Discounted cash flow Discount rate 7.64 % 7.64 % 7.64 % Total Level 3 Liabilities $ 328,087,936 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Origination and extension fee expense (1)(2) $ 488,219 $ 737,903 $ 1,302,826 $ 1,806,215 Asset management fee 2,049,916 1,611,934 6,152,392 4,740,657 Asset servicing fee 487,210 379,712 1,454,109 1,124,759 Operating expenses reimbursed to Manager 2,407,757 2,013,135 6,704,790 6,082,333 Disposition fee (3) 242,500 410,694 1,451,063 890,194 Total $ 5,675,602 $ 5,153,378 $ 17,065,180 $ 14,644,158 _______________ (1) Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan. (2) Amount for the nine months ended September 30, 2023 excluded $0.5 million of origination fee paid to the Manager in connection with the acquisition of the industrial buildings in 2023. Amount for the nine months ended September 30, 2022 excluded $0.2 million of origination fee paid to the Manager in connection with the Company’s equity investment in an unconsolidated investment. This origination fee was capitalized to the carrying value of the unconsolidated investment as a transaction cost. The table below lists the participation interests purchased by the Company pursuant to participation agreements as of: September 30, 2023 Participating Interests Principal Balance Carrying Value Mesa AZ Industrial Owner, LLC (1) 38.27% $ 31,000,000 $ 31,283,132 UNJ Sole Member, LLC (1) 40.80% 7,444,357 7,486,595 Allowance for credit losses — (415,268) $ 38,444,357 $ 38,354,459 December 31, 2022 Participating Interests Principal Balance Carrying Value Havemeyer TSM LLC (1)(2) 23.00% $ 3,282,208 $ 3,313,813 Mesa AZ Industrial Owner, LLC (1) 38.27% 31,000,000 31,276,468 UNJ Sole Member, LLC (1) 40.80% 7,444,357 7,482,547 $ 41,726,565 $ 42,072,828 ________________ (1) The loan is held in the name of Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager. (2) This loan was repaid in February 2023. Transfers Treated as Obligations Under Participation Agreements as of Principal Balance Carrying Value % Transferred Principal Balance Carrying Value 610 Walnut Investors LLC (1) $ 18,625,738 $ 18,738,386 67.57 % $ 12,584,958 $ 12,680,594 $ 18,625,738 $ 18,738,386 $ 12,584,958 $ 12,680,594 ________________ |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Unsecured Notes Payable | The table below presents detailed information regarding the unsecured notes payable as of: September 30, 2023 December 31, 2022 Principal Balance Carrying Value Fair Value Principal Balance Carrying Value Fair Value 6.00% Senior Notes Due 2026 (1) $ 85,125,000 $ 82,992,867 $ 66,738,000 $ 85,125,000 $ 82,487,769 $ 68,100,000 7.00% Senior Notes Due 2026 (2) 38,375,000 34,908,585 36,241,350 38,375,000 34,042,904 35,381,748 $ 123,500,000 $ 117,901,452 $ 102,979,350 $ 123,500,000 $ 116,530,673 $ 103,481,748 _______________ (1) Carrying value is net of unamortized issue discount of $1.6 million and $1.9 million, and unamortized deferred financing costs of $0.6 million and $0.7 million as of September 30, 2023 and December 31, 2022, respectively. (2) Carrying value is net of unamortized purchase discount of $3.5 million and $4.3 million as of September 30, 2023 and December 31, 2022, respectively. |
Schedule of Debt | The following tables present detailed information with respect to each borrowing under the UBS Master Repurchase Agreement as of: September 30, 2023 Collateral Borrowings Under Master Repurchase Agreement Principal Amount Carrying Value Fair Borrowing Date Principal Amount Interest NB Factory TIC 1, LLC $ 28,000,000 $ 28,863,816 $ 28,918,363 11/8/2021 $ 18,970,000 Term SOFR+1.75% Grandview’s Remington Place, 23,100,000 23,206,471 23,235,030 5/6/2022 18,480,000 Term SOFR + 1.965% $ 51,100,000 $ 52,070,287 $ 52,153,393 $ 37,450,000 December 31, 2022 Collateral Borrowings Under Master Repurchase Agreement Principal Amount Carrying Value Fair Borrowing Date Principal Amount Interest NB Factory TIC 1, LLC $ 28,000,000 $ 28,857,892 $ 28,902,234 11/8/2021 $ 18,970,000 LIBOR+1.74% (LIBOR floor of 0.1%) Grandview’s Madison Place, LLC 17,000,000 17,105,928 17,105,928 3/7/2022 13,600,000 Term SOFR + 1.965% Grandview’s Remington Place, 23,100,000 23,199,620 23,203,343 5/6/2022 18,480,000 Term SOFR + 1.965% $ 68,100,000 $ 69,163,440 $ 69,211,505 $ 51,050,000 The following tables present detailed information with respect to each borrowing under the Repurchase Agreement as of: September 30, 2023 Collateral Borrowings Under Repurchase Agreement Principal Amount Carrying Value Fair Borrowing Date Principal Amount Interest 1389 Peachtree St, LP; 1401 Peachtree St, LP; and $ 58,695,313 $ 58,695,313 $ 50,900,000 2/18/2022 $ 20,072,636 Term SOFR + 2.465% AGRE DCP Palm Springs, LLC 43,222,382 43,861,312 43,549,187 2/18/2022 28,094,548 Term SOFR + 1.315% (1.8% floor) Patrick Henry Recovery Acquisition, 18,000,000 18,044,070 17,980,843 2/18/2022 14,400,000 Term SOFR + 0.865% (1.5% floor) Hillsborough Owners LLC 21,826,479 21,926,266 21,977,570 7/14/2023 12,888,441 Term SOFR + 5% (0.25% Floor) $ 141,744,174 $ 142,526,961 $ 134,407,600 $ 75,455,625 December 31, 2022 Collateral Borrowings Under Repurchase Agreement Principal Amount Carrying Value Fair Borrowing Date Principal Amount Interest 330 Tryon DE LLC $ 22,800,000 $ 22,902,215 $ 22,687,235 2/18/2022 $ 18,240,000 Term SOFR + 2.015% (0.01% floor) 1389 Peachtree St, LP; 1401 57,184,178 57,453,482 56,844,322 2/18/2022 41,587,275 Term SOFR + 2.465% AGRE DCP Palm Springs, LLC 43,222,382 43,758,804 43,062,933 2/18/2022 28,094,548 Term SOFR + 1.315% (1.8% floor) Patrick Henry Recovery 18,000,000 18,041,782 17,824,300 2/18/2022 14,400,000 Term SOFR + 0.865% (1.5% floor) University Park Berkeley, LLC 26,342,468 26,536,122 26,472,938 2/18/2022 17,504,783 Term SOFR + 1.365% ( 1.50% floor) $ 167,549,028 $ 168,692,405 $ 166,891,728 $ 119,826,606 The following table presents certain information about mortgage loans payable as of: September 30, 2023 December 31, 2022 Lender Current Maturity Principal Amount Carrying Value Carrying Value of Principal Amount Carrying Value Carrying Value of Centennial Bank (1) Term SOFR + 3.85% (Term SOFR Floor of 2.23%) May 31, 2023 $ 27,603,118 $ 27,869,606 $ 27,004,389 $ 29,252,308 $ 29,488,326 $ 40,581,847 TPG RE Finance 24, LTD (2) Term SOFR +3.5% (Term SOFR Floor of 3.75% April 9, 2027 32,999,135 32,285,757 48,387,162 — — — GSF Lender, LLC (3) 6.254% June 6, 2028 40,250,000 39,278,946 82,363,391 — — — $ 100,852,253 $ 99,434,309 $ 157,754,942 $ 29,252,308 $ 29,488,326 $ 40,581,847 ___________________ (1) This loan was collateralized by a multi-tenant office building that the Company acquired through foreclosure. In October 2023, the Company conveyed its interest in the office building to the lender by deed-in-lieu of foreclosure and the mortgage loan payable is effectively extinguished. (2) This loan is collateralized by three industrial buildings that the Company acquired in March 2023. (3) This loan is collateralized by five industrial buildings that the Company acquired in May 2023. |
Schedule of Long-term Debt Instruments | Scheduled debt principal payments for each of the five calendar years following September 30, 2023 are as follows: Years Ending December 31, Total 2023 (October 1 through December 31) $ 27,603,118 2024 178,274,831 2025 37,000,000 2026 123,500,000 2027 32,999,136 Thereafter 40,250,000 439,627,085 Unamortized deferred financing costs (8,185,466) Total $ 431,441,619 |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table presents earnings per share: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net loss $ (17,477,698) $ (6,891,942) $ (36,167,284) $ (6,357,395) Series A preferred stock dividend declared — (3,906) (3,907) (11,718) Net loss allocable to common stock $ (17,477,698) $ (6,895,848) $ (36,171,191) $ (6,369,113) Weighted-average shares outstanding - basic 24,335,576 19,487,460 24,335,460 19,487,460 Loss per share - basic and diluted $ (0.72) $ (0.35) $ (1.49) $ (0.33) |
Business (Details)
Business (Details) - USD ($) $ in Millions | Sep. 30, 2023 | Mar. 02, 2020 |
Financial Highlights | ||
Common stock, shares, issued (in shares) | 4,574,470.35 | |
Participating mortgage loans, participation liabilities, amount | $ 49.8 | |
Cash | $ 25.5 | |
Partnership interest | Terra JV | ||
Financial Highlights | ||
Beneficial ownership interest (as percent) | 70% | |
Partnership interest | Terra BDC | ||
Financial Highlights | ||
Beneficial ownership interest (as percent) | 19.90% | |
Partnership interest | Terra Offshore REIT | ||
Financial Highlights | ||
Beneficial ownership interest (as percent) | 10.10% | |
Minimum | ||
Financial Highlights | ||
Loan origination amount | $ 10 | |
Maximum | ||
Financial Highlights | ||
Loan origination amount | $ 50 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Narrative (Details) - USD ($) | 1 Months Ended | 9 Months Ended | ||||
Feb. 18, 2022 | Jun. 30, 2023 | Sep. 30, 2023 | Sep. 30, 2022 | Jan. 01, 2023 | Dec. 31, 2022 | |
Accounting Policies [Line Items] | ||||||
Increase to total reserve | $ 60,578,587 | $ 25,471,890 | ||||
Useful life (in years) | 40 years | |||||
Repayments of loan | $ 1,649,191 | $ 624,342 | ||||
Accounting Standards Update 2016-13 | ||||||
Accounting Policies [Line Items] | ||||||
Allowance for loan losses | $ 4,600,000 | |||||
Term Loan | Terra BDC | ||||||
Accounting Policies [Line Items] | ||||||
Debt assumed | $ 25,000,000 | |||||
Repayments of loan | $ 10,000,000 | |||||
Cumulative Effect, Period of Adoption, Adjustment | Credit Losses Reserve | ||||||
Accounting Policies [Line Items] | ||||||
Increase to total reserve | $ 4,600,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 | Sep. 30, 2022 | Dec. 31, 2021 |
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 19,242,370 | $ 28,567,825 | $ 21,957,216 | |
Restricted cash | 5,418,932 | 4,633,204 | 5,521,080 | |
Cash held in escrow by lender | 4,894,546 | 3,268,563 | 4,697,219 | |
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ 29,555,848 | $ 36,469,592 | $ 32,175,515 | $ 51,098,647 |
Mergers - Narrative (Details)
Mergers - Narrative (Details) | 3 Months Ended | 9 Months Ended | |||||||
Aug. 08, 2023 USD ($) | Oct. 01, 2022 USD ($) member $ / shares shares | Sep. 30, 2023 USD ($) $ / shares shares | Sep. 30, 2022 USD ($) shares | Sep. 30, 2023 USD ($) $ / shares shares | Sep. 30, 2022 USD ($) shares | Jul. 25, 2023 | Dec. 31, 2022 USD ($) $ / shares shares | Mar. 02, 2020 shares | |
Business Acquisition | |||||||||
Common stock, shares, issued (in shares) | shares | 4,574,470.35 | ||||||||
Obligation under participation agreement | $ | $ 0 | $ 0 | $ 12,680,594 | ||||||
Gain on extinguishment of debt | $ | $ 3,400,000 | $ 14,079,379 | $ 0 | $ 14,079,379 | $ 0 | ||||
WMC | |||||||||
Business Acquisition | |||||||||
Termination fees | $ | $ 3,000,000 | ||||||||
Class B Common Stock | |||||||||
Business Acquisition | |||||||||
Common stock, par or stated value per share (in usd per share) | $ 0.01 | $ 0.01 | $ 0.01 | ||||||
Share conversion rate | 0.595 | ||||||||
Share price (in usd per share) | $ 14.38 | ||||||||
Common stock, shares, issued (in shares) | shares | 24,335,711 | 24,335,711 | 24,335,370 | ||||||
Terra BDC | Class B Common Stock | |||||||||
Business Acquisition | |||||||||
Common stock, shares, issued (in shares) | shares | 4,847,910 | 1 | 1 | ||||||
Terra BDC | |||||||||
Business Acquisition | |||||||||
Common stock, par or stated value per share (in usd per share) | $ 0.001 | ||||||||
Sale of stock, percentage of ownership after transaction | 19.90% | ||||||||
Obligation under participation agreement | $ | $ 37,000,000 | ||||||||
Board member increase | member | 3 | ||||||||
Terra BDC | Class B Common Stock | |||||||||
Business Acquisition | |||||||||
Common stock, par or stated value per share (in usd per share) | $ 0.01 | ||||||||
Share price (in usd per share) | $ 14.66 | ||||||||
Common stock, shares, issued (in shares) | shares | 4,847,910 | ||||||||
MITT | |||||||||
Business Acquisition | |||||||||
Acquired percentage | 5.20% |
Mergers - Schedule of Recognize
Mergers - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) - Terra BDC | Oct. 01, 2022 USD ($) |
Total Consideration | |
Fair value of Terra Property Trust shares of common stock issued | $ 71,054,620 |
Cash paid for fractional shares | 12,920 |
Transaction costs | 2,283,785 |
Total Consideration | 73,351,325 |
Assets Acquired and Liabilities Assumed at Fair Value | |
Cash and cash equivalents | 24,321,951 |
Restricted cash | 260,614 |
Interest receivable | 1,367,044 |
Other assets | 55,465 |
Term loan payable | (25,000,000) |
Unsecured notes payable | (33,770,000) |
Obligations under participation agreements | (6,114,979) |
Interest reserve and other deposits held on investments | (260,614) |
Due to manager | (682,541) |
Interest payable | (53,186) |
Accounts payable and accrued expenses | (740,824) |
Other liabilities | (387,446) |
Net assets acquired | 73,351,325 |
Loans Held For Investment | |
Assets Acquired and Liabilities Assumed at Fair Value | |
Loans held for investment | 77,562,528 |
Loans Held For Investment Acquired Through Participation | |
Assets Acquired and Liabilities Assumed at Fair Value | |
Loans held for investment | $ 36,793,313 |
Loans Held for Investment - Nar
Loans Held for Investment - Narrative (Details) - USD ($) $ in Millions | Sep. 30, 2023 | Dec. 31, 2022 |
Receivables [Abstract] | ||
Accrued interest receivable | $ 4.3 | $ 4.1 |
Loans Held for Investment - Sch
Loans Held for Investment - Schedule of Portfolio Summary (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 USD ($) loan | Dec. 31, 2022 USD ($) loan | |
Loans and Financing Receivable | ||
Number of loans | loan | 22 | 31 |
Principal balance | $ 526,796,770 | $ 645,795,459 |
Carrying value | 470,682,291 | 626,490,767 |
Fair value | $ 471,873,386 | $ 623,145,754 |
Weighted-average coupon rate | 13.04% | 11.59% |
Weighted-average remaining term (years) | 6 months 25 days | 1 year 1 month 20 days |
Debt instrument, face | $ 439,627,083 | $ 451,349,737 |
Fixed Rate | ||
Loans and Financing Receivable | ||
Number of loans | loan | 5 | 8 |
Principal balance | $ 53,349,208 | $ 90,990,183 |
Carrying value | 53,449,024 | 92,274,998 |
Fair value | $ 52,771,702 | $ 90,729,098 |
Weighted-average coupon rate | 12.94% | 13.82% |
Weighted-average remaining term (years) | 1 year 3 months 18 days | 1 year 4 months 6 days |
Floating Rate | ||
Loans and Financing Receivable | ||
Number of loans | loan | 17 | 23 |
Principal balance | $ 473,447,562 | $ 554,805,276 |
Carrying value | 417,233,267 | 534,215,769 |
Fair value | $ 419,101,684 | $ 532,416,656 |
Weighted-average coupon rate | 13.05% | 11.23% |
Weighted-average remaining term (years) | 5 months 23 days | 1 year 1 month 6 days |
Floating Rate | Revolving line of credit | Collateral | ||
Loans and Financing Receivable | ||
Principal balance | $ 339,900,000 | $ 413,100,000 |
Debt instrument, face | $ 200,300,000 | $ 261,000,000 |
Floating Rate | Term Loan | ||
Loans and Financing Receivable | ||
Number of loans | loan | 15 | 21 |
Floating Rate | Term Loan | LIBOR | ||
Loans and Financing Receivable | ||
Interest rate base (as percent) | 5.43% | 4.39% |
Floating Rate | Term Loan | SOFR | ||
Loans and Financing Receivable | ||
Interest rate base (as percent) | 5.32% | 4.06% |
Floating Rate | Term Loan | Term SOFR | ||
Loans and Financing Receivable | ||
Interest rate base (as percent) | 5.32% | 4.36% |
Loans Held for Investment - S_2
Loans Held for Investment - Schedule of Lending Activities (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Investment in Movement in Mortgage Loans on Real Estate [Roll Forward] | ||||
Provision for credit losses | $ (27,096,841) | $ (9,188,129) | $ (30,899,434) | $ (9,264,058) |
Real Estate Loan | ||||
Investment in Movement in Mortgage Loans on Real Estate [Roll Forward] | ||||
Beginning balance | 626,490,767 | 469,673,314 | ||
New loans made | 73,104,166 | 187,878,643 | ||
Principal repayments received | (123,364,974) | (158,765,183) | ||
Net amortization of premiums on loans | (1,023,275) | (122,783) | ||
Settlement of loans in exchange for real estate properties (Note 6) | (68,737,877) | |||
Accrual, payment and accretion of investment-related fees and other, net | (679,819) | 779,310 | ||
Provision for credit losses | (30,856,645) | (9,264,058) | ||
Ending balance | 470,682,291 | 490,179,243 | 470,682,291 | 490,179,243 |
Real Estate Loan | Cumulative Effect, Period of Adoption, Adjustment | ||||
Investment in Movement in Mortgage Loans on Real Estate [Roll Forward] | ||||
Beginning balance | (4,250,052) | |||
Real Estate Loan | Loans Held for Investment | ||||
Investment in Movement in Mortgage Loans on Real Estate [Roll Forward] | ||||
Beginning balance | 584,417,939 | 457,329,582 | ||
New loans made | 73,104,166 | 155,653,368 | ||
Principal repayments received | (120,082,766) | (158,765,183) | ||
Net amortization of premiums on loans | (1,023,275) | (122,783) | ||
Settlement of loans in exchange for real estate properties (Note 6) | (68,737,877) | |||
Accrual, payment and accretion of investment-related fees and other, net | (658,926) | 489,352 | ||
Provision for credit losses | (30,568,286) | (9,264,058) | ||
Ending balance | 432,327,832 | 445,320,278 | 432,327,832 | 445,320,278 |
Real Estate Loan | Loans Held for Investment | Cumulative Effect, Period of Adoption, Adjustment | ||||
Investment in Movement in Mortgage Loans on Real Estate [Roll Forward] | ||||
Beginning balance | (4,123,143) | |||
Real Estate Loan | Loans Held for Investment through Participation Interests | ||||
Investment in Movement in Mortgage Loans on Real Estate [Roll Forward] | ||||
Beginning balance | 42,072,828 | 12,343,732 | ||
New loans made | 0 | 32,225,275 | ||
Principal repayments received | (3,282,208) | 0 | ||
Net amortization of premiums on loans | 0 | 0 | ||
Settlement of loans in exchange for real estate properties (Note 6) | 0 | |||
Accrual, payment and accretion of investment-related fees and other, net | (20,893) | 289,958 | ||
Provision for credit losses | (288,359) | 0 | ||
Ending balance | $ 38,354,459 | $ 44,858,965 | 38,354,459 | $ 44,858,965 |
Real Estate Loan | Loans Held for Investment through Participation Interests | Cumulative Effect, Period of Adoption, Adjustment | ||||
Investment in Movement in Mortgage Loans on Real Estate [Roll Forward] | ||||
Beginning balance | $ (126,909) |
Loans Held for Investment - Loa
Loans Held for Investment - Loan Structure (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Loans and Financing Receivable | ||
Principal Balance | $ 526,796,770 | $ 645,795,459 |
Carrying Value | 531,260,878 | 651,962,657 |
Allowance for credit losses | (60,578,587) | (25,471,890) |
Total, net of allowance for credit losses | $ 470,682,291 | $ 626,490,767 |
% of Total | 100% | 100% |
Allowance for loan losses (as a percent) | (12.90%) | (4.10%) |
Credit facility | ||
Loans and Financing Receivable | ||
Principal Balance | $ 0 | $ 28,802,833 |
Carrying Value | $ 0 | $ 29,080,183 |
% of Total | 0% | 4.60% |
Preferred equity investments | ||
Loans and Financing Receivable | ||
Principal Balance | $ 125,951,529 | $ 121,231,434 |
Carrying Value | $ 126,578,253 | $ 122,132,177 |
% of Total | 26.90% | 19.50% |
Mezzanine loans | ||
Loans and Financing Receivable | ||
Principal Balance | $ 38,281,840 | $ 39,352,303 |
Carrying Value | $ 38,258,053 | $ 39,451,115 |
% of Total | 8.10% | 6.30% |
First mortgages | ||
Loans and Financing Receivable | ||
Principal Balance | $ 362,563,401 | $ 456,408,889 |
Carrying Value | $ 366,424,572 | $ 461,299,182 |
% of Total | 77.90% | 73.70% |
Loans Held for Investment - Pro
Loans Held for Investment - Property Type (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Loans and Financing Receivable | ||
Principal Balance | $ 526,796,770 | $ 645,795,459 |
Carrying Value | 531,260,878 | 651,962,657 |
Allowance for credit losses | (60,578,587) | (25,471,890) |
Total, net of allowance for credit losses | $ 470,682,291 | $ 626,490,767 |
% of Total | 100% | 100% |
Allowance for loan losses (as a percent) | (12.90%) | (4.10%) |
Office | ||
Loans and Financing Receivable | ||
Principal Balance | $ 167,559,588 | $ 184,196,708 |
Carrying Value | $ 167,607,063 | $ 184,722,657 |
% of Total | 35.50% | 29.40% |
Multifamily | ||
Loans and Financing Receivable | ||
Principal Balance | $ 82,183,385 | $ 104,589,464 |
Carrying Value | $ 82,707,320 | $ 105,570,432 |
% of Total | 17.60% | 16.90% |
Industrial | ||
Loans and Financing Receivable | ||
Principal Balance | $ 66,571,495 | $ 147,796,164 |
Carrying Value | $ 67,125,625 | $ 148,891,742 |
% of Total | 14.30% | 23.80% |
Mixed-use | ||
Loans and Financing Receivable | ||
Principal Balance | $ 63,096,365 | $ 64,880,450 |
Carrying Value | $ 63,559,577 | $ 65,838,965 |
% of Total | 13.50% | 10.50% |
Infill land | ||
Loans and Financing Receivable | ||
Principal Balance | $ 51,913,555 | $ 48,860,291 |
Carrying Value | $ 53,168,879 | $ 49,565,437 |
% of Total | 11.30% | 7.90% |
Hotel - full/select service | ||
Loans and Financing Receivable | ||
Principal Balance | $ 43,222,382 | $ 43,222,382 |
Carrying Value | $ 43,861,312 | $ 43,758,804 |
% of Total | 9.30% | 7% |
Student housing | ||
Loans and Financing Receivable | ||
Principal Balance | $ 31,000,000 | $ 31,000,000 |
Carrying Value | $ 31,794,386 | $ 31,774,261 |
% of Total | 6.80% | 5.10% |
Infrastructure | ||
Loans and Financing Receivable | ||
Principal Balance | $ 21,250,000 | $ 21,250,000 |
Carrying Value | $ 21,436,716 | $ 21,840,359 |
% of Total | 4.60% | 3.50% |
Loans Held for Investment - Geo
Loans Held for Investment - Geographic Locations (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Loans and Financing Receivable | ||
Principal Balance | $ 526,796,770 | $ 645,795,459 |
Carrying Value | 531,260,878 | 651,962,657 |
Allowance for credit losses | (60,578,587) | (25,471,890) |
Total, net of allowance for credit losses | $ 470,682,291 | $ 626,490,767 |
% of Total | 100% | 100% |
Allowance for loan losses (as a percent) | (12.90%) | (4.10%) |
California | ||
Loans and Financing Receivable | ||
Principal Balance | $ 139,930,729 | $ 164,253,345 |
Carrying Value | $ 141,243,492 | $ 165,839,561 |
% of Total | 30.10% | 26.50% |
New York | ||
Loans and Financing Receivable | ||
Principal Balance | $ 90,447,055 | $ 91,845,479 |
Carrying Value | $ 90,447,055 | $ 91,877,084 |
% of Total | 19.20% | 14.70% |
New Jersey | ||
Loans and Financing Receivable | ||
Principal Balance | $ 80,485,050 | $ 62,228,622 |
Carrying Value | $ 82,011,372 | $ 62,958,482 |
% of Total | 17.40% | 10% |
Georgia | ||
Loans and Financing Receivable | ||
Principal Balance | $ 75,632,491 | $ 72,401,718 |
Carrying Value | $ 75,938,028 | $ 73,101,964 |
% of Total | 16.10% | 11.70% |
Utah | ||
Loans and Financing Receivable | ||
Principal Balance | $ 49,250,000 | $ 49,250,000 |
Carrying Value | $ 50,300,532 | $ 50,698,251 |
% of Total | 10.70% | 8.10% |
Washington | ||
Loans and Financing Receivable | ||
Principal Balance | $ 31,224,966 | $ 56,671,267 |
Carrying Value | $ 31,111,001 | $ 57,027,639 |
% of Total | 6.60% | 9.10% |
Arizona | ||
Loans and Financing Receivable | ||
Principal Balance | $ 31,000,000 | $ 31,000,000 |
Carrying Value | $ 31,283,132 | $ 31,276,468 |
% of Total | 6.60% | 5% |
North Carolina | ||
Loans and Financing Receivable | ||
Principal Balance | $ 21,826,479 | $ 43,520,028 |
Carrying Value | $ 21,926,266 | $ 44,041,162 |
% of Total | 4.70% | 7% |
Massachusetts | ||
Loans and Financing Receivable | ||
Principal Balance | $ 7,000,000 | $ 7,000,000 |
Carrying Value | $ 7,000,000 | $ 7,000,000 |
% of Total | 1.50% | 1.10% |
Texas | ||
Loans and Financing Receivable | ||
Principal Balance | $ 0 | $ 67,625,000 |
Carrying Value | $ 0 | $ 68,142,046 |
% of Total | 0% | 10.90% |
Loans Held for Investment - Cur
Loans Held for Investment - Current Expected Credit Losses Reserve (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward] | ||
Allowance for credit losses, beginning of period | $ 25,471,890 | |
Allowance for credit losses, end of period | 60,578,587 | |
Credit Losses Reserve | Funded Loans | ||
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward] | ||
Allowance for credit losses, beginning of period | 25,471,890 | $ 13,658,481 |
Provision for credit losses | 30,856,645 | 9,264,058 |
Charge-offs | 0 | 0 |
Recoveries | 0 | 0 |
Allowance for credit losses, end of period | 60,578,587 | $ 22,922,539 |
Credit Losses Reserve | Funded Loans | Cumulative Effect, Period of Adoption, Adjustment | ||
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward] | ||
Allowance for credit losses, beginning of period | 4,250,052 | |
Credit Losses Reserve | Unfunded Loan Commitment | ||
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward] | ||
Liability for credit losses on unfunded commitments, beginning of period | 0 | |
Provision for credit losses | 42,789 | |
Liability for credit losses on unfunded commitments, end of period | 412,460 | |
Credit Losses Reserve | Unfunded Loan Commitment | Cumulative Effect, Period of Adoption, Adjustment | ||
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward] | ||
Liability for credit losses on unfunded commitments, beginning of period | $ 369,671 |
Loans Held for Investment - N_2
Loans Held for Investment - Narratives - Past-Due Loans and Loan Risk Rating (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 USD ($) loan | Sep. 30, 2022 USD ($) loan | Sep. 30, 2023 USD ($) loan | Sep. 30, 2022 USD ($) loan | Dec. 31, 2022 USD ($) loan | |
Loans and Financing Receivable | |||||
Unfunded commitments | $ 44,400,000 | $ 44,400,000 | $ 47,300,000 | ||
Interest receivable | 4,304,303 | $ 4,304,303 | $ 4,100,501 | ||
Number of loans with a loan risk rating | loan | 22 | 31 | |||
Carrying Value | 531,260,878 | $ 531,260,878 | $ 651,962,657 | ||
Loans held for investment, net of allowance for credit losses | 60,578,587 | $ 60,578,587 | $ 25,471,890 | ||
Nonperforming Loans | |||||
Loans and Financing Receivable | |||||
Number of loans with a loan risk rating | loan | 6 | 4 | |||
Carrying Value | $ 171,348,201 | $ 171,348,201 | $ 89,928,215 | ||
Nonperforming Loans | Suspended Interest Income Accrual | |||||
Loans and Financing Receivable | |||||
Number of loans in default | loan | 5 | 3 | 3 | 3 | |
Suspended interest income accrual | $ 5,400,000 | $ 2,800,000 | $ 12,600,000 | $ 5,100,000 | |
Interest receivable | 0 | $ 0 | $ 0 | ||
4 | |||||
Loans and Financing Receivable | |||||
Percent of carrying amounts of loans (as percent) | 1.50% | ||||
Number of loans with a loan risk rating | loan | 0 | 0 | |||
Carrying Value | 0 | $ 0 | $ 0 | ||
5 | |||||
Loans and Financing Receivable | |||||
Percent of carrying amounts of loans (as percent) | 5% | ||||
Number of loans with a loan risk rating | loan | 0 | 0 | |||
Carrying Value | 0 | $ 0 | $ 0 | ||
Other | Nonperforming Loans | |||||
Loans and Financing Receivable | |||||
Number of loans with a loan risk rating | loan | 6 | 4 | |||
Carrying Value | 171,300,000 | $ 171,300,000 | $ 89,900,000 | ||
Loans held for investment, net of allowance for credit losses | $ 58,900,000 | $ 58,900,000 | $ 25,500,000 |
Loans Held for Investment - L_2
Loans Held for Investment - Loan Risk Rating (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 USD ($) loan | Dec. 31, 2022 USD ($) loan | |
Loans and Financing Receivable | ||
Number of Loans | loan | 22 | 31 |
Principal Balance | $ 526,796,770 | $ 645,795,459 |
Amortized Cost | 531,260,878 | 651,962,657 |
Allowance for credit losses | (60,578,587) | (25,471,890) |
Total, net of allowance for credit losses | $ 470,682,291 | $ 626,490,767 |
% of Total | 100% | 100% |
2023 | $ 7,904,530 | |
2022 | 176,230,346 | |
2021 | 96,956,107 | |
2020 | 27,826,630 | |
2019 | 121,965,639 | |
Prior | $ 100,377,626 | |
Nonperforming Loans | ||
Loans and Financing Receivable | ||
Number of Loans | loan | 6 | 4 |
Principal Balance | $ 89,928,215 | |
Amortized Cost | $ 171,348,201 | $ 89,928,215 |
% of Total | 32.30% | 13.80% |
2023 | $ 0 | |
2022 | 20,840,888 | |
2021 | 0 | |
2020 | 0 | |
2019 | 60,060,257 | |
Prior | $ 90,447,056 | |
Nonperforming Loans | Specific Allowance | ||
Loans and Financing Receivable | ||
Allowance for credit losses | $ (25,500,000) | |
1 | ||
Loans and Financing Receivable | ||
Number of Loans | loan | 0 | 0 |
Principal Balance | $ 0 | |
Amortized Cost | $ 0 | $ 0 |
% of Total | 0% | 0% |
2023 | $ 0 | |
2022 | 0 | |
2021 | 0 | |
2020 | 0 | |
2019 | 0 | |
Prior | $ 0 | |
2 | ||
Loans and Financing Receivable | ||
Number of Loans | loan | 2 | 2 |
Principal Balance | $ 25,000,000 | |
Amortized Cost | $ 25,044,070 | $ 25,041,782 |
% of Total | 4.70% | 3.80% |
2023 | $ 0 | |
2022 | 0 | |
2021 | 0 | |
2020 | 0 | |
2019 | 18,044,070 | |
Prior | $ 7,000,000 | |
3 | ||
Loans and Financing Receivable | ||
Number of Loans | loan | 14 | 25 |
Principal Balance | $ 530,867,244 | |
Amortized Cost | $ 334,868,607 | $ 536,992,660 |
% of Total | 63% | 82.40% |
2023 | $ 7,904,530 | |
2022 | 155,389,458 | |
2021 | 96,956,107 | |
2020 | 27,826,630 | |
2019 | 43,861,312 | |
Prior | $ 2,930,570 | |
4 | ||
Loans and Financing Receivable | ||
Number of Loans | loan | 0 | 0 |
Principal Balance | $ 0 | |
Amortized Cost | $ 0 | $ 0 |
% of Total | 0% | 0% |
2023 | $ 0 | |
2022 | 0 | |
2021 | 0 | |
2020 | 0 | |
2019 | 0 | |
Prior | $ 0 | |
5 | ||
Loans and Financing Receivable | ||
Number of Loans | loan | 0 | 0 |
Principal Balance | $ 0 | |
Amortized Cost | $ 0 | $ 0 |
% of Total | 0% | 0% |
2023 | $ 0 | |
2022 | 0 | |
2021 | 0 | |
2020 | 0 | |
2019 | 0 | |
Prior | $ 0 |
Loans Held for Investment - N_3
Loans Held for Investment - Narratives - TDR (Details) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Troubled Debt Restructuring | ||||
Debt instrument, face | $ 451,349,737 | $ 439,627,083 | $ 451,349,737 | |
Repayments of loan | 1,649,191 | $ 624,342 | ||
Converted to subordinated equity | $ 1,400,000 | 1,400,000 | ||
Senior Loans | ||||
Troubled Debt Restructuring | ||||
Debt instrument, face | 40,100,000 | 40,100,000 | ||
Repayments of loan | 38,700,000 | |||
Converted to subordinated equity | $ 1,400,000 | |||
Accrued dividends rate (as percent) | 8% | |||
Principal Forgiveness | ||||
Troubled Debt Restructuring | ||||
Investment in troubled debt restructuring | $ 1 | $ 1 |
Loans Held for Investment - Tro
Loans Held for Investment - Troubled Debt Restructuring (Details) - Principal Forgiveness | 1 Months Ended | 9 Months Ended | 12 Months Ended |
Dec. 31, 2022 USD ($) loan | Sep. 30, 2023 USD ($) | Dec. 31, 2022 USD ($) | |
Troubled Debt Restructuring | |||
Number of loans modified | loan | 1 | ||
Pre-modified recorded carrying value | $ 40,072,138 | ||
Post-modified recorded carrying value | $ 1,364,944 | $ 1,400,000 | $ 1,400,000 |
Equity Investment in Unconsol_3
Equity Investment in Unconsolidated Investments - Narratives (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Aug. 03, 2020 USD ($) | May 31, 2023 USD ($) | Sep. 30, 2022 USD ($) venture | Sep. 30, 2023 USD ($) venture | Sep. 30, 2022 USD ($) venture | Sep. 30, 2023 USD ($) venture | Sep. 30, 2022 USD ($) venture | Dec. 31, 2022 USD ($) venture | |
Schedule of Equity Method Investments | ||||||||
Number of join ventures | venture | 3 | 3 | 3 | |||||
Equity investment in unconsolidated investments | $ 32,513,920 | $ 32,513,920 | $ 62,498,340 | |||||
Equity income (loss) from investment | 41,839 | $ 1,483,846 | (2,154,955) | $ 4,267,513 | ||||
Distributions received from equity investment in unconsolidated investments | 5,805,494 | $ 180,549 | ||||||
Number of joint interests with interests sold | venture | 2 | 2 | 2 | |||||
Proceeds from sale of equity method investments | $ 33,700,000 | |||||||
Realized gain on disposal | $ 800,000 | |||||||
Debt instrument, face | 439,627,083 | 439,627,083 | $ 451,349,737 | |||||
Percentage of net cash flow (as a percent) | 35% | |||||||
Repayments of loan | 1,649,191 | $ 624,342 | ||||||
Mezzanine Loan, Acquisition | ||||||||
Schedule of Equity Method Investments | ||||||||
Debt instrument, face | $ 10,000,000 | |||||||
Repayments of loan | $ 10,000,000 | |||||||
Mavik RESOF | ||||||||
Schedule of Equity Method Investments | ||||||||
Committed capital | $ 50,000,000 | |||||||
Unfunded commitment outstanding | $ 37,400,000 | $ 37,400,000 | $ 22,400,000 | |||||
Equity method investment, ownership percentage | 14.90% | 14.90% | 27.90% | |||||
Equity investment in unconsolidated investments | $ 18,300,000 | $ 18,300,000 | $ 36,800,000 | |||||
Equity income (loss) from investment | 900,000 | $ 2,100,000 | 50,000 | 5,000,000 | ||||
Distributions received from equity investment in unconsolidated investments | 700,000 | $ 0 | 5,400,000 | $ 0 | ||||
Payments for origination of mortgage loans held-for-sale | $ 500,000 | |||||||
Joint Venture | ||||||||
Schedule of Equity Method Investments | ||||||||
Equity method investment, ownership percentage | 53% | 53% | 53% | |||||
Equity income (loss) from investment | $ (900,000) | $ 600,000 | (2,200,000) | $ 700,000 | ||||
Distributions received from equity investment in unconsolidated investments | $ 200,000 | $ 900,000 | ||||||
Acquisition costs, period cost | $ 500,000 | |||||||
Another Joint venture | ||||||||
Schedule of Equity Method Investments | ||||||||
Equity method investment, ownership percentage | 59% | 59% | 59% |
Equity Investment in Unconsol_4
Equity Investment in Unconsolidated Investments - Equity Investment in a Limited Partnership (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Schedule of Equity Method Investments | |||||
Other assets | $ 11,124,846 | $ 11,124,846 | $ 2,780,367 | ||
Total assets | 756,371,180 | 756,371,180 | 813,336,892 | ||
Revolving line of credit, net of financing costs | 50,251,912 | 50,251,912 | 89,807,448 | ||
Obligations under participation agreement (proceeds of $38,444,357 and $41,726,565, respectively) | 0 | 0 | 12,680,594 | ||
Total liabilities | 489,351,881 | 489,351,881 | 491,454,718 | ||
Unrealized appreciation (depreciation) on investments | (1,040,192) | $ 0 | (982,384) | $ (133,994) | |
Obligations under participation agreement | 1,494,422 | 17,023,011 | |||
Mavik RESOF | |||||
Schedule of Equity Method Investments | |||||
Investments at fair value (cost of $166,181,966 and $176,035,290, respectively) | 174,083,602 | 174,083,602 | 178,283,703 | ||
Other assets | 34,383,022 | 34,383,022 | 23,918,841 | ||
Total assets | 208,466,624 | 208,466,624 | 202,202,544 | ||
Revolving line of credit, net of financing costs | 38,190,052 | 38,190,052 | 14,795,985 | ||
Obligations under participation agreement (proceeds of $38,444,357 and $41,726,565, respectively) | 38,868,663 | 38,868,663 | 41,962,861 | ||
Other liabilities | 11,019,371 | 11,019,371 | 17,120,804 | ||
Total liabilities | 88,078,086 | 88,078,086 | 73,879,650 | ||
Partners’ capital | 120,388,538 | 120,388,538 | 128,322,894 | ||
Total investment income | 8,504,140 | 12,581,277 | 24,880,051 | 23,317,312 | |
Total expenses | 2,981,365 | 3,434,548 | 9,975,744 | 6,489,678 | |
Net investment income | 5,522,775 | 9,146,729 | 14,904,307 | 16,827,634 | |
Unrealized appreciation (depreciation) on investments | 533,266 | (644,446) | (350,676) | 917,745 | |
Provision for income tax | 0 | 0 | (138,944) | 0 | |
Net increase in partners’ capital resulting from operations | 6,056,041 | $ 8,502,283 | 14,414,687 | $ 17,745,379 | |
Carrying Value | $ 166,181,966 | 166,181,966 | 176,035,290 | ||
Obligations under participation agreement | $ 38,444,357 | $ 41,726,565 |
Equity Investment in Unconsol_5
Equity Investment in Unconsolidated Investments - Equity Investment in Joint Venture (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Schedule of Equity Method Investments | ||
Carrying Value | $ 32,513,920 | $ 62,498,340 |
Joint Venture | ||
Schedule of Equity Method Investments | ||
Carrying Value | $ 14,193,537 | $ 25,703,666 |
Joint Venture | LEL Arlington JV LLC | ||
Schedule of Equity Method Investments | ||
Beneficial Ownership Interest | 27.20% | 27.20% |
Carrying Value | $ 6,431,784 | $ 7,271,603 |
Joint Venture | LEL NW 49th JV LLC | ||
Schedule of Equity Method Investments | ||
Beneficial Ownership Interest | 27.20% | 27.20% |
Carrying Value | $ 1,653,527 | $ 1,521,556 |
Joint Venture | TCG Corinthian FL Portfolio JV LLV | ||
Schedule of Equity Method Investments | ||
Beneficial Ownership Interest | 30.60% | 30.60% |
Carrying Value | $ 6,108,226 | $ 6,896,816 |
Joint Venture | SF-Dallas Industrial, LLC | ||
Schedule of Equity Method Investments | ||
Carrying Value | $ 0 | $ 10,013,691 |
Equity Investment in Unconsol_6
Equity Investment in Unconsolidated Investments - Schedule of Equity Method Investments JV (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Schedule of Equity Method Investments | |||||
Other assets | $ 11,124,846 | $ 11,124,846 | $ 2,780,367 | ||
Total assets | 756,371,180 | 756,371,180 | 813,336,892 | ||
Mortgage loan payable | 99,434,309 | 99,434,309 | 29,488,326 | ||
Total liabilities | 489,351,881 | 489,351,881 | 491,454,718 | ||
Revenues | 17,109,571 | $ 13,663,166 | 52,894,197 | $ 40,463,549 | |
Depreciation and amortization expense | (4,989,800) | (5,155,119) | |||
Unrealized (losses) gains | (1,040,192) | 0 | (982,384) | (133,994) | |
Joint Venture | |||||
Schedule of Equity Method Investments | |||||
Net investments in real estate | 191,498,145 | 191,498,145 | 192,616,298 | ||
Other assets | 12,614,486 | 12,614,486 | 12,817,388 | ||
Total assets | 204,112,631 | 204,112,631 | 205,433,686 | ||
Mortgage loan payable | 149,120,780 | 149,120,780 | 147,740,645 | ||
Other liabilities | 5,288,108 | 5,288,108 | 3,104,624 | ||
Total liabilities | 154,408,888 | 154,408,888 | 150,845,269 | ||
Members’ capital | 49,703,743 | 49,703,743 | $ 54,588,417 | ||
Revenues | 4,369,642 | 3,830,398 | 12,537,910 | 9,961,868 | |
Operating expenses | (1,902,828) | (1,960,888) | (6,227,802) | (4,984,553) | |
Depreciation and amortization expense | (1,706,127) | (1,296,079) | (5,399,378) | (3,051,976) | |
Interest expense | (2,638,961) | (2,269,662) | (7,794,759) | (5,099,449) | |
Unrealized (losses) gains | (995,658) | 1,617,548 | (2,245,640) | 3,023,925 | |
Net loss | $ (2,873,932) | $ (78,683) | $ (9,129,669) | $ (150,185) |
Real Estate Owned, Net - Narrat
Real Estate Owned, Net - Narratives (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Jun. 30, 2022 USD ($) | Mar. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Sep. 30, 2023 USD ($) building tenant | Sep. 30, 2022 USD ($) a | Sep. 30, 2023 USD ($) building tenant | Sep. 30, 2022 USD ($) a | Dec. 31, 2022 tenant | |
Real Estate [Line Items] | ||||||||
Impairment charges | $ 0 | $ 0 | $ 11,765,540 | $ 1,604,989 | ||||
Area of land | a | 4.9 | 4.9 | ||||||
Proceeds from sale of real estate | $ 8,600,000 | 0 | $ 8,585,500 | |||||
Loss on sale of investments | $ 100,000 | |||||||
Impairment of real estate | $ 1,600,000 | $ 3,400,000 | ||||||
Real estate and intangibles | Fair Value, Nonrecurring | ||||||||
Real Estate [Line Items] | ||||||||
Impairment charges | $ 0 | $ 0 | $ 11,765,540 | $ 1,604,989 | ||||
Ground Lease | ||||||||
Real Estate [Line Items] | ||||||||
Weighted average remaining lease term — operating lease (years) | 63 years 1 month 6 days | 63 years 1 month 6 days | 63 years 9 months 18 days | |||||
Base rent renewal term (in years) | 5 years | |||||||
Percent of fair market value of land | 9% | 9% | ||||||
Industrial | ||||||||
Real Estate [Line Items] | ||||||||
Number of leased buildings | building | 8 | 8 | ||||||
Number of tenants | tenant | 10 | 10 | ||||||
Office | ||||||||
Real Estate [Line Items] | ||||||||
Number of tenants | tenant | 3 | 3 | 3 |
Real Estate Owned, Net - Invest
Real Estate Owned, Net - Investment Related to Real Estate Acquisition (Details) | Sep. 30, 2023 USD ($) | May 25, 2023 USD ($) property | Mar. 24, 2023 USD ($) property |
Real Estate [Line Items] | |||
Real estate investments, net | $ 132,087,234 | ||
Industrial | Texas, United States | |||
Real Estate [Line Items] | |||
Number of Properties | property | 5 | 3 | |
Real estate investments, net | $ 83,288,961 | $ 48,798,273 |
Real Estate Owned, Net - Total
Real Estate Owned, Net - Total Capitalized Costs (Details) - USD ($) | 9 Months Ended | |||
Sep. 30, 2023 | May 31, 2023 | Dec. 31, 2022 | Sep. 30, 2022 | |
Total Capitalized Costs: | ||||
Cash and cash equivalents | $ 19,242,370 | $ 28,567,825 | $ 21,957,216 | |
Total, net of allowance for credit losses | 470,682,291 | 626,490,767 | ||
Equity investment in unconsolidated investments | 32,513,920 | 62,498,340 | ||
Interest receivable | 4,304,303 | 4,100,501 | ||
Other assets | 11,124,846 | 2,780,367 | ||
Total assets | 756,371,180 | $ 813,336,892 | ||
Industrial Buildings | ||||
Total Capitalized Costs: | ||||
Cash and cash equivalents | 52,313,739 | $ 3,515,466 | ||
Total, net of allowance for credit losses | 68,737,877 | 68,737,877 | ||
Equity investment in unconsolidated investments | 10,149,642 | 10,149,642 | ||
Interest receivable | 456,650 | 456,650 | ||
Other assets | 429,326 | 429,326 | ||
Total assets | 132,087,234 | 83,288,961 | ||
Net Assets Acquired | ||||
Cash and cash equivalents | 712,608 | 712,608 | ||
Other assets | 33,802 | 33,802 | ||
In-place lease (weighted-average expected life of 3.95 years) | 8,403,667 | |||
Below-market rent (weighted-average expected life of 3.98 years) | (4,770,870) | |||
Accounts payable and accrued expenses | (912,771) | (912,771) | ||
Net assets acquired | 132,087,234 | 83,288,961 | ||
Land | Industrial Buildings | ||||
Net Assets Acquired | ||||
Land, building and improvements | 23,785,004 | 14,457,149 | ||
Building and building improvements | Industrial Buildings | ||||
Net Assets Acquired | ||||
Land, building and improvements | 104,613,728 | $ 65,365,376 | ||
In-place lease | Industrial Buildings | ||||
Net Assets Acquired | ||||
In-place lease (weighted-average expected life of 3.95 years) | $ 12,719,000 | |||
Weighted-average expected life (in years) | 3 years 11 months 12 days | |||
Below-market rent | Industrial Buildings | ||||
Net Assets Acquired | ||||
Below-market rent (weighted-average expected life of 3.98 years) | $ (8,864,137) | |||
Weighted-average expected life (in years) | 3 years 11 months 23 days |
Real Estate Owned, Net - Real E
Real Estate Owned, Net - Real Estate Owned, Net (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Real Estate [Line Items] | ||
Real estate, Net | $ 161,077,440 | $ 46,660,226 |
Lease intangible liabilities, Net | (16,014,692) | (8,646,840) |
Total real estate | ||
Real Estate [Line Items] | ||
Real estate, Cost | 170,644,314 | 53,816,609 |
Real estate, Accumulated Depreciation/Amortization | (9,566,874) | (7,156,383) |
Real estate, Net | 161,077,440 | 46,660,226 |
Land | ||
Real Estate [Line Items] | ||
Real estate, Cost | 23,785,004 | 0 |
Real estate, Accumulated Depreciation/Amortization | 0 | 0 |
Real estate, Net | 23,785,004 | 0 |
Building and building improvements | ||
Real Estate [Line Items] | ||
Real estate, Cost | 144,743,638 | 51,725,969 |
Real estate, Accumulated Depreciation/Amortization | (7,892,321) | (5,711,468) |
Real estate, Net | 136,851,317 | 46,014,501 |
Tenant improvements | ||
Real Estate [Line Items] | ||
Real estate, Cost | 1,879,672 | 1,854,640 |
Real estate, Accumulated Depreciation/Amortization | (1,438,553) | (1,224,648) |
Real estate, Net | 441,119 | 629,992 |
Furniture and fixtures | ||
Real Estate [Line Items] | ||
Real estate, Cost | 236,000 | 236,000 |
Real estate, Accumulated Depreciation/Amortization | (236,000) | (220,267) |
Real estate, Net | 0 | 15,733 |
Total Intangible Assets | ||
Real Estate [Line Items] | ||
Lease intangible assets, Cost | 27,858,079 | 15,139,080 |
Lease intangible assets, Accumulated Depreciation/Amortization | (15,165,885) | (12,570,619) |
Total | 12,692,194 | 2,568,461 |
In-place lease | ||
Real Estate [Line Items] | ||
Lease intangible assets, Cost | 27,701,537 | 14,982,538 |
Lease intangible assets, Accumulated Depreciation/Amortization | (15,075,179) | (12,493,079) |
Total | 12,626,358 | 2,489,459 |
Above-market rent | ||
Real Estate [Line Items] | ||
Lease intangible assets, Cost | 156,542 | 156,542 |
Lease intangible assets, Accumulated Depreciation/Amortization | (90,706) | (77,540) |
Total | 65,836 | 79,002 |
Total Intangible Liabilities | ||
Real Estate [Line Items] | ||
Lease intangible liabilities, Cost | (20,515,329) | (11,651,192) |
Lease intangible liabilities, Accumulated Depreciation/Amortization | 4,500,637 | 3,004,352 |
Lease intangible liabilities, Net | (16,014,692) | (8,646,840) |
Below-market rent | ||
Real Estate [Line Items] | ||
Lease intangible liabilities, Cost | (11,619,059) | (2,754,922) |
Lease intangible liabilities, Accumulated Depreciation/Amortization | 3,827,171 | 2,428,647 |
Lease intangible liabilities, Net | (7,791,888) | (326,275) |
Above-market ground lease | ||
Real Estate [Line Items] | ||
Lease intangible liabilities, Cost | (8,896,270) | (8,896,270) |
Lease intangible liabilities, Accumulated Depreciation/Amortization | 673,466 | 575,705 |
Lease intangible liabilities, Net | (8,222,804) | (8,320,565) |
Total Real Estate | ||
Real Estate [Line Items] | ||
Real estate, Cost | 177,987,064 | 57,304,497 |
Real estate, Accumulated Depreciation/Amortization | (20,232,122) | (16,722,650) |
Real estate, Net | $ 157,754,942 | $ 40,581,847 |
Real Estate Owned, Net - Real_2
Real Estate Owned, Net - Real Estate Operating Revenues and Expenses (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Real estate operating revenues: | ||||
Total | $ 4,121,040 | $ 2,962,812 | $ 8,257,943 | $ 8,933,587 |
Real estate operating expenses: | ||||
Management fees | 2,049,916 | 1,611,934 | 6,152,392 | 4,740,657 |
Total | 1,912,322 | 1,274,849 | 4,986,446 | 3,740,140 |
Total real estate | ||||
Real estate operating revenues: | ||||
Lease revenue | 3,114,212 | 1,752,594 | 6,482,943 | 5,251,417 |
Other operating income | 1,006,828 | 1,210,218 | 1,775,000 | 3,682,170 |
Total | 4,121,040 | 2,962,812 | 8,257,943 | 8,933,587 |
Real estate operating expenses: | ||||
Utilities | 111,755 | 84,769 | 218,088 | 186,274 |
Real estate taxes | 590,894 | 353,361 | 1,483,255 | 1,044,520 |
Repairs and maintenances | 230,701 | 171,085 | 694,253 | 498,318 |
Management fees | 104,036 | 68,867 | 230,334 | 206,954 |
Lease expense, including amortization of above-market ground lease | 487,163 | 487,163 | 1,461,489 | 1,461,489 |
Other operating expenses | 387,773 | 109,604 | 899,027 | 342,585 |
Total | $ 1,912,322 | $ 1,274,849 | $ 4,986,446 | $ 3,740,140 |
Real Estate Owned, Net - Future
Real Estate Owned, Net - Future Minimum Rent Income (Details) | Sep. 30, 2023 USD ($) |
Real Estate [Abstract] | |
2023 (October 1 through December 31) | $ 2,338,114 |
2024 | 9,456,610 |
2025 | 4,940,447 |
2026 | 4,600,139 |
2027 | 3,162,610 |
Thereafter | 5,821,613 |
Total | $ 30,319,533 |
Real Estate Owned, Net - Annual
Real Estate Owned, Net - Annual Net Amortization of Intangibles (Details) | Sep. 30, 2023 USD ($) |
Real Estate [Line Items] | |
2023 (October 1 through December 31) | $ 529,975 |
2024 | 2,202,909 |
2025 | 477,390 |
2026 | 492,018 |
2027 | 244,264 |
Thereafter | (7,269,054) |
Total | (3,322,498) |
Net Decrease in Real Estate Operating Revenue | |
Real Estate [Line Items] | |
2023 (October 1 through December 31) | (783,637) |
2024 | (3,090,247) |
2025 | (1,532,194) |
2026 | (1,158,162) |
2027 | (393,640) |
Thereafter | (768,172) |
Total | (7,726,052) |
Increase in Depreciation and Amortization | |
Real Estate [Line Items] | |
2023 (October 1 through December 31) | 1,378,786 |
2024 | 5,423,504 |
2025 | 2,139,932 |
2026 | 1,780,528 |
2027 | 768,252 |
Thereafter | 1,135,356 |
Total | 12,626,358 |
Decrease in Rent Expense | |
Real Estate [Line Items] | |
2023 (October 1 through December 31) | (65,174) |
2024 | (130,348) |
2025 | (130,348) |
2026 | (130,348) |
2027 | (130,348) |
Thereafter | (7,636,238) |
Total | $ (8,222,804) |
Real Estate Owned, Net - Ground
Real Estate Owned, Net - Ground Lease Disclosures (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Real Estate [Line Items] | ||
Operating lease right-of-use asset | $ 27,365,847 | $ 27,378,786 |
Operating lease liability | 27,365,847 | 27,378,786 |
Ground Lease | ||
Real Estate [Line Items] | ||
Operating lease right-of-use asset | 27,365,847 | 27,378,786 |
Operating lease liability | $ 27,365,847 | $ 27,378,786 |
Weighted average remaining lease term — operating lease (years) | 63 years 1 month 6 days | 63 years 9 months 18 days |
Weighted average discount rate — operating lease | 7.60% | 7.60% |
Real Estate Owned, Net - Schedu
Real Estate Owned, Net - Schedule of Lease Expense (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Ground Lease | ||||
Real Estate [Line Items] | ||||
Operating lease cost | $ 519,750 | $ 519,750 | $ 1,559,250 | $ 1,559,250 |
Real Estate Owned, Net - Sche_2
Real Estate Owned, Net - Schedule of Non-cash Information (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Real Estate [Abstract] | ||
Amounts included in the measurement of lease liability, Operating cash flows from an operating lease | $ 1,559,250 | $ 1,559,250 |
Right-of-use assets obtained in exchange for lease obligations, Operating lease | $ 1,559,250 | $ 1,559,250 |
Real Estate Owned, Net - Maturi
Real Estate Owned, Net - Maturities of Operating Lease Liabilities (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Real Estate [Abstract] | ||
2023 (October 1 through December 31) | $ 519,750 | |
2024 | 2,079,000 | |
2025 | 2,079,000 | |
2026 | 2,079,000 | |
2027 | 2,079,000 | |
Thereafter | 122,227,875 | |
Total lease payments | 131,063,625 | |
Less: Imputed interest | (103,697,778) | |
Total | $ 27,365,847 | $ 27,378,786 |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2023 USD ($) | Sep. 30, 2023 USD ($) | Mar. 31, 2023 USD ($) | Sep. 30, 2022 USD ($) a | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) a | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||||
Purchases | $ 258,500 | |||||
Impairment charges | $ 0 | $ 0 | $ 11,765,540 | $ 1,604,989 | ||
Area of land | a | 4.9 | 4.9 | ||||
Corporate Bonds | ||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||||
Corporate bonds purchased | $ 20,000,000 | |||||
Coupon rate on purchased bonds (as percent) | 6.125% | 6.125% | ||||
Discount Rate | Real estate and intangibles | ||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||||
Real Estate and intangibles, measurement input | 0.0850 | 0.0850 | ||||
Terminal Capitalization Rate | Real estate and intangibles | ||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||||
Real Estate and intangibles, measurement input | 0.0750 | 0.0750 | ||||
Fair Value, Nonrecurring | Real estate and intangibles | ||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||||
Impairment charges | $ 0 | $ 0 | $ 11,765,540 | $ 1,604,989 | ||
Level 3 | Derivative - interest rate cap | ||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||||
Purchases | $ 258,500 | |||||
Derivative, cap interest rate (as percent) | 5% | 5% |
Fair Value Measurements - Fair
Fair Value Measurements - Fair Value Measurements of Marketable Securities, by Major Class (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 | Sep. 30, 2022 | Dec. 31, 2021 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Marketable securities | $ 7,054,491 | $ 147,960 | $ 0 | $ 1,310,000 |
Derivatives | 212,754 | 0 | ||
Total | 10,467,164 | 147,960 | ||
Debt securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Marketable securities | 1,241,993 | 147,960 | ||
Equity Securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Marketable securities | 5,812,498 | |||
Money market fund | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Money market fund | 3,199,919 | |||
Level 1 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Total | 10,254,410 | 147,960 | ||
Level 1 | Debt securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Marketable securities | 1,241,993 | 147,960 | ||
Level 1 | Equity Securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Marketable securities | 5,812,498 | |||
Level 1 | Money market fund | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Money market fund | 3,199,919 | |||
Level 2 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Total | 0 | 0 | ||
Level 2 | Debt securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Marketable securities | 0 | 0 | ||
Level 2 | Equity Securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Marketable securities | 0 | |||
Level 2 | Money market fund | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Money market fund | 0 | |||
Level 3 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Total | 212,754 | 0 | ||
Level 3 | Debt securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Marketable securities | 0 | $ 0 | ||
Level 3 | Equity Securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Marketable securities | 0 | |||
Level 3 | Money market fund | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Money market fund | 0 | |||
Derivative - interest rate cap | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Derivatives | 212,754 | |||
Derivative - interest rate cap | Level 1 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Derivatives | 0 | |||
Derivative - interest rate cap | Level 2 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Derivatives | 0 | |||
Derivative - interest rate cap | Level 3 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Derivatives | $ 212,754 |
Fair Value Measurements - Activ
Fair Value Measurements - Activities of the Marketable Securities (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Jul. 25, 2023 | |
Marketable Securities | |||
Beginning balance | $ 147,960 | $ 1,310,000 | |
Purchases | 7,905,211 | 0 | |
Proceeds from sale | 0 | (1,259,417) | |
Reclassification of net realized gains on marketable securities into earnings | 0 | 83,411 | |
Unrealized losses on marketable securities and derivatives | (998,680) | (133,994) | |
Ending balance | 7,054,491 | $ 0 | |
Derivatives | |||
Beginning balance | 0 | ||
Purchases | 258,500 | ||
Proceeds from sale | 0 | ||
Reclassification of net realized gains on marketable securities into earnings | 0 | ||
Unrealized losses on marketable securities and derivatives | (45,746) | ||
Ending balance | $ 212,754 | ||
MITT | |||
Derivatives | |||
Acquired percentage | 5.20% |
Fair Value Measurements - Fai_2
Fair Value Measurements - Fair Value Measurements, Nonrecurring (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Loans: | ||
Principal Amount | $ 526,796,770 | $ 645,795,459 |
Carrying Value | 531,260,878 | 651,962,657 |
Allowance for loan losses | (60,578,587) | (25,471,890) |
Total, net of allowance for credit losses | 470,682,291 | 626,490,767 |
Fair Value | 471,873,386 | 623,145,754 |
Liabilities: | ||
Principal Amount | 439,627,083 | 451,349,737 |
Carrying Value | 431,441,619 | 442,811,751 |
Fair Value | 419,372,921 | 431,569,684 |
Loans Held For Investment | ||
Loans: | ||
Allowance for loan losses | (60,163,319) | (25,471,890) |
Total, net of allowance for credit losses | 432,327,832 | 584,417,939 |
Loans held for investment acquired through participation | ||
Loans: | ||
Allowance for loan losses | (415,268) | 0 |
Total, net of allowance for credit losses | 38,354,459 | 42,072,828 |
Level 3 | ||
Loans: | ||
Allowance for loan losses | (60,578,587) | (25,471,890) |
Fair Value | 471,873,386 | 623,145,754 |
Liabilities: | ||
Fair Value | 316,393,571 | 328,087,936 |
Level 3 | Revolving line of credit | ||
Liabilities: | ||
Principal Amount | 50,369,205 | 90,135,865 |
Carrying Value | 50,251,912 | 89,807,448 |
Fair Value | 50,369,205 | 90,135,865 |
Level 3 | Loans Held For Investment | ||
Loans: | ||
Principal Amount | 488,352,413 | 604,068,894 |
Carrying Value | 492,491,151 | 609,889,829 |
Fair Value | 433,004,722 | 581,182,892 |
Level 3 | Loans held for investment acquired through participation | ||
Loans: | ||
Principal Amount | 38,444,357 | 41,726,565 |
Carrying Value | 38,769,727 | 42,072,828 |
Fair Value | 38,868,664 | 41,962,862 |
Level 3 | Term loan payable | ||
Liabilities: | ||
Principal Amount | 15,000,000 | 25,000,000 |
Carrying Value | 14,898,434 | 25,000,000 |
Fair Value | 15,000,000 | 25,000,000 |
Level 3 | Repurchase agreement payable | ||
Liabilities: | ||
Principal Amount | 112,905,625 | 170,876,606 |
Carrying Value | 112,392,727 | 169,304,710 |
Fair Value | 112,905,625 | 170,876,606 |
Level 3 | Obligations under participation agreements | ||
Liabilities: | ||
Principal Amount | 0 | 12,584,958 |
Carrying Value | 0 | 12,680,594 |
Fair Value | 0 | 12,680,595 |
Level 3 | Mortgage loan payable | ||
Liabilities: | ||
Principal Amount | 100,852,253 | 29,252,308 |
Carrying Value | 99,434,309 | 29,488,326 |
Fair Value | 101,118,741 | 29,394,870 |
Level 3 | Note payable | ||
Liabilities: | ||
Principal Amount | 37,000,000 | 0 |
Carrying Value | 36,562,785 | 0 |
Fair Value | 37,000,000 | 0 |
Level 1 | Unsecured notes payable | ||
Liabilities: | ||
Principal Amount | 123,500,000 | 123,500,000 |
Carrying Value | 117,901,452 | 116,530,673 |
Fair Value | $ 102,979,350 | $ 103,481,748 |
Fair Value Measurements - Items
Fair Value Measurements - Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Impairment charges | $ 0 | $ 0 | $ 11,765,540 | $ 1,604,989 |
Fair Value, Nonrecurring | Real estate and intangibles | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Real estate and intangibles | 27,004,389 | 8,395,011 | ||
Impairment charges | $ 0 | $ 0 | $ 11,765,540 | $ 1,604,989 |
Fair Value Measurements - Valua
Fair Value Measurements - Valuation Techniques (Details) | Sep. 30, 2023 USD ($) | Dec. 31, 2022 USD ($) |
Fair Value Measurement Inputs and Valuation Techniques | ||
Assets, Fair Value | $ 471,873,386 | $ 623,145,754 |
Liabilities, Fair Value | 419,372,921 | 431,569,684 |
Level 3 | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Assets, Fair Value | 471,873,386 | 623,145,754 |
Liabilities, Fair Value | 316,393,571 | 328,087,936 |
Level 3 | Revolving line of credit | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Liabilities, Fair Value | 50,369,205 | 90,135,865 |
Level 3 | Loans Held For Investment | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Assets, Fair Value | 433,004,722 | 581,182,892 |
Level 3 | Loans Held For Investment Acquired Through Participation | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Assets, Fair Value | 38,868,664 | 41,962,862 |
Level 3 | Repurchase agreement payable | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Liabilities, Fair Value | 112,905,625 | 170,876,606 |
Level 3 | Obligations under participation agreements | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Liabilities, Fair Value | 0 | 12,680,595 |
Level 3 | Mortgage loan payable | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Liabilities, Fair Value | 101,118,741 | 29,394,870 |
Level 3 | Term loan payable | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Liabilities, Fair Value | 15,000,000 | 25,000,000 |
Level 3 | Note payable | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Liabilities, Fair Value | $ 37,000,000 | $ 0 |
Level 3 | Discounted Cash Flow | Discount Rate | Revolving line of credit | Minimum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.0867 | 0.0764 |
Level 3 | Discounted Cash Flow | Discount Rate | Revolving line of credit | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.0867 | 0.0764 |
Level 3 | Discounted Cash Flow | Discount Rate | Revolving line of credit | Weighted Average | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.0867 | 0.0764 |
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment | Minimum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.0903 | 0.0871 |
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1655 | 0.1936 |
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment | Weighted Average | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1223 | 0.1146 |
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment Acquired Through Participation | Minimum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1530 | 0.1525 |
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment Acquired Through Participation | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1832 | 0.1706 |
Level 3 | Discounted Cash Flow | Discount Rate | Loans Held For Investment Acquired Through Participation | Weighted Average | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1774 | 0.1667 |
Level 3 | Discounted Cash Flow | Discount Rate | Repurchase agreement payable | Minimum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.0618 | 0.0522 |
Level 3 | Discounted Cash Flow | Discount Rate | Repurchase agreement payable | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1032 | 0.0617 |
Level 3 | Discounted Cash Flow | Discount Rate | Repurchase agreement payable | Weighted Average | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.0738 | 0.0682 |
Level 3 | Discounted Cash Flow | Discount Rate | Obligations under participation agreements | Minimum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1636 | |
Level 3 | Discounted Cash Flow | Discount Rate | Obligations under participation agreements | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1636 | |
Level 3 | Discounted Cash Flow | Discount Rate | Obligations under participation agreements | Weighted Average | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1636 | |
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage loan payable | Minimum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.0625 | 0.0824 |
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage loan payable | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.0917 | 0.0824 |
Level 3 | Discounted Cash Flow | Discount Rate | Mortgage loan payable | Weighted Average | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.0789 | 0.0824 |
Level 3 | Discounted Cash Flow | Discount Rate | Term loan payable | Minimum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1271 | 0.0563 |
Level 3 | Discounted Cash Flow | Discount Rate | Term loan payable | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1271 | 0.0563 |
Level 3 | Discounted Cash Flow | Discount Rate | Term loan payable | Weighted Average | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1271 | 0.0563 |
Level 3 | Discounted Cash Flow | Discount Rate | Note payable | Minimum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1092 | |
Level 3 | Discounted Cash Flow | Discount Rate | Note payable | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1092 | |
Level 3 | Discounted Cash Flow | Discount Rate | Note payable | Weighted Average | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0.1092 |
Related Party Transactions - Sc
Related Party Transactions - Schedule of Fees Paid and Costs Reimbursed to the Manager (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Related Party Transaction [Line Items] | ||||
Asset management fee | $ 2,049,916 | $ 1,611,934 | $ 6,152,392 | $ 4,740,657 |
Asset servicing fee | 487,210 | 379,712 | 1,454,109 | 1,124,759 |
Operating expenses reimbursed to Manager | 2,407,757 | 2,013,135 | 6,704,790 | 6,082,333 |
Related Party | ||||
Related Party Transaction [Line Items] | ||||
Origination and extension fee expense | 488,219 | 737,903 | 1,302,826 | 1,806,215 |
Asset management fee | 2,049,916 | 1,611,934 | 6,152,392 | 4,740,657 |
Asset servicing fee | 487,210 | 379,712 | 1,454,109 | 1,124,759 |
Operating expenses reimbursed to Manager | 2,407,757 | 2,013,135 | 6,704,790 | 6,082,333 |
Disposition fee | 242,500 | 410,694 | 1,451,063 | 890,194 |
Total | $ 5,675,602 | $ 5,153,378 | 17,065,180 | 14,644,158 |
Mavik RESOF | ||||
Related Party Transaction [Line Items] | ||||
Acquisition costs, period cost | $ 500,000 | $ 200,000 |
Related Party Transactions - Na
Related Party Transactions - Narratives (Details) | 3 Months Ended | 9 Months Ended | |||||||
Aug. 03, 2020 USD ($) | Sep. 30, 2023 USD ($) | Mar. 31, 2023 USD ($) | Sep. 30, 2022 USD ($) | Jun. 30, 2022 USD ($) | Mar. 31, 2022 USD ($) | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) | |
Related Party Transaction [Line Items] | |||||||||
Manager's entitled transaction break-up fee | 0.5 | ||||||||
Termination fee | $ 0 | $ 0 | $ 0 | ||||||
Distribution to investors | 4,650,531 | $ 4,650,492 | $ 3,724,053 | $ 3,780,568 | $ 3,893,595 | 14,000,000 | $ 11,400,000 | ||
Investment company, return of capital distribution | $ 4,700,000 | $ 0 | $ 13,500,000 | $ 5,400,000 | |||||
Related Party | |||||||||
Related Party Transaction [Line Items] | |||||||||
Percent of origination fees payable | 1% | 1% | |||||||
Percent of principal amount of loan extended | 1% | 1% | |||||||
Management fee, annual rate (as percent) | 1% | ||||||||
Asset servicing fee annual rate (as percent) | 0.25% | 0.25% | |||||||
Disposition fee due to manager percent | 1% | 1% | |||||||
Due to manager | $ 3,200,568 | $ 3,200,568 | $ 3,935,997 | ||||||
Mavik Real Estate Special Opportunities Fund, LP | |||||||||
Related Party Transaction [Line Items] | |||||||||
Committed capital | $ 50,000,000 |
Related Party Transactions - Pa
Related Party Transactions - Participation Interests Purchased (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Related Party Transaction [Line Items] | ||
Principal Balance | $ 526,796,770 | $ 645,795,459 |
Carrying Value | 470,682,291 | 626,490,767 |
Allowance for credit losses | (60,578,587) | (25,471,890) |
Related Party | Loans Held For Investment Acquired Through Participation | ||
Related Party Transaction [Line Items] | ||
Principal Balance | 38,444,357 | 41,726,565 |
Carrying Value | 38,354,459 | $ 42,072,828 |
Allowance for credit losses | $ (415,268) | |
Related Party | Loans Held For Investment Acquired Through Participation | Havemeyer TSM LLC | ||
Related Party Transaction [Line Items] | ||
Participating Interests | 23% | |
Principal Balance | $ 3,282,208 | |
Carrying Value | $ 3,313,813 | |
Related Party | Loans Held For Investment Acquired Through Participation | Mesa AZ Industrial Owner, LLC | ||
Related Party Transaction [Line Items] | ||
Participating Interests | 38.27% | 38.27% |
Principal Balance | $ 31,000,000 | $ 31,000,000 |
Carrying Value | $ 31,283,132 | $ 31,276,468 |
Related Party | Loans Held For Investment Acquired Through Participation | UNIJ Sole Member LLC | ||
Related Party Transaction [Line Items] | ||
Participating Interests | 40.80% | 40.80% |
Principal Balance | $ 7,444,357 | $ 7,444,357 |
Carrying Value | $ 7,486,595 | $ 7,482,547 |
Related Party Transactions - Tr
Related Party Transactions - Transferred to Third-Party (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Related Party Transaction [Line Items] | ||
Principal Balance | $ 526,796,770 | $ 645,795,459 |
Debt instrument, face | 439,627,083 | 451,349,737 |
Secured Debt | $ 14,898,434 | 25,000,000 |
Participating Mortgage Loan | ||
Related Party Transaction [Line Items] | ||
Principal Balance | 18,625,738 | |
Carrying Value | 18,738,386 | |
Debt instrument, face | 12,584,958 | |
Secured Debt | 12,680,594 | |
610 Walnut Investors LLC | Participating Mortgage Loan | ||
Related Party Transaction [Line Items] | ||
Principal Balance | 18,625,738 | |
Carrying Value | $ 18,738,386 | |
Percentage Ownership Sold | 67.57% | |
Debt instrument, face | $ 12,584,958 | |
Secured Debt | $ 12,680,594 |
Debt - Narratives - Unsecured N
Debt - Narratives - Unsecured Notes Payable (Details) - USD ($) | Jun. 25, 2021 | Jun. 10, 2021 | Feb. 26, 2021 | Feb. 10, 2021 | Sep. 30, 2023 | Dec. 31, 2022 |
Debt Instrument | ||||||
Principal Amount | $ 439,627,083 | $ 451,349,737 | ||||
Unsecured notes payable | ||||||
Debt Instrument | ||||||
Principal Amount | 123,500,000 | 123,500,000 | ||||
6.00% Senior Notes Due 2026 | Unsecured notes payable | ||||||
Debt Instrument | ||||||
Fixed rate (as percent) | 6% | 6% | ||||
Principal Amount | $ 6,600,000 | $ 78,500,000 | $ 85,125,000 | 85,125,000 | ||
Proceeds from issuance of debt | 6,400,000 | 76,000,000 | ||||
Debt issuance costs, gross | $ 200,000 | $ 2,500,000 | ||||
Asset coverage ratio | 150% | |||||
7.00% Senior Notes Due 2026 | Unsecured notes payable | ||||||
Debt Instrument | ||||||
Fixed rate (as percent) | 7% | 7% | ||||
Principal Amount | $ 3,600,000 | $ 34,800,000 | $ 38,375,000 | $ 38,375,000 | ||
Proceeds from issuance of debt | 3,500,000 | 33,700,000 | ||||
Debt issuance costs, gross | $ 100,000 | $ 1,100,000 | ||||
Debt instrument, redemption price, percentage | 100% |
Debt - Unsecured Notes Payable
Debt - Unsecured Notes Payable (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 | Jun. 25, 2021 | Jun. 10, 2021 | Feb. 26, 2021 | Feb. 10, 2021 |
Debt Instrument | ||||||
Debt instrument, face | $ 439,627,083 | $ 451,349,737 | ||||
Carrying Value | 431,441,619 | 442,811,751 | ||||
Fair Value | 419,372,921 | 431,569,684 | ||||
Unsecured notes payable | ||||||
Debt Instrument | ||||||
Debt instrument, face | 123,500,000 | 123,500,000 | ||||
Carrying Value | 117,901,452 | 116,530,673 | ||||
Fair Value | 102,979,350 | 103,481,748 | ||||
6.00% Senior Notes Due 2026 | Unsecured notes payable | ||||||
Debt Instrument | ||||||
Debt instrument, face | 85,125,000 | 85,125,000 | $ 6,600,000 | $ 78,500,000 | ||
Carrying Value | 82,992,867 | 82,487,769 | ||||
Fair Value | 66,738,000 | 68,100,000 | ||||
Unamortized discount | 1,600,000 | 1,900,000 | ||||
Unamortized deferred financing costs | 600,000 | 700,000 | ||||
7.00% Senior Notes Due 2026 | Unsecured notes payable | ||||||
Debt Instrument | ||||||
Debt instrument, face | 38,375,000 | 38,375,000 | $ 3,600,000 | $ 34,800,000 | ||
Carrying Value | 34,908,585 | 34,042,904 | ||||
Fair Value | 36,241,350 | 35,381,748 | ||||
Unamortized discount | $ 3,500,000 | $ 4,300,000 |
Debt - Narratives - Revolving L
Debt - Narratives - Revolving Line of Credit (Details) | 9 Months Ended | ||||||||
Mar. 12, 2023 | Mar. 12, 2021 USD ($) | Mar. 12, 2021 USD ($) | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Sep. 29, 2023 USD ($) | Dec. 31, 2022 USD ($) | Jan. 04, 2022 USD ($) | Nov. 08, 2021 USD ($) | |
Debt Instrument | |||||||||
Maximum borrowing capacity | $ 50,400,000 | $ 90,100,000 | |||||||
Payment of financing costs | 2,098,725 | $ 989,032 | |||||||
Line of credit facility collateral assets | 87,500,000 | $ 177,400,000 | |||||||
Proceeds from borrowings under revolving line of credit | 57,032,155 | 41,169,295 | |||||||
Repayments | 96,798,815 | $ 55,609,325 | |||||||
UBS Master Repurchase Agreement | Related Party | Terra Mortgage Capital LLC | |||||||||
Debt Instrument | |||||||||
Maximum borrowing capacity | $ 195,000,000 | ||||||||
Payment guarantee maximum percent | 25% | 25% | |||||||
Minimum net worth required for compliance | $ 269,000,000 | $ 215,700,000 | |||||||
Ratio of indebtedness to net capital | 3.50 | ||||||||
Revolving line of credit | |||||||||
Debt Instrument | |||||||||
Maximum borrowing capacity | $ 75,000,000 | $ 75,000,000 | $ 125,000,000 | ||||||
Minimum net worth required for compliance | 250,000,000 | ||||||||
Quarterly operating profit for compliance | $ 3,500,000 | ||||||||
Ratio of indebtedness to net capital | 2.50 | ||||||||
Payment of financing costs | $ 600,000 | ||||||||
Revolving line of credit | Floor rate | |||||||||
Debt Instrument | |||||||||
Variable rate (as percent) | 6% | 4% | |||||||
Revolving line of credit | LIBOR | |||||||||
Debt Instrument | |||||||||
Variable rate (as percent) | 3.25% | ||||||||
Revolving line of credit | Term SOFR | |||||||||
Debt Instrument | |||||||||
Variable rate (as percent) | 3.35% |
Debt - Narratives - Repurchase
Debt - Narratives - Repurchase Agreements (Details) | 3 Months Ended | 9 Months Ended | |||||||
Feb. 18, 2022 USD ($) | Nov. 08, 2021 USD ($) | Dec. 31, 2023 | Sep. 30, 2023 USD ($) | Sep. 30, 2023 USD ($) | Sep. 30, 2022 USD ($) | Sep. 29, 2023 USD ($) | Dec. 31, 2022 USD ($) | Mar. 12, 2021 | |
Debt Instrument | |||||||||
Maximum borrowing capacity | $ 50,400,000 | $ 50,400,000 | $ 90,100,000 | ||||||
Cash and cash equivalents | $ 19,242,370 | 19,242,370 | $ 21,957,216 | $ 28,567,825 | |||||
Proceeds from borrowings under repurchase agreements | 14,189,300 | 150,706,606 | |||||||
Repayments of borrowings under repurchase agreements | $ 72,160,282 | 0 | |||||||
Terra Mortgage Capital LLC | UBS Master Repurchase Agreement | Related Party | |||||||||
Debt Instrument | |||||||||
Maximum borrowing capacity | $ 195,000,000 | ||||||||
Deferred financing costs | 600,000 | ||||||||
Payment guarantee maximum percent | 25% | ||||||||
Cash liquidity | $ 5,000,000 | ||||||||
Debt instrument covenant minimum percentage of cash liquidity | 5% | ||||||||
Cash and cash equivalents | $ 15,000,000 | ||||||||
Minimum percentage of total liquidity | 10% | ||||||||
Minimum net worth required for compliance | $ 215,700,000 | $ 269,000,000 | |||||||
Debt instrument covenant requirement on consolidated tangible net worth minimum percent | 75% | 75% | 75% | 75% | |||||
EBITDA To interest expense ratio | 1.25 | 1.10 | |||||||
Ratio of indebtedness to net capital | 3.50 | ||||||||
Proceeds from borrowings under repurchase agreements | $ 0 | 30,900,000 | |||||||
Repayments of borrowings under repurchase agreements | 13,600,000 | 0 | |||||||
Terra Mortgage Capital LLC | UBS Master Repurchase Agreement | Related Party | Forecast | |||||||||
Debt Instrument | |||||||||
EBITDA To interest expense ratio | 1.25 | ||||||||
Terra Mortgage Capital LLC | UBS Master Repurchase Agreement | Related Party | Minimum | |||||||||
Debt Instrument | |||||||||
Value-added assets with loan-to-value ratio | 65% | ||||||||
Value added assets yield ratio | 2.50% | ||||||||
Minimum net worth required for compliance | $ 225,000,000 | 225,000,000 | |||||||
Terra Mortgage Capital LLC | UBS Master Repurchase Agreement | Related Party | Minimum | Term SOFR | |||||||||
Debt Instrument | |||||||||
Variable rate (as percent) | 1.60% | ||||||||
Terra Mortgage Capital LLC | UBS Master Repurchase Agreement | Related Party | Maximum | |||||||||
Debt Instrument | |||||||||
Value-added assets with loan-to-value ratio | 80% | ||||||||
Value added assets yield ratio | 5% | ||||||||
Terra Mortgage Capital LLC | UBS Master Repurchase Agreement | Related Party | Maximum | Term SOFR | |||||||||
Debt Instrument | |||||||||
Variable rate (as percent) | 2.25% | ||||||||
Terra Mortgage Capital LLC | Uncommitted Master Repurchase Agreement | Related Party | |||||||||
Debt Instrument | |||||||||
Maximum borrowing capacity | $ 200,000,000 | ||||||||
Deferred financing costs | $ 600,000 | ||||||||
Payment guarantee maximum percent | 25% | ||||||||
Cash liquidity | $ 5,000,000 | ||||||||
Debt instrument covenant minimum percentage of cash liquidity | 5% | ||||||||
Cash and cash equivalents | $ 15,000,000 | ||||||||
Minimum percentage of total liquidity | 10% | ||||||||
Debt instrument covenant requirement on consolidated tangible net worth minimum percent | 75% | ||||||||
EBITDA To interest expense ratio | 1.50 | ||||||||
Ratio of indebtedness to net capital | 3 | ||||||||
Proceeds from borrowings under repurchase agreements | $ 103,000,000 | 14,200,000 | 119,800,000 | ||||||
Repayments of borrowings under repurchase agreements | $ 58,600,000 | $ 0 | |||||||
Unamortized deferred financing costs | $ 1,700,000 | ||||||||
Terra Mortgage Capital LLC | Uncommitted Master Repurchase Agreement | Related Party | Forecast | |||||||||
Debt Instrument | |||||||||
EBITDA To interest expense ratio | 1.50 | ||||||||
Terra Mortgage Capital LLC | Uncommitted Master Repurchase Agreement | Related Party | Nonperforming Loans | |||||||||
Debt Instrument | |||||||||
Payment guarantee maximum percent | 50% | ||||||||
Terra Mortgage Capital LLC | Uncommitted Master Repurchase Agreement | Related Party | Performing Loans | |||||||||
Debt Instrument | |||||||||
Payment guarantee maximum percent | 25% | ||||||||
Terra Mortgage Capital LLC | Uncommitted Master Repurchase Agreement | Related Party | Minimum | Term SOFR | |||||||||
Debt Instrument | |||||||||
Variable rate (as percent) | 1.75% | ||||||||
Terra Mortgage Capital LLC | Uncommitted Master Repurchase Agreement | Related Party | Maximum | Term SOFR | |||||||||
Debt Instrument | |||||||||
Variable rate (as percent) | 3% |
Debt - Schedule of Repurchase A
Debt - Schedule of Repurchase Agreements (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Debt Instrument | ||
Principal Amount | $ 526,796,770 | $ 645,795,459 |
UBS Master Repurchase Agreement | ||
Debt Instrument | ||
Principal Amount | 51,100,000 | 68,100,000 |
Collateral, Carrying Value | 52,070,287 | 69,163,440 |
Collateral, Fair Value | 52,153,393 | 69,211,505 |
Borrowings Under Master Repurchase Agreement, Principal Amount | 37,450,000 | 51,050,000 |
UBS Master Repurchase Agreement | NB Factory TIC 1, LLC | ||
Debt Instrument | ||
Principal Amount | 28,000,000 | 28,000,000 |
Collateral, Carrying Value | 28,863,816 | 28,857,892 |
Collateral, Fair Value | 28,918,363 | 28,902,234 |
Borrowings Under Master Repurchase Agreement, Principal Amount | $ 18,970,000 | $ 18,970,000 |
UBS Master Repurchase Agreement | NB Factory TIC 1, LLC | LIBOR | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 1.74% | |
UBS Master Repurchase Agreement | NB Factory TIC 1, LLC | LIBOR | Floor rate | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 0.10% | |
UBS Master Repurchase Agreement | NB Factory TIC 1, LLC | SOFR | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 1.75% | |
UBS Master Repurchase Agreement | Grandview’s Madison Place, LLC | ||
Debt Instrument | ||
Principal Amount | $ 17,000,000 | |
Collateral, Carrying Value | 17,105,928 | |
Collateral, Fair Value | 17,105,928 | |
Borrowings Under Master Repurchase Agreement, Principal Amount | $ 13,600,000 | |
UBS Master Repurchase Agreement | Grandview’s Madison Place, LLC | SOFR | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 1.965% | |
UBS Master Repurchase Agreement | Grandview’s Remington Place, LLC | ||
Debt Instrument | ||
Principal Amount | $ 23,100,000 | $ 23,100,000 |
Collateral, Carrying Value | 23,206,471 | 23,199,620 |
Collateral, Fair Value | 23,235,030 | 23,203,343 |
Borrowings Under Master Repurchase Agreement, Principal Amount | $ 18,480,000 | $ 18,480,000 |
UBS Master Repurchase Agreement | Grandview’s Remington Place, LLC | SOFR | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 1.965% | 1.965% |
Uncommitted Master Repurchase Agreement | ||
Debt Instrument | ||
Principal Amount | $ 141,744,174 | $ 167,549,028 |
Collateral, Carrying Value | 142,526,961 | 168,692,405 |
Collateral, Fair Value | 134,407,600 | 166,891,728 |
Borrowings Under Master Repurchase Agreement, Principal Amount | 75,455,625 | 119,826,606 |
Uncommitted Master Repurchase Agreement | 330 Tryon DE LLC | ||
Debt Instrument | ||
Principal Amount | 22,800,000 | |
Collateral, Carrying Value | 22,902,215 | |
Collateral, Fair Value | 22,687,235 | |
Borrowings Under Master Repurchase Agreement, Principal Amount | $ 18,240,000 | |
Uncommitted Master Repurchase Agreement | 330 Tryon DE LLC | SOFR | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 2.015% | |
Uncommitted Master Repurchase Agreement | 330 Tryon DE LLC | SOFR | Floor rate | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 0.01% | |
Uncommitted Master Repurchase Agreement | 1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP | ||
Debt Instrument | ||
Principal Amount | 58,695,313 | $ 57,184,178 |
Collateral, Carrying Value | 58,695,313 | 57,453,482 |
Collateral, Fair Value | 50,900,000 | 56,844,322 |
Borrowings Under Master Repurchase Agreement, Principal Amount | $ 20,072,636 | $ 41,587,275 |
Uncommitted Master Repurchase Agreement | 1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP | SOFR | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 2.465% | 2.465% |
Uncommitted Master Repurchase Agreement | AGRE DCP Palm Springs, LLC | ||
Debt Instrument | ||
Principal Amount | $ 43,222,382 | $ 43,222,382 |
Collateral, Carrying Value | 43,861,312 | 43,758,804 |
Collateral, Fair Value | 43,549,187 | 43,062,933 |
Borrowings Under Master Repurchase Agreement, Principal Amount | $ 28,094,548 | $ 28,094,548 |
Uncommitted Master Repurchase Agreement | AGRE DCP Palm Springs, LLC | SOFR | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 1.315% | 1.315% |
Uncommitted Master Repurchase Agreement | AGRE DCP Palm Springs, LLC | SOFR | Floor rate | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 1.80% | 1.80% |
Uncommitted Master Repurchase Agreement | Patrick Henry Recovery Acquisition, LLC | ||
Debt Instrument | ||
Principal Amount | $ 18,000,000 | $ 18,000,000 |
Collateral, Carrying Value | 18,044,070 | 18,041,782 |
Collateral, Fair Value | 17,980,843 | 17,824,300 |
Borrowings Under Master Repurchase Agreement, Principal Amount | $ 14,400,000 | $ 14,400,000 |
Uncommitted Master Repurchase Agreement | Patrick Henry Recovery Acquisition, LLC | SOFR | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 0.865% | 0.865% |
Uncommitted Master Repurchase Agreement | Patrick Henry Recovery Acquisition, LLC | SOFR | Floor rate | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 1.50% | 1.50% |
Uncommitted Master Repurchase Agreement | Hillsborough Owners LLC | ||
Debt Instrument | ||
Principal Amount | $ 21,826,479 | |
Collateral, Carrying Value | 21,926,266 | |
Collateral, Fair Value | 21,977,570 | |
Borrowings Under Master Repurchase Agreement, Principal Amount | $ 12,888,441 | |
Uncommitted Master Repurchase Agreement | Hillsborough Owners LLC | SOFR | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 5% | |
Uncommitted Master Repurchase Agreement | Hillsborough Owners LLC | SOFR | Floor rate | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 0.25% | |
Uncommitted Master Repurchase Agreement | University Park Berkeley, LLC | ||
Debt Instrument | ||
Principal Amount | $ 26,342,468 | |
Collateral, Carrying Value | 26,536,122 | |
Collateral, Fair Value | 26,472,938 | |
Borrowings Under Master Repurchase Agreement, Principal Amount | $ 17,504,783 | |
Uncommitted Master Repurchase Agreement | University Park Berkeley, LLC | SOFR | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 1.365% | |
Uncommitted Master Repurchase Agreement | University Park Berkeley, LLC | SOFR | Floor rate | ||
Debt Instrument | ||
Borrowings Under Master Repurchase Agreement, Interest Rate (as percent) | 1.50% |
Debt - Narratives - Term Loan (
Debt - Narratives - Term Loan (Details) - USD ($) | 1 Months Ended | |||
Apr. 09, 2021 | Jun. 30, 2023 | Sep. 30, 2023 | Dec. 31, 2022 | |
Debt Instrument | ||||
Term loan payable, net of deferred financing costs | $ 14,898,434 | $ 25,000,000 | ||
Credit Agreement | ||||
Debt Instrument | ||||
Term loan payable, net of deferred financing costs | $ 25,000,000 | |||
Minimum incremental loans | 1,000,000 | |||
Loans in excess | $ 500,000 | |||
Fixed rate (as percent) | 5.625% | 5.625% | ||
Interest rate, increase (as percent) | 6.625% | |||
Commitment fee percentage | 2.50% | |||
Unused capacity, commitment fee percentage | 0.75% | |||
Loan origination fee | $ 150,000 | |||
Principal amount outstanding | $ 15,000,000 | $ 25,000,000 | ||
Credit Agreement | SOFR | Maximum | ||||
Debt Instrument | ||||
Variable rate (as percent) | 7.375% | |||
Credit Agreement | SOFR | Minimum | ||||
Debt Instrument | ||||
Variable rate (as percent) | 5% |
Debt - Mortgage Loan Payable (D
Debt - Mortgage Loan Payable (Details) | 9 Months Ended | |||
Sep. 30, 2023 USD ($) | May 31, 2023 USD ($) building | Mar. 31, 2023 USD ($) building | Dec. 31, 2022 USD ($) | |
Debt Instrument | ||||
Debt instrument, face | $ 439,627,083 | $ 451,349,737 | ||
Principal Amount | 100,852,253 | 29,252,308 | ||
Carrying Value | 99,434,309 | 29,488,326 | ||
Carrying Value of Collateral | 157,754,942 | 40,581,847 | ||
Centennial Bank | ||||
Debt Instrument | ||||
Principal Amount | 27,603,118 | 29,252,308 | ||
Carrying Value | 27,869,606 | 29,488,326 | ||
Carrying Value of Collateral | $ 27,004,389 | 40,581,847 | ||
Centennial Bank | Term SOFR | ||||
Debt Instrument | ||||
Current Interest Rate | 3.85% | |||
Centennial Bank | Term SOFR | Minimum | ||||
Debt Instrument | ||||
Interest rate (as percent) | 2.23% | |||
Acquisition Financing Loan Agreement | Mortgage Loan Payable | ||||
Debt Instrument | ||||
Debt instrument, face | $ 37,000,000 | |||
Acquisition Financing Loan Agreement | Mortgage Loan Payable | TPG RE Finance 24, LTD | ||||
Debt Instrument | ||||
Number of Properties | building | 3 | |||
Current Interest Rate | 3.50% | |||
Interest rate (as percent) | 3.75% | |||
Principal Amount | $ 32,999,135 | 0 | ||
Carrying Value | 32,285,757 | 0 | ||
Carrying Value of Collateral | $ 48,387,162 | 0 | ||
Acquisition Financing Loan Agreement | Mortgage Loan Payable | GSF Lender, LLC | ||||
Debt Instrument | ||||
Number of Properties | building | 5 | 3 | ||
Interest rate (as percent) | 6.254% | |||
Principal Amount | $ 40,250,000 | $ 40,300,000 | 0 | |
Carrying Value | 39,278,946 | 0 | ||
Carrying Value of Collateral | $ 82,363,391 | $ 0 |
Debt - Note Payable (Details)
Debt - Note Payable (Details) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Debt Instrument | ||||
Proceeds from borrowing under note payable | $ 36,556,125 | $ 0 | ||
Principal balance | $ 526,796,770 | 526,796,770 | $ 645,795,459 | |
Promissory Note | ||||
Debt Instrument | ||||
Proceeds from borrowing under note payable | $ 37,000,000 | |||
Promissory Note | SOFR | ||||
Debt Instrument | ||||
Variable rate (as percent) | 5.60% | |||
Promissory Note | Floor rate | ||||
Debt Instrument | ||||
Variable rate (as percent) | 10.90% | |||
Senior Loans | ||||
Debt Instrument | ||||
Principal balance | $ 59,600,000 | $ 59,600,000 |
Debt - Scheduled Debt Principal
Debt - Scheduled Debt Principal Payments (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Debt Disclosure [Abstract] | ||
2023 (October 1 through December 31) | $ 27,603,118 | |
2024 | 178,274,831 | |
2025 | 37,000,000 | |
2026 | 123,500,000 | |
2027 | 32,999,136 | |
Thereafter | 40,250,000 | |
Long term debt | 439,627,085 | |
Unamortized deferred financing costs | (8,185,466) | $ (8,600,000) |
Total | 431,441,619 | |
Unamortized deferred financing costs | $ 8,185,466 | $ 8,600,000 |
Debt - Narratives - Obligations
Debt - Narratives - Obligations Under Participation Agreements and Secured Borrowing (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Debt Instrument | ||
Participation mortgage loan | $ 14,898,434 | $ 25,000,000 |
Participating Mortgage Loan | ||
Debt Instrument | ||
Participation mortgage loan | 12,680,594 | |
Carrying Value | $ 18,738,386 | |
Participating Mortgage Loan | Weighted Average | ||
Debt Instrument | ||
Weighted-average interest rate (as percent) | 16.40% |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Millions | 9 Months Ended | ||||
Jul. 07, 2023 | Aug. 03, 2020 | Sep. 30, 2023 | Jul. 17, 2023 | Dec. 31, 2022 | |
Other Commitments | |||||
Unfunded commitments | $ 44.4 | $ 47.3 | |||
Ground Lease | |||||
Other Commitments | |||||
Base rent renewal term (in years) | 5 years | ||||
Percent of fair market value of land | 9% | ||||
Ground Lease | Guarantee Obligations | |||||
Other Commitments | |||||
Stated prepayment of loan | $ 11.3 | ||||
Original issuance of loan | 28.5 | ||||
Remaining loan amount | $ 17.2 | ||||
Principal amount outstanding | $ 27.6 | ||||
Mavik RESOF | |||||
Other Commitments | |||||
Committed capital | $ 50 | ||||
Unfunded commitment outstanding | $ 37.4 | 22.4 | |||
Mavik RESOF | |||||
Other Commitments | |||||
Committed capital | $ 50 | ||||
Unfunded commitment outstanding | $ 22.4 |
Equity - Earnings Per Share (De
Equity - Earnings Per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Equity [Abstract] | ||||||||
Net loss | $ (17,477,698) | $ (19,237,065) | $ 547,479 | $ (6,891,942) | $ 1,292,434 | $ (757,887) | $ (36,167,284) | $ (6,357,395) |
Series A preferred stock dividend declared | 0 | (3,906) | (3,907) | (11,718) | ||||
Net loss allocable to common stock | $ (17,477,698) | $ (6,895,848) | $ (36,171,191) | $ (6,369,113) | ||||
Weighted-average shares outstanding — basic (in shares) | 24,335,576 | 19,487,460 | 24,335,460 | 19,487,460 | ||||
Weighted-average shares outstanding — diluted (in shares) | 24,335,576 | 19,487,460 | 24,335,460 | 19,487,460 | ||||
Loss per share — basic (in usd per share) | $ (0.72) | $ (0.35) | $ (1.49) | $ (0.33) | ||||
Loss per share — diluted (in usd per share) | $ (0.72) | $ (0.35) | $ (1.49) | $ (0.33) |
Equity - Preferred Stock Classe
Equity - Preferred Stock Classes (Details) - USD ($) | Nov. 30, 2016 | Sep. 30, 2023 | Mar. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2016 |
Class of Stock | |||||
Preferred stock, authorized (in shares) | 50,000,000 | 50,000,000 | |||
Preferred stock, par value (in usd per share) | $ 0.01 | $ 0.01 | |||
Series A Preferred Stock | |||||
Class of Stock | |||||
Preferred stock, authorized (in shares) | 125 | ||||
Preferred stock, issued (in shares) | 0 | 125 | |||
Preferred stock outstanding (in shares) | 0 | 125 | |||
Preferred stock, dividend rate, percentage | 12.50% | ||||
Preferred stock, liquidation preference (in usd per share) | $ 1,000 | ||||
Preferred stock sold (in shares) | 125 | ||||
Preferred stock value sold | $ 125,000 | ||||
Preferred stock, redemption price (in usd per share) | $ 1,000 | ||||
Preferred stock redemption premium (in usd per share) | $ 50 | ||||
Preferred Stock redeemed | $ 125,000 |
Equity - Common Stock (Details)
Equity - Common Stock (Details) | Sep. 30, 2023 $ / shares shares | Dec. 31, 2022 $ / shares shares | Oct. 01, 2022 $ / shares shares | Sep. 30, 2022 shares | Mar. 02, 2020 shares |
Equity disclosure | |||||
Common stock, shares authorized (in shares) | 950,000,000 | ||||
Common stock, shares, issued (in shares) | 4,574,470.35 | ||||
Common And Preferred | |||||
Equity disclosure | |||||
Common stock, shares authorized (in shares) | 500,000,000 | ||||
Class A Common Stock | |||||
Equity disclosure | |||||
Common stock, shares authorized (in shares) | 450,000,000 | 450,000,000 | 450,000,000 | ||
Common stock, par or stated value per share (in usd per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | ||
Common stock, shares, issued (in shares) | 0 | 0 | |||
Class B Common Stock | |||||
Equity disclosure | |||||
Common stock, shares authorized (in shares) | 450,000,000 | 450,000,000 | 450,000,000 | ||
Common stock, par or stated value per share (in usd per share) | $ / shares | $ 0.01 | $ 0.01 | |||
Common stock, shares, issued (in shares) | 24,335,711 | 24,335,370 | |||
Common stock, shares, outstanding (in shares) | 24,335,711 | 24,335,370 | |||
Conversion ratio | 0.33 | ||||
Preferred Stock | |||||
Equity disclosure | |||||
Common stock, shares authorized (in shares) | 50,000,000 | ||||
Terra BDC | Class B Common Stock | |||||
Equity disclosure | |||||
Common stock, shares, issued (in shares) | 4,847,910 | 1 | |||
Common stock, shares, outstanding (in shares) | 1 | ||||
Terra JV | Class B Common Stock | |||||
Equity disclosure | |||||
Equity method investment, ownership percentage | 70% | ||||
Terra BDC | Class B Common Stock | |||||
Equity disclosure | |||||
Equity method investment, ownership percentage | 19.90% | ||||
Terra Offshore REIT | Class B Common Stock | |||||
Equity disclosure | |||||
Equity method investment, ownership percentage | 10.10% |
Equity - Distributions (Details
Equity - Distributions (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Equity [Abstract] | |||||||
Distribution to investors | $ 4,650,531 | $ 4,650,492 | $ 3,724,053 | $ 3,780,568 | $ 3,893,595 | $ 14,000,000 | $ 11,400,000 |
Investment company, return of capital distribution | 4,700,000 | 0 | 13,500,000 | 5,400,000 | |||
Preferred stock dividend declared | $ 0 | $ 3,906 | $ 3,907 | $ 11,718 |
Equity - Dividend Reinvestment
Equity - Dividend Reinvestment Plan (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2023 | |
Equity [Abstract] | ||||
Shares issued from reinvestment of shareholder distributions (in shares) | 341 | |||
Shares issued from reinvestment of shareholder distributions | $ 2,575 | $ 1,510 | $ 478 |