UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the Quarterly Period Ended ~~March 31,~~September 30, 2022


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

~~For the transition period from to~~

Commission File Number: 000-55780

Terra Secured Income Fund 5, LLC

(Exact name of registrant as specified in its charter)


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

~~550 Fifth Avenue, 6~~205 West 28th Street, 12th Floor

New York, New York ~~10036~~10001

(Address of principal executive offices) (Zip Code)

(212) 753-5100

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Securities Exchange Act of 1934:

None

Securities registered pursuant to section 12(g) of the Securities Exchange Act of 1934:

Units of Limited Liability Company Interests

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

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

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☑

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

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

As of ~~May 12,~~November 10, 2022, the registrant had ~~6,624.3~~6,623.4 units of limited liability company interests outstanding. No market value has been computed based upon the fact that no active trading market had been established as of the date of this document.

TABLE OF CONTENTS


		Page

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Statements of Financial Condition as of ~~March 31,~~September 30, 2022 (unaudited) and December 31, 2021	2

	Statements of Operations for the Three and Nine Months Ended ~~March 31,~~September 30, 2022 and 2021 (unaudited)	3

	Statements of Changes in Members’ Capital for the Three and Nine Months Ended ~~March 31,~~September 30, 2022 and 2021 (unaudited)	4

	Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~March 31,~~September 30 , 2022 and 2021 (unaudited)	56

	Schedules of Investment as of ~~March 31,~~September 30 , 2022 (unaudited) and December 31, 2021	67

	Notes to Financial Statements as of ~~March 31,~~September 30, 2022 (unaudited)	1314

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2225

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3540

Item 4.	Controls and Procedures	3641

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	3741

Item 1A.	Risk Factors	3741

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3741

Item 3.	Defaults upon Senior Securities	3742

Item 4.	Mine Safety Disclosures	3742

Item 5.	Other Information	3742

Item 6.	Exhibits	3742

Signatures		3944

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Terra Secured Income Fund 5, LLC

Statements of Financial Condition


		March 31, 2022		December 31, 2021			September 30, 2022		December 31, 2021
		(unaudited)					(unaudited)
Assets	Assets					Assets
Equity investment in Terra JV, LLC at fair value (cost of $217,482,964 and $219,704,515, respectively)		$	216,121,691	$	217,324,720
Equity investment in Terra JV, LLC at fair value (cost of $215,595,000 and $219,704,515, respectively)						Equity investment in Terra JV, LLC at fair value (cost of $215,595,000 and $219,704,515, respectively)	$	218,582,190	$	217,324,720
Cash and cash equivalents	Cash and cash equivalents	777,694		836,052		Cash and cash equivalents	216,747		836,052
Other assets	Other assets	31,586		33,830		Other assets	11,075		33,830
Total assets	Total assets	$	216,930,971	$	218,194,602	Total assets	$	218,810,012	$	218,194,602

Liabilities and Members’ Capital	Liabilities and Members’ Capital					Liabilities and Members’ Capital
Liabilities	Liabilities					Liabilities
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	185,249	$	118,025	Accounts payable and accrued expenses	$	141,397	$	118,025
Total liabilities	Total liabilities	185,249		118,025		Total liabilities	141,397		118,025
Commitments and contingencies (Note 5)	Commitments and contingencies (Note 5)	0		0		Commitments and contingencies (Note 5)
Members’ capital:	Members’ capital:					Members’ capital:
Managing member	Managing member	—		—		Managing member	—		—
Non-managing members	Non-managing members	216,745,722		218,076,577		Non-managing members	218,668,615		218,076,577
Total members’ capital	Total members’ capital	216,745,722		218,076,577		Total members’ capital	218,668,615		218,076,577
Total liabilities and members’ capital	Total liabilities and members’ capital	$	216,930,971	$	218,194,602	Total liabilities and members’ capital	$	218,810,012	$	218,194,602
Net asset value per unit	Net asset value per unit	$	32,659	$	32,860	Net asset value per unit	$	33,015	$	32,860

See notes to unaudited financial statements.

Terra Secured Income Fund 5, LLC

Statements of Operations

(Unaudited)


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021			2022		2021		2022		2021
Investment income	Investment income					Investment income
Dividend income	Dividend income	$	758,110	$	1,126,895	Dividend income	$	3,054,348	$	—	$	4,569,442	$	1,126,895
Other operating income	Other operating income	11		20		Other operating income	19		10		45		43
Total investment income	Total investment income	758,121		1,126,915		Total investment income	3,054,367		10		4,569,487		1,126,938
Operating expenses	Operating expenses					Operating expenses
Professional fees	Professional fees	127,060		120,135		Professional fees	121,588		119,508		381,787		350,488
Other	Other	1,392		385		Other	1,099		744		4,018		2,484
Total operating expenses	Total operating expenses	128,452		120,520		Total operating expenses	122,687		120,252		385,805		352,972
Net investment income		629,669		1,006,395
Net change in unrealized appreciation on investment		1,018,522		492,466
Net increase in members’ capital resulting from operations		$	1,648,191	$	1,498,861
Net investment income (loss)						Net investment income (loss)	2,931,680		(120,242)		4,183,682		773,966
Net change in unrealized appreciation (depreciation) on investment						Net change in unrealized appreciation (depreciation) on investment	775,976		(1,074,864)		5,366,985		(2,320,213)
Net increase (decrease) in members’ capital resulting from operations						Net increase (decrease) in members’ capital resulting from operations	$	3,707,656	$	(1,195,106)	$	9,550,667	$	(1,546,247)
Per unit data:	Per unit data:					Per unit data:
Net investment income per unit		$	95	$	152
Net increase in members’ capital resulting from operations per unit		$	248	$	226
Net investment income (loss) per unit						Net investment income (loss) per unit	$	443	$	(18)	$	631	$	119
Net increase (decrease) in members’ capital resulting from operations per unit						Net increase (decrease) in members’ capital resulting from operations per unit	$	560	$	(180)	$	1,441	$	(229)
Weighted average units outstanding	Weighted average units outstanding	6,636.6		6,637.8		Weighted average units outstanding	6,624.3		6,637.3		6,629.4		6,636.0

See notes to unaudited financial statements.

Terra Secured Income Fund 5, LLC

Statements of Changes in Members’ Capital

(Unaudited)


		Managing Member		Non-Managing Members		Total			Managing Member		Non-Managing Members		Total
Balance, January 1, 2022	Balance, January 1, 2022	$	—	$	218,076,577	$	218,076,577	Balance, January 1, 2022	$	—	$	218,076,577	218,076,577
Capital distributions	Capital distributions	—		(2,979,046)		(2,979,046)		Capital distributions	—		(2,979,044)		(2,979,044)
Increase in members’ capital resulting from operations:	Increase in members’ capital resulting from operations:							Increase in members’ capital resulting from operations:
Net investment income	Net investment income	—		629,669		629,669		Net investment income	—		629,669		629,669
Net change in unrealized appreciation on investment	Net change in unrealized appreciation on investment	—		1,018,522		1,018,522		Net change in unrealized appreciation on investment	—		1,018,522		1,018,522
Net increase in members’ capital resulting from operations	Net increase in members’ capital resulting from operations	—		1,648,191		1,648,191		Net increase in members’ capital resulting from operations	—		1,648,191		1,648,191
Balance, March 31, 2022		$	—	$	216,745,722	$	216,745,722
Balance at March 31, 2022								Balance at March 31, 2022	—		216,745,724		216,745,724
Capital distributions								Capital distributions	—		(2,813,249)		(2,813,249)
Capital redemptions								Capital redemptions	—		(400,728)		(400,728)
Increase in members’ capital resulting from operations:								Increase in members’ capital resulting from operations:
Net investment income								Net investment income	—		622,333		622,333
Net change in unrealized appreciation on investment								Net change in unrealized appreciation on investment	—		3,572,487		3,572,487
Net increase in members’ capital resulting from operations								Net increase in members’ capital resulting from operations	—		4,194,820		4,194,820
Balance at June 30, 2022								Balance at June 30, 2022	—		217,726,567		217,726,567
Capital distributions								Capital distributions	—		(2,732,380)		(2,732,380)
Capital redemptions								Capital redemptions	—		(33,228)		(33,228)
Increase in members’ capital resulting from operations:								Increase in members’ capital resulting from operations:					—
Net investment income								Net investment income	—		2,931,680		2,931,680
Net change in unrealized appreciation on investment								Net change in unrealized appreciation on investment	—		775,976		775,976
Net increase in members’ capital resulting from operations								Net increase in members’ capital resulting from operations	—		3,707,656		3,707,656
Balance, September 30, 2022								Balance, September 30, 2022	$	—	$	218,668,615	$	218,668,615

Managing
Member Non-Managing Members Total
Balance, January 1, 2021 $ — $ 235,417,419 $ 235,417,419
Capital distributions — (2,979,582) (2,979,582)
Increase in members’ capital resulting from operations:
Net investment income — 1,006,395 1,006,395
Net change in unrealized appreciation on investment — 492,466 492,466
Net increase in members’ capital resulting from operations — 1,498,861 1,498,861
Balance, March 31, 2021 $ — $ 233,936,698 $ 233,936,698

See notes to unaudited financial statements.

Terra Secured Income Fund 5, LLC

Statements of ~~Cash Flows~~Changes in Members’ Capital (Continued)

(Unaudited)

Three Months Ended March 31,
2022 2021
Cash flows from operating activities:
Net increase in members’ capital resulting from operations $ 1,648,191 $ 1,498,861
Adjustments to reconcile net increase in members’ capital resulting
from operations to net cash provided by operating activities:
Return of capital on investment 2,221,551 1,852,767
Net change in unrealized appreciation on investment (1,018,522) (492,466)
\
Changes in operating assets and liabilities:
Decrease in other assets 2,244 7,500
Increase in accounts payable and accrued expenses 67,224 23,360
Net cash provided by operating activities 2,920,688 2,890,022
Cash flows from financing activities:
Distributions paid (2,979,046) (2,979,582)
Net cash used in financing activities (2,979,046) (2,979,582)
Net decrease in cash and cash equivalents (58,358) (89,560)
Cash and cash equivalents at beginning of period 836,052 225,214
Cash and cash equivalents at end of period $ 777,694 $ 135,654


	Managing Member		Non-Managing Members		Total
Balance, January 1, 2021	$	—	$	235,417,419	$	235,417,419
Capital distributions	—		(2,979,582)		(2,979,582)
Increase in members’ capital resulting from operations:
Net investment income	—		1,006,395		1,006,395
Net change in unrealized appreciation on investment	—		492,466		492,466
Net increase in members’ capital resulting from operations	—		1,498,861		1,498,861
Balance at March 31, 2021	—		233,936,698		233,936,698
Capital distributions	—		(2,979,254)		(2,979,254)
Capital redemptions	—		(39,227)		(39,227)
Decrease in members’ capital resulting from operations:
Net investment loss	—		(112,187)		(112,187)
Net change in unrealized depreciation on investment	—		(1,737,815)		(1,737,815)
Net decrease in members’ capital resulting from operations	—		(1,850,002)		(1,850,002)
Balance at June 30, 2021	—		229,068,215		229,068,215
Capital distributions	—		(2,979,046)		(2,979,046)
Decrease in members’ capital resulting from operations:
Net investment loss	—		(120,242)		(120,242)
Net change in unrealized depreciation on investment	—		(1,074,864)		(1,074,864)
Net decrease in members’ capital resulting from operations	—		(1,195,106)		(1,195,106)
Balance, September 30, 2021	$	—	$	224,894,063	$	224,894,063

See notes to unaudited financial statements.

Terra Secured Income Fund 5, LLC

Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net increase (decrease) in members’ capital resulting from operations	$	9,550,667	$	(1,546,247)
Adjustments to reconcile net increase (decrease) in members’ capital resulting from operations to net cash provided by operating activities:
Return of capital on investment	4,109,515		8,222,090
Net change in unrealized (appreciation) depreciation on investment	(5,366,985)		2,320,213

Changes in operating assets and liabilities:
Decrease in other assets	22,755		22,500
Increase (decrease) in accounts payable and accrued expenses	23,372		(43,910)
Net cash provided by operating activities	8,339,324		8,974,646

Cash flows from financing activities:
Distributions paid	(8,524,673)		(8,937,882)
Payment for capital redemptions	(433,956)		(39,227)
Net cash used in financing activities	(8,958,629)		(8,977,109)

Net decrease in cash and cash equivalents	(619,305)		(2,463)
Cash and cash equivalents at beginning of period	836,052		225,214
Cash and cash equivalents at end of period	$	216,747	$	222,751

See notes to unaudited financial statements.

Terra Secured Income Fund 5, LLC

Schedule of Investment

~~March 31,~~September 30, 2022 (Unaudited) and December 31, 2021

On January 1, 2016, the Company, the then parent of Terra Property Trust, Inc. (“Terra Property Trust”), contributed its consolidated portfolio of net assets to Terra Property Trust pursuant to a contribution agreement in exchange for shares of Terra Property Trust’s common stock, par value $0.01 per share. Upon receipt of the contribution of the consolidated portfolio of net assets from the Company, Terra Property Trust commenced its operations on January 1, 2016. As discussed in Note 4, on March 2, 2020, Terra Property Trust engaged in a series of transactions pursuant to which Terra Property Trust 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 that Terra Property Trust owned, cash of $25.5 million and other working capital. As of both ~~March 31,~~September 30, 2022 and December 31, 2021, Terra JV, LLC (“Terra JV”) held 87.4% of the issued and outstanding shares of Terra Property Trust’s common stock with the remainder held by Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”), and the Company and Terra Secured Income Fund 7, LLC (“Terra Fund 7”) owned an 87.6% and 12.4% percentage interest, respectively, in Terra JV. Accordingly, as of both ~~March 31,~~September 30, 2022 and December 31, 2021, the Company indirectly beneficially owned 76.5% of the outstanding shares of common stock of Terra Property Trust through Terra JV.

The following table presents a summary of the Company’s investment as of ~~March 31,~~September 30, 2022 and December 31, 2021:


			Percentage Interest			March 31, 2022							December 31, 2021										Percentage Interest			September 30, 2022							December 31, 2021
Investment	Investment	Date Acquired		Cost			Fair Value		% of Members’ Capital		Cost			Fair Value		% of Members’ Capital		Investment		Date Acquired				Cost			Fair Value		% of Members’ Capital		Cost			Fair Value		% of Members’ Capital
Terra JV, LLC	Terra JV, LLC	3/2/2020		87.6	%		$	217,482,964	$	216,121,691	99.7	%		$	219,704,515	$	217,324,720		99.7	%	Terra JV, LLC	3/2/2020		87.6	%		$	215,595,000	$	218,582,190	100.0	%		$	219,704,515	$	217,324,720	99.7	%

As of both ~~March 31,~~September 30, 2022 and December 31, 2021, the Company indirectly beneficially owned 76.5% of the outstanding shares of common stock of Terra Property Trust. Additionally, as of both ~~March 31,~~September 30, 2022 and December 31, 2021, Terra JV was jointly-controlled by the Company and Terra Fund 7.

The following table presents a schedule of loans held for investment by Terra Property Trust at 100% and the Company’s pro-rata share of the fair value at ~~March 31,~~September 30, 2022:

Portfolio Company Collateral Location Property
Type Coupon
Rate Current Interest Rate Exit Fee Acquisition Date Maturity
Date Principal Amount Amortized
Cost
Fair
Value (1)
Pro Rata
Fair Value (2)
% (3)
Loans held for investment:
Mezzanine loans:
150 Blackstone River Road, LLC US - MA Industrial 8.5 % 8.5 % — % 9/21/2017 9/6/2027 $ 7,000,000 $ 7,000,000 $ 6,862,858 $ 5,250,086 2.4 %
High Pointe Mezzanine Investments, LLC US - SC Student housing 13.0 % 13.0 % 1.0 % 12/27/2013 1/6/2024 3,000,000 3,137,435 3,030,000 2,317,950 1.1 %
UNJ Sole Member, LLC (4)
US - CA Mixed-use 15.0 % 15.0 % 1.0 % 11/24/2021 6/1/2017 7,444,357 7,478,454 7,478,454 5,721,017 2.6 %
17,444,357 17,615,889 17,371,312 13,289,053 6.1 %
Preferred equity investments:
370 Lex Part Deux, LLC (5)(6)
US - NY Office LIBOR + 8.25% (2.44% Floor) 10.7 % — % 12/17/2018 1/9/2023 60,583,057 60,583,057 58,835,209 45,008,935 20.8 %
REEC Harlem Holdings Company, LLC (7)
US - NY Mixed-use LIBOR + 12.5% (no Floor) 13.0 % — % 3/9/2018 3/9/2023 15,925,032 15,925,032 2,998,624 2,293,947 1.1 %
RS JZ Driggs, LLC (5)(6)(8)
US - NY Multifamily 12.3 % 12.3 % 1.0 % 5/1/2018 1/1/2021 16,933,491 17,099,374 17,098,238 13,080,152 6.0 %
93,441,580 93,607,463 78,932,071 60,383,034 27.9 %

~~See notes to unaudited financial statements~~.

~~Terra Secured Income Fund 5, LLC~~

~~Schedule of Investment (Continued)~~

~~March 31, 2022 (Unaudited) and December 31, 2021~~

~~Terra Property Trust’s Schedule of Loans Held for Investment as of March 31, 2022 (Continued):~~

Portfolio Company Collateral Location Property
Type Coupon
Rate Current Interest Rate Exit Fee Acquisition Date Maturity
Date Principal Amount Amortized
Cost
Fair
Value (1)
Pro Rata
Fair Value (2)
% (3)
Loans held for investment:
First mortgages:
14th & Alice Street Owner, LLC (9)
US - CA Multifamily LIBOR + 4.0% (0.25% Floor) 4.5 % 2.0 % 10/15/2021 4/15/2023 $ 39,468,000 $ 40,197,784 $ 40,222,586 $ 30,770,278 14.2 %
1389 Peachtree St, LP; 1401 Peachtree St, LP;
   1409 Peachtree St, LP (10)
US - GA Office LIBOR + 4.5% (no Floor) 5.0 % 0.5 % 2/22/2019 8/10/2023 53,970,491 54,221,854 53,083,178 40,608,631 18.7 %
330 Tryon DE LLC (10)
US - NC Office LIBOR + 4.25% (0.10% Floor) 4.7 % 0.5 % 2/7/2019 3/1/2024 22,800,000 22,903,651 22,638,331 17,318,323 8.0 %
606 Fayetteville LLC and 401 E. Lakewood LLC (11)
US - NC Land 9.0 % 9.0 % 1.0 % 8/16/2021 8/1/2023 17,536,492 17,663,959 17,690,666 13,533,359 6.2 %
870 Santa Cruz, LLC (11)
US - CA Office LIBOR + 6.75% (0.5% Floor) 7.3 % 1.0 % 12/15/2020 12/15/2023 19,760,033 19,934,619 19,993,943 15,295,366 7.1 %
AARSHW Property LLC (11)
US - NJ Industrial SOFR +7.5% (0.15% Floor) 7.7 % 0.9 % 3/7/2022 3/7/2024 18,771,608 18,541,648 18,911,932 14,467,628 6.7 %
AAESUF Property LLC (11)
US - NJ Industrial SOFR +11.95% (0.05% Floor) 12.1 % 5%-10% 3/15/2022 3/1/2024 16,800,000 16,849,956 17,456,207 13,353,998 6.2 %
AGRE DCP Palm Springs, LLC (10)
US - CA Hotel - full/
   select service LIBOR + 5.0% (1.80% Floor) 6.8 % 1.5 % 12/12/2019 1/1/2024 43,222,381 43,696,133 43,738,712 33,460,115 15.4 %
Austin H. I. Borrower LLC (11)
US- TX Hotel - full/
   select service LIBOR + 7.5% (0.25% Floor) 8.0 % 1.0 % 9/21/2021 10/1/2024 13,695,947 13,824,587 13,832,906 10,582,173 4.9 %
D-G Acquisition #6, LLC and D-G
   Quimisa, LLC (11)
US - CA Land LIBOR + 7.0% (0.25% Floor) 7.5 % 0.5 % 7/21/2021 7/21/2023 8,846,216 8,854,524 8,886,221 6,797,959 3.1 %
Grandview’s Madison Place, LLC (9)
US - WA Multifamily SOFR + 4.45% (0.05% Floor) 4.6 % 0.8 % 2/10/2022 2/10/2025 17,000,000 17,111,299 17,111,299 13,090,144 6.0 %
Hillsborough Owners LLC (12)
US - NC Mixed-use LIBOR + 8.0% (0.25% Floor) 8.5 % 1.0 % 10/27/2021 11/1/2023 5,444,696 5,458,850 5,468,477 4,183,385 1.9 %
NB Factory TIC 1, LLC (9)
US - UT Student housing LIBOR + 5.0% (0.25% Floor) 5.5 % 3.3 % 8/16/2021 3/5/2023 28,000,000 28,529,857 28,861,172 22,078,797 10.3 %
Patrick Henry Recovery Acquisition, LLC (10)
US - CA Office LIBOR + 2.95% (1.5% Floor) 4.5 % 0.3 % 11/25/2019 12/1/2023 18,000,000 18,041,590 18,049,540 13,807,898 6.4 %
The Lux Washington, LLC (11)
US - WA Land LIBOR + 7.0% (0.75% floor) 7.8 % 1.0 % 7/22/2021 1/22/2024 7,424,855 7,376,668 7,489,172 5,729,217 2.6 %
University Park Berkeley, LLC (10)
US - CA Multifamily LIBOR + 4.2% (1.50% Floor) 5.7 % 0.8 % 2/27/2020 3/1/2023 25,815,378 25,995,342 26,008,381 19,896,411 9.2 %
Windy Hill PV Five CM, LLC (13)
US - CA Office LIBOR + 6.0% (2.05% Floor) 8.1 % 0.5 % 9/20/2019 9/20/2022 54,078,939 54,416,729 54,375,474 41,597,238 19.2 %
410,635,036 413,619,050 413,818,197 316,570,920 146.1 %
Credit facility:
Post Brothers Holdings LLC (5)(6)
US - PA N/A 15.0 % 15.0 % 4.6%-8.9% 03/29/2022 3/29/2025 21,000,000 21,670,442 21,670,443 16,577,889 7.6 %
William A. Shopoff & Cindy L. Shopoff (5)(6)
US - CA Industrial 15.0 % 15.0 % 1.0 % 10/4/2021 4/4/2023 25,000,000 25,214,933 25,214,934 19,289,425 8.9 %
46,000,000 46,885,375 46,885,377 35,867,314 16.5 %
Total gross loans held for investment 567,520,973 571,727,777 557,006,957 426,110,321 196.6 %
Obligations under participation agreements and secured borrowing (5)(6)(13)
(95,283,106) (96,090,690) (95,483,175) (73,044,629) (33.7) %
Allowance for loan losses — (13,708,777) — — — %
Net loans held for investment $ 472,237,867 $ 461,928,310 $ 461,523,782 $ 353,065,692 162.9 %


Portfolio Company	Collateral Location	Property Type	Coupon Rate		Current Interest Rate		Exit Fee		Acquisition Date	Maturity Date	Principal Amount		Amortized Cost		Fair Value (1)		Pro Rata Fair Value (2)		% (3)
Loans held for investment:
Mezzanine loans:
150 Blackstone River Road, LLC	US - MA	Industrial	8.5	%	8.5	%	—	%	9/21/2017	9/6/2027	$	7,000,000	$	7,000,000	$	6,499,917	$	4,972,437	2.3	%
610 Walnut Investors LLC	US - CA	Office	Term SOFR + 12.0% (2.0 Floor)		15.0	%	1.0	%	8/30/2022	9/7/2024	17,875,000		17,965,565		18,007,012		13,775,364		6.3	%
UNJ Sole Member, LLC (4)	US - CA	Mixed-use	15.0	%	15.0	%	1.0	%	11/24/2021	6/1/2027	7,444,357		7,480,670		7,480,670		5,722,713		2.6	%
											32,319,357		32,446,235		31,987,599		24,470,514		11.2	%
Preferred equity investments:
370 Lex Part Deux, LLC (5)(6)(7)	US - NY	Office	LIBOR + 8.25% (2.44% Floor)		11.4	%	—	%	12/17/2018	1/9/2023	60,583,057		60,583,057		50,500,000		38,632,500		17.6	%
REEC Harlem Holdings Company, LLC (8)	US - NY	Mixed-use	LIBOR + 12.5% (no Floor)		15.6	%	—	%	3/9/2018	3/9/2023	15,964,483		15,964,483		3,058,988		2,340,126		1.1	%
RS JZ Driggs, LLC (5)(6)(9)	US - NY	Multifamily	12.3	%	12.3	%	1.0	%	5/1/2018	1/1/2021	4,773,805		4,773,805		4,773,805		3,651,961		1.7	%
											81,321,345		81,321,345		58,332,793		44,624,587		20.4	%

See notes to unaudited financial statements.

Terra Secured Income Fund 5, LLC

Schedule of Investment (Continued)

~~March 31,~~September 30, 2022 (Unaudited) and December 31, 2021

Terra Property Trust’s Schedule of Loans Held for Investment as of ~~March 31,~~September 30, 2022 (Continued):

Operating real estate:
Description Acquisition Date
Fair Value of Real Estate (1)
Encumbrance Net Investment
Pro Rata Net Investment (2)
% (3)(16)

Multi-tenant office building in Santa Monica, CA (14)
7/30/2018 $ 65,043,111 $ 31,757,725 $ 33,285,386 $ 25,463,320 11.7 %
Land in Conshohocken, PA (15)
1/9/2019 8,395,011 — 8,395,011 6,422,183 3.0 %
$ 73,438,122 $ 31,757,725 $ 41,680,397 $ 31,885,503 14.7 %
Portfolio Company Dividend Yield Acquisition Date Maturity Date Shares Cost Fair Value
Pro Rata
Fair Value (2)
% (3)
Marketable securities (17):
Common and preferred shares:
Nexpoint Real Estate Finance, Inc. - Cumulative
Series A Preferred Shares 8.5 % 7/30/2020 7/24/2025 20,204 $ 475,201 $ 510,151 $ 390,266 0.2 %
Total marketable securities $ 475,201 $ 510,151 $ 390,266 0.2 %
Equity investments:
Portfolio Company Ownership Interest Cost Fair Value
Pro Rata
Fair Value (2)
% (3)
Mavik Real Estate Special Opportunities Fund, LP - limited partnership interest (18)
44% $ 40,245,914 $ 44,531,683 $ 34,066,737 15.7 %
LEL Arlington JV LLC - limited liability member units (19)
80% 23,962,388 23,962,388 18,331,227 8.5 %
LEL NW 49th LV LLC - limited liability member units (19)
80% 4,838,353 4,838,353 3,701,340 1.7 %
TCG Corinthian FL Portfolio JV LLC (19)
90% 22,615,435 22,615,435 17,300,808 8.0 %
$ 91,662,090 $ 95,947,859 $ 73,400,112 33.9 %


Portfolio Company	Collateral Location	Property Type	Coupon Rate		Current Interest Rate		Exit Fee		Acquisition Date	Maturity Date	Principal Amount		Amortized Cost		Fair Value (1)		Pro Rata Fair Value (2)		% (3)
Loans held for investment:
First mortgages:
14th & Alice Street Owner, LLC (10)	US - CA	Multifamily	LIBOR + 4.0% (0.25% Floor)		7.1	%	2.0	%	10/15/2021	4/15/2023	$	39,935,197	$	40,695,573	$	40,700,960	$	31,136,234	14.3	%
1389 Peachtree St, LP; 1401 Peachtree St, LP; 1409 Peachtree St, LP (11)	US - GA	Office	LIBOR + 4.5% (no Floor)		7.6	%	0.5	%	2/22/2019	8/10/2023	55,565,351		55,824,187		54,449,071		41,653,539		19.1	%
330 Tryon DE LLC (11)	US - NC	Office	Term SOFR+ 4.25% (0.10% Floor)		7.3	%	0.5	%	2/7/2019	3/1/2024	22,800,000		22,901,913		22,330,779		17,083,046		7.8	%
AARSHW Property LLC (12)(13)	US - NJ	Industrial	SOFR +7.5% (0.15% Floor)		10.0	%	0.9	%	3/7/2022	8/17/2024	31,349,686		31,393,974		31,583,527		24,161,398		11.0	%
AAESUF Property LLC (12)	US - NJ	Land	SOFR +11.95% (0.05% Floor)		14.4	%	5%-10%		3/15/2022	3/1/2024	17,079,150		17,354,911		17,759,977		13,586,382		6.2	%
AGRE DCP Palm Springs, LLC (11)	US - CA	Hotel - full/ select service	LIBOR +5.0% (1.8% Floor)		8.1	%	1.5	%	12/12/2019	1/1/2024	43,222,382		43,738,349		42,388,236		32,427,001		14.8	%
Grandview’s Madison Place, LLC (10)	US - WA	Multifamily	Term SOFR + 4.45% (0.05% Floor)		7.5	%	0.8	%	2/10/2022	2/10/2025	17,000,000		17,106,851		17,106,851		13,086,741		6.0	%
Grandview’s Remington Place, LLC (10)	US - WA	Multifamily	Term SOFR + 4.45% (0.05% Floor)		7.5	%	0.5	%	4/22/2022	4/22/2024	21,600,000		21,675,808		21,695,798		16,597,285		7.6	%
Hillsborough Owners LLC (14)	US - NC	Mixed-use	LIBOR + 8.0% (0.25% Floor)		11.1	%	1.0	%	10/27/2021	11/1/2023	6,088,283		6,113,748		6,114,982		4,677,961		2.1	%
Mesa AZ Industrial Owner, LLC (4)	US - AZ	Land	Term SOFR + 12.7% (2.3% Floor)		15.7	%	1.0	%	9/15/2022	9/14/2023	31,000,000		31,264,547		31,264,547		23,917,378		10.9	%
NB Factory TIC 1, LLC (10)	US - UT	Student housing	LIBOR + 5.0% (0.25% Floor)		8.1	%	3.3	%	8/16/2021	3/5/2023	28,000,000		28,742,362		28,767,188		22,006,899		10.1	%
Patrick Henry Recovery Acquisition, LLC (11)	US - CA	Office	LIBOR + 2.95% (1.5% Floor)		6.1	%	0.3	%	11/25/2019	12/1/2023	18,000,000		18,041,664		17,634,957		13,490,742		6.2	%
The Lux Washington, LLC (12)	US - WA	Multifamily	LIBOR + 7.0% (0.75% floor)		10.1	%	1.0	%	7/22/2021	1/22/2024	12,917,559		12,995,916		13,085,811		10,010,645		4.6	%
University Park Berkeley, LLC (11)	US - CA	Multifamily	LIBOR + 4.2% (1.50% Floor)		7.3	%	0.8	%	2/27/2020	3/1/2023	26,066,304		26,255,496		25,997,440		19,888,042		9.1	%
											370,623,912		374,105,299		370,880,124		283,723,293		129.8	%
Credit facility:
William A. Shopoff & Cindy L. Shopoff (5)(6)	US - CA	Industrial	15.0	%	15.0	%	1.0	%	10/4/2021	4/4/2023	25,000,000		25,228,903		25,228,904		19,300,112		8.8	%
											25,000,000		25,228,903		25,228,904		19,300,112		8.8	%
Total gross loans held for investment											509,264,614		513,101,782		486,429,420		372,118,506		170.2	%
Obligations under participation agreements (5)(6)											(36,831,634)		(36,952,837)		(33,423,769)		(25,569,183)		(11.7)	%
Allowance for loan losses											—		(22,922,539)		—		—		—	%
Net loans held for investment											$	472,432,980	$	453,226,406	$	453,005,651	$	346,549,323	158.5	%

See notes to unaudited financial statements.

Terra Secured Income Fund 5, LLC

Schedule of Investment (Continued)

September 30, 2022 (Unaudited) and December 31, 2021

Terra Property Trust’s Schedule of Loans Held for Investment as of September 30, 2022 (Continued):


Operating real estate:
Description	Acquisition Date	Fair Value of Real Estate (1)		Encumbrance		Net Investment		Pro Rata Net Investment (2)		% (3)(16)
Multi-tenant office building in Santa Monica, CA (15)	7/30/2018	$	65,043,111	$	31,338,350	$	33,704,761	$	25,784,142	11.8		%

Equity investments:
Portfolio Company						Ownership Interest		Cost		Fair Value			Pro Rata Fair Value (2)		% (3)
Mavik Real Estate Special Opportunities Fund, LP - limited partnership interest (17)						31%		$	39,937,201	$	39,314,456		$	30,075,559	13.8	%
LEL Arlington JV LLC - limited liability member units (18)						27%		7,930,844		7,930,844			6,067,096		2.8	%
LEL NW 49th LV LLC - limited liability member units (18)						27%		1,737,626		1,737,626			1,329,284		0.6	%
TCG Corinthian FL Portfolio JV LLC (18)						31%		7,465,926		7,465,926			5,711,433		2.6	%
								$	57,071,597	$	56,448,852		$	43,183,372	19.8	%

__________________________

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

(2)Amount represents the Company’s portion, or 76.5%, of the fair value or net investment value.

(3)Percentage is based on the Company’s pro rata share of the fair value or net investment value over the Company’s total members’ capital of ~~$216.7~~$218.7 million at ~~March 31,~~September 30, 2022.

(4)Terra Property Trust purchased a portion of the interest in this loan from Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party real estate investment trust managed by Terra REIT Advisors, via a participation agreement.

(5)The loan participations from Terra Property Trust do not qualify for sale accounting and therefore, the gross amount of these loans remain in Terra Property Trust’s consolidated balance sheets.

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

(7)This loan is currently in default because certain conditions in the Limited Liability Company Agreement were not met. For both the three and nine months ended September 30, 2022, Terra Property Trust suspended interest income accrual of $1.5 million on this loan, because recovery of such income was doubtful.

(8)For the three and nine months ended ~~March 31,~~September 30, 2022, Terra Property Trust suspended interest income accrual of $0.6 million and $1.8 million on this loan, respectively, because recovery of such income was doubtful. Additionally, the fair value of the loan declined as a result of a decline in the fair value of the collateral.

~~(8)~~(9)This loan is in maturity default. Terra Property Trust ~~has exercised its rights and is facilitating the completion of construction~~initiated a litigation to seek full repayment of the ~~asset in anticipation of lease up and disposition of~~loan from the ~~asset.~~sponsor. For the three and nine months ended ~~March 31,~~September 30, 2022, Terra Property Trust suspended interest income accrual of ~~$0.5~~$0.6 million and $1.7 million on this loan, respectively, because recovery of such income was doubtful.

~~(9)These loans were used as collateral for $58.2 million of borrowings under a repurchase agreement.~~

(10)These loans were used as collateral for ~~$118.3~~$75.4 million of borrowings under a repurchase agreement.

(11)These loans were used as collateral for ~~$65.0~~$119.8 million of borrowings under a repurchase agreement.

(12)These loans were used as collateral for $24.1 million of borrowings under a revolving line of credit.

~~(12)~~(13)Amount included $4.0 million of incremental borrowing that bears interest at an annual rate of 20.0% until certain conditions are met, at which time the interest rate will be the same as the original loan.

(14)Terra Property Trust purchased a portion of the interest in this loan from Terra Income Fund 6, Inc. via a participation agreement.

~~(13)~~In March 2020, Terra Property Trust entered into a financing transaction where a third-party purchased an A-note position. Because the transaction does not qualify for sale accounting, the gross amount of the loan remains in the consolidated balance sheets. The liability is reflected as secured borrowing in Terra Property Trust’s consolidated balance sheets.

~~(14)~~(15)Terra Property Trust acquired this property through foreclosure of a $54.0 million first mortgage.

~~(15)~~Terra Property Trust acquired the collateral for this loan pursuant to a deed in lieu of foreclosure. The land is currently vacant and the fair value reflects its estimated selling price. In March 2022, Terra Property Trust entered into a sales agreement to sell the land. As of March 31, 2022, the land was classified as assets held-for-sale on Terra Property Trust’s consolidated balance sheets.

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

(17)~~From time to time, Terra Property Trust may invest in short-term debt and equity securities. These securities are comprised of shares of common and preferred stock and bonds.~~

~~(18)~~On August 3, 2020, Terra Property Trust entered into a subscription agreement with Mavik Real Estate Special Opportunities Fund, LP (“RESOF”) whereby Terra Property Trust 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. As of ~~March 31,~~September 30, 2022, the unfunded commitment was ~~$16.4~~$19.3 million.

~~(19)~~(18)In the fourth quarter of 2021 and the first quarter of 2022, Terra Property Trust purchased equity interests in three joint ventures that invest in real estate properties. In September 2022, Terra Property Trust 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.

See notes to unaudited financial statements.

910

Terra Secured Income Fund 5, LLC

Schedule of Investment (Continued)

~~March 31,~~September 30, 2022 (Unaudited) and December 31, 2021

The following table presents a schedule of loans held for investment held by Terra Property Trust as of December 31, 2021:


Portfolio Company	Collateral Location	Property Type	Coupon Rate		Current Interest Rate		Exit Fee		Acquisition Date	Maturity Date	Principal Amount		Amortized Cost		Fair Value (1)		Pro Rata Fair Value (2)		% (3)
Loans held for investment:
Mezzanine loans:
150 Blackstone River Road, LLC	US - MA	Industrial	8.5	%	8.5	%	—	%	9/21/2017	9/6/2027	$	7,000,000	$	7,000,000	$	6,982,101	$	5,341,307	2.4	%
High Pointe Mezzanine Investments, LLC	US - SC	Student housing	13.0	%	13.0	%	1.0	%	12/27/2013	1/6/2024	3,000,000		3,145,614		3,059,611		2,340,602		1.1	%
UNJ Sole Member, LLC (4)	US - CA	Mixed-use	15.0	%	15.0	%	1.0	%	11/24/2021	6/1/2017	7,444,357		7,477,190		7,477,190		5,720,050		2.6	%
											17,444,357		17,622,804		17,518,902		13,401,959		6.1	%
Preferred equity investments:
370 Lex Part Deux, LLC (5)(6)	US - NY	Office	LIBOR + 8.25% (2.44% Floor)		10.7	%	—	%	12/17/2018	1/9/2023	60,012,639		60,012,639		57,858,019		44,261,385		20.3	%
REEC Harlem Holdings Company, LLC (7)	US - NY	Mixed-use	LIBOR + 12.5% (no Floor)		12.6	%	—	%	3/9/2018	3/9/2023	16,633,292		16,633,292		3,708,310		2,836,857		1.3	%
RS JZ Driggs, LLC (5)(6)(8)	US - NY	Multifamily	12.3	%	12.3	%	1.0	%	5/1/2018	1/1/2021	15,606,409		15,754,641		15,748,942		12,047,941		5.5	%
											92,252,340		92,400,572		77,315,271		59,146,183		27.1	%
First mortgages:
14th & Alice Street Owner, LLC (9)	US - CA	Multifamily	LIBOR + 4.0% (0.25% Floor)		4.3	%	2.0	%	10/15/2021	4/15/2023	39,384,000		40,089,153		40,130,448		30,699,793		14.1	%
1389 Peachtree St, LP; 1401 Peachtree St, LP; 1409 Peachtree St, LP (10)	US - GA	Office	LIBOR + 4.5% (no Floor)		4.6	%	0.5	%	2/22/2019	8/10/2023	53,289,288		53,536,884		52,031,363		39,803,993		18.3	%
330 Tryon DE LLC (10)	US - NC	Office	LIBOR + 4.25% (0.10% Floor)		4.4	%	0.5	%	2/7/2019	3/1/2024	22,800,000		22,902,354		22,594,654		17,284,910		7.9	%
606 Fayetteville LLC and 401 E. Lakewood LLC (11)	US - NC	Land	9.0	%	9.0	%	1.0	%	8/16/2021	8/1/2023	16,829,962		16,935,803		16,974,601		12,985,570		6.0	%
870 Santa Cruz, LLC (11)	US - CA	Office	LIBOR + 6.75% (0.5% Floor)		7.3	%	1.0	%	12/15/2020	12/15/2023	17,540,875		17,669,303		17,781,285		13,602,683		6.2	%
AGRE DCP Palm Springs, LLC (10)(12)	US - CA	Hotel - full/ select service	LIBOR + 5.0% (1.80% Floor)		6.8	%	1.5	%	12/12/2019	1/1/2024	43,222,381		43,669,992		43,829,842		33,529,829		15.5	%
Austin H. I. Borrower LLC (11)(13)	US- TX	Hotel - full/ select service	LIBOR + 7.5% (0.25% Floor)		7.8	%	1.0	%	9/21/2021	10/1/2024	13,625,000		13,725,690		13,735,569		10,507,710		4.8	%
D-G Acquisition #6, LLC and D-G Quimisa, LLC (11)	US - CA	Land	LIBOR + 7.0% (0.25% Floor)		7.3	%	0.5	%	7/21/2021	7/21/2023	8,607,092		8,605,341		8,645,413		6,613,741		3.0	%
Hillsborough Owners LLC (14)	US - NC	Mixed-use	LIBOR + 8.0% (0.25% Floor)		8.3	%	1.0	%	10/27/2021	11/1/2023	4,863,009		4,866,542		4,883,878		3,736,167		1.7	%
NB Factory TIC 1, LLC (9)	US - UT	Student housing	LIBOR + 5.0% (0.25% Floor)		5.3	%	3.3	%	8/16/2021	3/5/2023	28,000,000		28,420,056		28,851,547		22,071,433		10.1	%
Patrick Henry Recovery Acquisition, LLC (10)	US - CA	Office	LIBOR + 2.95% (1.5% Floor)		4.5	%	0.3	%	11/25/2019	12/1/2023	18,000,000		18,041,124		18,055,377		13,812,363		6.3	%
The Lux Washington, LLC (11)	US - WA	Land	LIBOR + 7.0% (0.75% floor)		7.8	%	1.0	%	7/22/2021	1/22/2024	3,523,401		3,382,683		3,553,330		2,718,297		1.2	%
University Park Berkeley, LLC (10)(15)	US - CA	Multifamily	LIBOR + 4.2% (1.50% Floor)		5.7	%	0.8	%	2/27/2020	3/1/2023	25,815,378		25,991,962		26,015,500		19,901,858		9.1	%
Windy Hill PV Five CM, LLC (16)	US - CA	Office	LIBOR + 6.0% (2.05% Floor)		8.1	%	0.5	%	9/20/2019	9/20/2022	49,954,068		50,264,568		50,077,674		38,309,421		17.6	%
											345,454,454		348,101,455		347,160,481		265,577,768		121.8	%

See notes to unaudited financial statements.

1011

Terra Secured Income Fund 5, LLC

Schedule of Investment (Continued)

~~March 31,~~September 30, 2022 (Unaudited) and December 31, 2021

Terra Property Trust’s Schedule of Loans Held for Investment as of December 31, 2021 (Continued):


Portfolio Company	Collateral Location	Property Type	Coupon Rate		Current Interest Rate		Exit Fee		Acquisition Date	Maturity Date	Principal Amount		Amortized Cost		Fair Value (1)		Pro Rata Fair Value (2)		% (3)
Loans held for investment:
Credit facility:
William A. Shopoff & Cindy L. Shopoff (5)(6)	US - CA	Industrial	15.0	%	15.0	%	1.0	%	10/4/2021	4/4/2023	$	25,000,000	$	25,206,964	$	25,206,965	$	19,283,328	8.8	%
											25,000,000		25,206,964		25,206,965		19,283,328		8.8	%
Total gross loans held for investment											480,151,151		483,331,795		467,201,619		357,409,238		163.8	%
Obligations under participation agreements and secured borrowing (5)(6)(16)											(76,569,398)		(76,818,156)		(75,900,089)		(58,063,568)		(26.6)	%
Allowance for loan losses											—		(13,658,481)		—		—		—	%
Net loans held for investment											$	403,581,753	$	392,855,158	$	391,301,530	$	299,345,670	137.2	%


Operating real estate:
Description	Acquisition Date		Fair Value of Real Estate (1)		Encumbrance		Net Investment		Pro Rata Net Investment (2)		% (3)(19)
Multi-tenant office building in Santa Monica, CA (17)	7/30/2018		$	65,043,111	$	31,962,692	$	33,080,419	$	25,306,521	11.6		%
Land in Conshohocken, PA (18)	1/9/2019		10,000,000		—		10,000,000		7,650,000		3.5		%
			$	75,043,111	$	31,962,692	$	43,080,419	$	32,956,521	15.1		%

Portfolio Company	Dividend Yield		Acquisition Date		Maturity Date		Shares		Cost		Fair Value			Pro Rata Fair Value (2)		% (3)
Marketable securities (20):
Common and preferred shares:
Nexpoint Real Estate Finance, Inc. - Cumulative Series A Preferred Shares	8.5	%	7/30/2020		7/24/2025		50,000		$	1,176,006	$	1,310,000		$	1,002,150	0.5	%
Total marketable securities									$	1,176,006	$	1,310,000		$	1,002,150	0.5	%

Equity investments:
Portfolio Company							Ownership Interest		Cost		Fair Value			Pro Rata Fair Value (2)		% (3)
Mavik Real Estate Special Opportunities Fund, LP - limited partnership interest (21)							50%		$	40,458,282	$	39,643,024		$	30,326,913	13.9	%
LEL Arlington JV LLC - limited liability member units (22)							80%		23,949,044		23,949,044			18,321,019		8.4	%
LEL NW 49th LV LLC - limited liability member units (22)							80%		5,306,467		5,306,467			4,059,447		1.9	%
									$	69,713,793	$	68,898,535		$	52,707,379	24.2	%

__________________________

1112

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

(2)Amount represents the Company’s portion, or 76.5%, of the fair value or net investment value.

(3)Percentage is based on the Company’s pro rata share of the fair value or net investment value over the Company’s total members’ capital of $218.1 million at December 31, 2021.

(5)The loan participations from Terra Property Trust do not qualify for sale accounting and therefore, the gross amount of these loans remain in Terra Property Trust’s consolidated balance sheets.

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

(7)For the year ended December 31, 2021, Terra Property Trust suspended interest income accrual of $2.3 million on this loan, because recovery of such income was doubtful. Additionally, the fair value of the loan declined as a result of a decline in the fair value of the collateral.

(8)This loan is in maturity default. Terra Property Trust has exercised its rights and is facilitating the completion of construction of the asset in anticipation of lease up and disposition of the asset. For the year ended December 31, 2021, Terra Property Trust suspended interest income accrual of $0.9 million on this loan because recovery of such income was doubtful.

(9)These loans were used as collateral for $44.6 million of borrowings under a repurchase agreement.

(10)These loans were used as collateral for $93.8 million of borrowings under a term loan payable.

(11)These loans were used as collateral for $38.6 million of borrowings under a revolving line of credit.

(12)In March 2021, Terra Property Trust amended the loan agreement to change the spread on the interest rate to 5.0%, increased the exit fee to 1.5% and extended the maturity to January 1, 2024. Additionally, under the loan amendment, the borrower made a partial repayment of $2.6 million.

(13)In September 2021, Terra Property Trust refinanced a previously-defaulted mezzanine loan with a new first mortgage. This refinancing was accounted for as a troubled debt restructuring and Terra Property Trust recognized a loss of $0.3 million on the restructuring.

(14)Terra Property Trust purchased a portion of the interest in this loan from Terra Income Fund 6, Inc. via a participation agreement.

(15)In December 2020, Terra Property Trust entered into a forbearance agreement with the borrower pursuant to which interest accrues on the loan during the 90-day forbearance period from November 2020 to January 2021. In March 2021, the forbearance period was extended through August 2021.

(16)In March 2020, Terra Property Trust entered into a financing transaction where a third-party purchased an A-note position. Because the transaction does not qualify for sale accounting, the gross amount of the loan remains in the consolidated balance sheets. The liability is reflected as secured borrowing in Terra Property Trust’s consolidated balance sheets.

(17)Terra Property Trust acquired this property through foreclosure of a $54.0 million first mortgage.

(18)Terra Property Trust acquired the collateral for this loan pursuant to a deed in lieu of foreclosure. The land is currently vacant and the fair value reflects its estimated selling price.

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

(20)From time to time, Terra Property Trust may invest in short-term debt and equity securities. These securities are comprised of shares of common and preferred stock and bonds.

(21)On August 3, 2020, Terra Property Trust entered into a subscription agreement with RESOF whereby Terra Property Trust 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. As of December 31, 2021, the unfunded commitment was $15.1 million.

(22)In the fourth quarter of 2021, Terra Property Trust purchased equity interests in two joint ventures that invest in real estate properties.

See notes to unaudited financial statements.

1213

Terra Secured Income Fund 5, LLC

Notes to Financial Statements (Unaudited)

~~March 31,~~September 30, 2022

Note 1. Business

Terra Secured Income Fund 5, LLC (the “Company”), is a real estate credit focused company that originates, structures, funds and manages high yielding commercial real estate investments, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments throughout the United States. The Company’s loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. The Company focuses on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties in primary and secondary markets. The Company was formed as a Delaware limited liability company on April 24, 2013 and commenced operations on August 8, 2013. The Company makes substantially all of its investments and conducts substantially all of its real estate lending business through Terra Property Trust, which has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2016. The Company’s investment objectives are to (i) preserve its members’ capital contributions, (ii) realize income from its investments and (iii) make monthly distributions to its members from cash generated from investments. There can be no assurances that the Company will be successful in meeting its investment objectives.

In December 2015, the members approved the merger of Terra Secured Income Fund, LLC (“Terra Fund 1”), Terra Secured Income Fund 2, LLC (“Terra Fund 2”), Terra Secured Income Fund 3, LLC (“Terra Fund 3”) and Terra Secured Income Fund 4, LLC (“Terra Fund 4”) with and into subsidiaries of the Company (individually, each a “Terra Fund” and collectively, the “Terra Funds”) through a series of separate mergers effective January 1, 2016 (collectively, the “Merger”). Following the Merger, the Company contributed the consolidated portfolio of net assets of the 5five Terra Funds to Terra Property Trust, a newly-formed and wholly-owned subsidiary of the Company that elected to be taxed as a REIT, in exchange for the shares of common stock of Terra Property Trust. Upon completion of the Merger, the Company became the parent company of Terra Funds 1 through 4 and the direct and indirect sole common stockholder of, and began conducting substantially all of its real estate lending business through, Terra Property Trust.

On March 2, 2020, Terra Fund 1, Terra Fund 2 and Terra Fund 3 merged with and into Terra Fund 4, with Terra Fund 4 continuing as the surviving company (the “Terra Fund Merger”), and the Company consolidated its holdings of shares of common stock of Terra Property Trust in Terra Fund 4. Subsequent to the Terra Fund Merger, the legal name of Terra Fund 4 was changed to Terra JV. On March 2, 2020, Terra Property Trust engaged in a series of transactions pursuant to which Terra Property Trust 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 that Terra Property Trust owned, cash of $25.5 million and other working capital. As of ~~March 31,~~September 30, 2022, Terra JV held 87.4% of the issued and outstanding shares of Terra Property Trust’s common stock with the remainder held by Terra Offshore REIT, and the Company and Terra Fund 7 owned an 87.6% and 12.4% percentage interest, respectively, in Terra JV (Note 4). The Company does not consolidate Terra JV because the Company and Terra Fund 7 share joint approval rights with respect to certain major decisions that are taken by Terra JV and Terra Property Trust (Note 4).

The Company’s investment activities are externally managed by Terra Fund Advisors, LLC (“Terra Fund Advisors” or the “Manager”). The Company does not currently have any employees and does not expect to have any employees. Services necessary for the Company’s business are provided by individuals who are employees of the Manager or its affiliates or by individuals who were contracted by the Company or by the Manager or its affiliates to work on behalf of the Company pursuant to the terms of the operating agreement, as amended.

The Company’s amended and restated operating agreement provides that the Company’s existence will continue until December 31, 2023, unless sooner terminated. However, the Company expects that prior to such date it will consummate a liquidity transaction, which could occur as early as this year and may include an orderly liquidation of its assets or an alternative liquidity event such as a strategic business combination, a sale of the Company or an initial public offering and listing of Terra Property Trust’s shares of common stock on a national securities exchange. The Manager would pursue an alternative liquidity event only if it believes such a transaction would be in the best interests of the Company’s members.

On April 1, 2021, Mavik Capital Management, LP (“Mavik”), an entity controlled by Vikram S. Uppal, the Chief Executive Officer of the Company, completed a series of related transactions that resulted in all of the outstanding interests in Terra Capital Partners, LLC, being acquired by Mavik for a combination of cash and interests in Mavik.

1314

Notes to Unaudited Financial Statements

~~As described in greater detail in~~ ~~Note~~ 8~~, on~~On October 1, 2022, pursuant to certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Terra BDC Merger Agreement”), Terra ~~Property Trust, Terra~~Income Fund 6, Inc. (“Terra BDC”) merged with and into Terra Income Fund 6, LLC (formerly Terra Merger Sub, ~~LLC,~~LLC) (“Terra LLC”), a wholly owned subsidiary of Terra Property Trust, ~~(“Merger Sub”),~~with Terra ~~Income Advisors,~~ LLC ~~and Terra REIT Advisors, LLC, entered into an Agreement and Plan~~continuing as the surviving entity of ~~Merger~~the merger (the ~~“Merger Agreement”~~“Terra BDC Merger”) ~~pursuant to which, subject to the terms~~ and ~~conditions therein, Terra Income Fund 6 will be merged with and into Merger Sub, with Merger Sub surviving~~ as a wholly owned subsidiary of Terra Property Trust ~~(such surviving company, the “Surviving Company” and such transaction, the “Merger”~~(Note 8). The Merger is expected to close during the third quarter of 2022, subject to the required approvals by Terra Income Fund 6’s stockholders and other customary closing conditions. There can be no assurances that the Merger will close.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The interim financial statements have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP”) and include all of the Company’s accounts. The accompanying interim financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. The Company is an investment company, as defined under U.S. GAAP, and applies accounting and reporting guidance in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services — Investment Companies.

Use of Estimates

The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those ~~estimates.~~estimates, and those differences could be material.

The coronavirus (“COVID-19”) pandemic has had a significant impact on local, national and global economies and has resulted in a world-wide economic slowdown. ~~However, after two years into~~As the COVID-19 pandemic evolved from its emergence in early 2020, so has its global impact. During the ~~real estate market~~course of the pandemic, many countries have re-instituted, or strongly encouraged, varying levels of quarantines and restrictions on travel and in some cases have at times limited operations of certain businesses and taken other restrictive measures designed to help slow the spread of COVID-19 and its variants. Governments and businesses have also instituted vaccine mandates and testing requirements for employees. While vaccine availability and uptake has ~~started~~increased, the longer-term macro-economic effects on global supply chains, inflation, labor shortages and wage increases continue to ~~recover from~~impact many industries, including the ~~dislocation it experienced. A strong pace~~collateral underlying certain of ~~vaccination along~~the Company’ loans. Moreover, with the potential for new strains of COVID-19 or outbreaks of other infectious diseases, governments and businesses may re-impose aggressive ~~fiscal stimulus, has improved~~measures to help slow the ~~outlook for~~spread of infectious diseases in the ~~real estate market. The Company continues to closely monitor the impact of~~future. For this reason, among others, as the COVID-19 pandemic ~~on all aspects of its investments~~continues, the potential global impacts are uncertain and ~~operations.~~difficult to assess. The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of ~~March 31, 2022;~~September 30, 2022, however uncertainty over the ~~extent to which~~ultimate impact of COVID-19, rising inflation and increases in interest rates on the ~~COVID-19 pandemic may impact~~global economy generally, and the Company’s investments and operations going forward will depend on future developments, which are highly uncertain and cannot be predicted with confidence. These developments include the duration of the outbreak, the impact of the global vaccination effort, any new strains of the virus that are resistant to available vaccines, the impact of government stimulus, new information that may emerge concerning the severity of the COVID-19 pandemic, and actions taken by federal, state and local agencies as well as the general public to contain the COVID-19 pandemic or treat its impact, among others. Accordingly,business in particular, makes any estimates and assumptions as of ~~March 31,~~September 30, 2022 ~~are~~ inherently less certain than they would be absent the current and potential impacts of ~~the~~ COVID-19, ~~pandemic.~~macroeconomic changes, and geopolitical events.

Equity Investment in Terra JV

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

Revenue Recognition

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

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

1415

Notes to Unaudited Financial Statements

Cash and Cash Equivalents

The Company considers all highly liquid investments, with original maturities of ninety days or less when purchased, as cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains all of its cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation.

Income Taxes

No provision for U.S. federal and state income taxes has been made in the accompanying financial statements, as individual members are responsible for their proportionate share of the Company’s taxable income. The Company, however, may be liable for New York City Unincorporated Business Tax (the “NYC UBT”) and similar taxes of various other municipalities. New York City imposes the NYC UBT at a statutory rate of 4% on net income generated from ordinary business activities carried on in New York City. For the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, none of the Company’s income was subject to the NYC UBT.

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

The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes, nor did the Company have any unrecognized tax benefits as of the periods presented herein. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its statements of operations. For the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its primary tax jurisdiction is federal. The Company’s ~~2018-2020~~2019-2021 federal tax years remain subject to examination by the Internal Revenue Service.

Recent Accounting Pronouncement

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 has subsequently been ~~delay~~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”). ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. In the event LIBOR is unavailable, Terra Property Trust’s investment documents provide for a substitute index, on a basis generally consistent with market practice, intended to put the Terra Property Trust in substantially the same economic position as LIBOR. As a result, the Company does not expect the reference rate reform and the adoption of ASU 2020-04 and ASU 2021-01 to have a material impact on its financial statements and disclosures

Note 3. Investment and Fair Value

Equity Investment in Terra JV

The Company invested substantially all of its equity capital in the purchase of shares of common stock of Terra Property Trust. As of both ~~March 31,~~September 30, 2022 and December 31, 2021, Terra JV held 87.4% of the issued and outstanding shares of Terra Property Trust’s common stock with the remainder held by Terra Offshore REIT, and the Company and Terra Fund 7 owned an 87.6% and 12.4% percentage interest, respectively, in Terra JV, and Terra JV became the Company’s only investment (Note 4).

1516

Notes to Unaudited Financial Statements

The following tables present a summary of the Company’s investment at ~~March 31,~~September 30, 2022 and December 31, 2021:


		March 31, 2022						December 31, 2021							September 30, 2022						December 31, 2021
Investment	Investment	Cost		Fair Value		% of Members’ Capital		Cost		Fair Value		% of Members’ Capital		Investment	Cost		Fair Value		% of Members’ Capital		Cost		Fair Value		% of Members’ Capital
87.6% interest in Terra JV, LLC	87.6% interest in Terra JV, LLC	$	217,482,964	$	216,121,691	99.7	%	$	219,704,515	$	217,324,720	99.7	%	87.6% interest in Terra JV, LLC	$	215,595,000	$	218,582,190	100.0	%	$	219,704,515	$	217,324,720	99.7	%

For the three months ended ~~March 31,~~September 30, 2022 and 2021, the Company received ~~approximately $3.0~~$2.8 million and $3.0 million of distributions from Terra JV, of which ~~$2.2~~none and $3.0 million were returns of capital, respectively. For the nine months ended September 30, 2022 and 2021, the Company received $8.7 million and ~~$1.9~~$9.3 million of distributions from Terra JV, of which $4.1 million and $8.2 million were returns of capital, respectively.

As of both ~~March 31,~~September 30, 2022 and December 31, 2021, the Company indirectly beneficially owned 76.5% (Note 4) of the outstanding shares of common stock of Terra Property Trust. The following tables present the summarized financial information of Terra Property Trust:


		March 31, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Carrying value of loans held for investment	Carrying value of loans held for investment	$	558,019,000	$	469,673,314	Carrying value of loans held for investment	$	490,179,243	$	469,673,314
Equity investment in unconsolidated investments	Equity investment in unconsolidated investments	91,662,090		69,713,793		Equity investment in unconsolidated investments	57,071,597		69,713,793
Real estate owned, net	Real estate owned, net	62,448,945		65,776,839		Real estate owned, net	50,608,552		65,776,839
Cash, cash equivalent and restricted cash	Cash, cash equivalent and restricted cash	25,568,820		51,098,647		Cash, cash equivalent and restricted cash	32,175,515		51,098,647
Other assets	Other assets	34,897,190		37,279,565		Other assets	42,535,866		37,279,565
Total assets	Total assets	772,596,045		693,542,158		Total assets	672,570,773		693,542,158
Term loan payable, unsecured notes payable, obligations under participation agreements, repurchase agreement payable, mortgage loan payable, revolving line of credit and secured borrowing	Term loan payable, unsecured notes payable, obligations under participation agreements, repurchase agreement payable, mortgage loan payable, revolving line of credit and secured borrowing	(448,176,646)		(364,910,392)		Term loan payable, unsecured notes payable, obligations under participation agreements, repurchase agreement payable, mortgage loan payable, revolving line of credit and secured borrowing	(367,805,898)		(364,910,392)
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	(45,804,851)		(45,078,478)		Accounts payable, accrued expenses and other liabilities	(39,828,972)		(45,078,478)
Lease intangible liabilities	Lease intangible liabilities	(9,426,358)		(9,709,710)		Lease intangible liabilities	(8,859,654)		(9,709,710)
Total liabilities	Total liabilities	(503,407,855)		(419,698,580)		Total liabilities	(416,494,524)		(419,698,580)
Stockholder’s equity	Stockholder’s equity	$	269,188,190	$	273,843,578	Stockholder’s equity	$	256,076,249	$	273,843,578


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021			2022		2021		2022		2021
Revenues	Revenues	$	12,112,270	$	10,289,252	Revenues	$	13,663,166	$	12,646,118	$	40,463,549	$	34,191,667
Expenses	Expenses	(14,241,581)		(10,136,375)		Expenses	(22,838,781)		(14,445,811)		(51,785,717)		(37,592,967)
Realized gains on marketable securities		51,133		—
Unrealized losses on marketable securities		(99,044)		(14,608)
Equity income from unconsolidated investments	Equity income from unconsolidated investments	1,419,335		1,337,827		Equity income from unconsolidated investments	1,483,846		1,824,825		4,267,513		4,563,491
Other gains and losses						Other gains and losses	799,827		(752,890)		697,260		(518,624)
Net (loss) income	Net (loss) income	$	(757,887)	$	1,476,096	Net (loss) income	$	(6,891,942)	$	(727,758)	$	(6,357,395)	$	643,567

Fair Value Measurements

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

1617

Notes to Unaudited Financial Statements

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

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

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

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

Assets and Liabilities Reported at Fair Value

The following table summarizes the Company’s equity investment at fair value on a recurring basis as of ~~March 31,~~September 30, 2022 and December 31, 2021:


		March 31, 2022									September 30, 2022
		Fair Value Measurements									Fair Value Measurements
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Investment:	Investment:									Investment:
Equity investment in Terra JV	Equity investment in Terra JV	$	—	$	—	$	216,121,691	$	216,121,691	Equity investment in Terra JV	$	—	$	—	$	218,582,190	$	218,582,190


	December 31, 2021
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Investment:
Equity investment in Terra JV	$	—	$	—	$	217,324,720	$	217,324,720

Changes in Level 3 investment for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021 were as follows:


		Equity Investment in Terra JV					Equity Investment in Terra JV
		Three Months Ended March 31,					Nine Months Ended September 30,
		2022		2021			2022		2021
Beginning balance	Beginning balance	$	217,324,720	$	235,357,977	Beginning balance	$	217,324,720	$	235,357,977
Return of capital	Return of capital	(2,221,551)		(1,852,767)		Return of capital	(4,109,515)		(8,222,090)
Net change in unrealized appreciation on investment		1,018,522		492,466
Net change in unrealized appreciation (depreciation) on investment						Net change in unrealized appreciation (depreciation) on investment	5,366,985		(2,320,213)
Ending balance	Ending balance	$	216,121,691	$	233,997,676	Ending balance	$	218,582,190	$	224,815,674
Net change in unrealized appreciation on investment for the period relating to those Level 3 assets that were still held by the Company		$	1,018,522	$	492,466
Net change in unrealized appreciation (depreciation) on investment for the period relating to those Level 3 assets that were still held by the Company						Net change in unrealized appreciation (depreciation) on investment for the period relating to those Level 3 assets that were still held by the Company	$	5,366,985	$	(2,320,213)

Transfers between levels, if any, are recognized at the beginning of the period in which transfers occur. For the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, there were no transfers.

The Company estimated that its other financial assets and liabilities had fair values that approximated their carrying values at ~~March 31,~~September 30, 2022 and December 31, 2021 due to their short-term nature.

1718

Notes to Unaudited Financial Statements

Valuation Process for Fair Value Measurement

Market quotations are not readily available for the Company’s investment in Terra Property Trust or Terra JV, which is included in Level 3 of the fair value hierarchy. The fair value of the Company’s sole investment takes into consideration the fair value of Terra Property Trust’s assets and liabilities which are valued utilizing a yield approach, i.e. a discounted cash flow methodology. In following this methodology, loans are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of Terra Property Trust’s loans, 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, its net operating income, 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); and the forces that influence the local markets in which the asset (the collateral) is purchased and sold, such as capitalization rates, occupancy rates, rental rates, replacement costs and the anticipated duration of each real estate-related loan. Valuation of Terra Property Trust’s investment in a 4.9 acre development parcel iswas based on the estimated selling price. The development parcel was sold in the second quarter of 2022. The fair value of Terra Property Trust’s investment in an office building is determined using the direct capitalization method.

The Manager designates a valuation committee to oversee the entire valuation process of Terra Property Trust’s Level 3 investments. The valuation committee is comprised of members of the Manager’s senior management, deal and portfolio management teams, who meet on a quarterly basis, or more frequently as needed, to review Terra Property Trust investments being valued as well as the inputs used in the proprietary valuation model. Valuations determined by the valuation committee are supported by pertinent data and, in addition to a proprietary valuation model, are based on market data, third-party valuation data and discount rates or other methods the valuation committee deems to be appropriate.

The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 investments as of ~~March 31,~~September 30, 2022 and December 31, 2021. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.

Fair Value

Primary Valuation Technique

Unobservable Inputs

March 31, 2022

Fair Value

Primary Valuation Technique

Unobservable Inputs

September 30, 2022

Asset Category

Minimum

Maximum

Weighted Average

Asset Category

Minimum

Maximum

Weighted Average

Assets:

Equity investment in Terra JV

216,121,691

Discounted cash flow (1)(2)

Discount rate (1)(2)

1.90

15.00

14.74

Equity investment in Terra JV

218,582,190

Discounted cash flow (1)(2)

Discount rate (1)(2)

3.91

18.69

17.53


	Fair Value		Primary Valuation Technique	Unobservable Inputs	December 31, 2021
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Equity investment in Terra JV	$	217,324,720	Discounted cash flow (1)(2)	Discount rate (1)(2)	2.45	%	15.00	%	12.66	%

_______________

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

(2)The fair value of Terra Property Trust’s investment in an office building is determined using the direct capitalization method with cap rate ranges from 5.25% to 6.00% as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. Additionally, the fair value of Terra Property Trust’s investment in a 4.9 acre development parcel isas of December 31, 2021 was based on the estimated selling price. The developmental parcel was sold in the second quarter of 2022.

Risks and Uncertainties

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

The COVID-19 pandemic has resulted in extreme volatility in a variety of global markets, including the real estate-related debt markets. U.S. financial markets, in particular, are experiencing limited liquidity and forced selling by certain market

1819

Notes to Unaudited Financial Statements

participants with insufficient liquidity available to meet current obligations, which puts further downward pressure on asset prices.

As the Company’s investment is carried at fair value with fair value changes recognized in the statements of operations, any changes in fair value would directly affect the Company’s members’ capital.

Note 4. Related Party Transactions

Operating Agreement

The Company has an operating agreement, as amended, with Terra Fund Advisors. The operating agreement, as amended, is scheduled to terminate on December 31, 2023 unless the Company is dissolved earlier. Starting January 1, 2016, the Company conducts all of its real estate lending business through Terra Property Trust. As such, Terra Property Trust is responsible for management compensation paid and operating expenses reimbursed to its manager pursuant to a management agreement with the manager.

Dividend Income

As discussed in Note 3, for the three months ended ~~March 31,~~September 30, 2022 and 2021, the Company received ~~approximately $3.0~~$2.8 million and $3.0 million of distributions from Terra JV, of which ~~$2.2~~none and $3.0 million were returns of capital, respectively. For the nine months ended September 30, 2022 and 2021, the Company received $8.7 million and ~~$1.9~~$9.3 million of distributions from Terra JV, of which $4.1 million and $8.2 million were returns of capital, respectively.

Note 5. Commitments and Contingencies

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

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

Note 6. Members’ Capital

As of ~~both March 31,~~September 30, 2022 and December 31, 2021, the Company had 6,623.4 and 6,636.6 units ~~outstanding.~~outstanding, respectively. The net asset value per unit was ~~$32,659~~$33,015 and $32,860 as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

Capital Distributions

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

For the three months ended ~~March 31,~~September 30, 2022 and 2021, the Company made total distributions to non-managing members of ~~$3.0~~$2.7 million and $3.0 million, respectively. For the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, the Company made total distributions to non-managing members of $8.5 million and $8.9 million, respectively. For the three and nine months ended September 30, 2022 and 2021, the Company did not accrue or make any carried interest distributions to the Manager.

Notes to Unaudited Financial Statements

Capital Redemptions

At the discretion of the Manager, a reserve of 5% of cash from operations may be established in order to repurchase units from non-managing members. The Manager is under no obligation to redeem non-managing members’ units. As of ~~March 31,~~

~~Notes to Unaudited Financial Statements~~

September 30, 2022 and 2021, 0no such reserve was established. For the three and nine months ended ~~March 31,~~September 30, 2022, the Company redeemed 1.0 units and 13.2 units for $0.03 million and $0.4 million. For the nine months ended September 30, 2021, the Company ~~did not redeem any units.~~redeemed 1.1 units for $39,227. There was no redemption for the three months ended September 30, 2021.

Allocation of Income (Loss)

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

Note 7. Financial Highlights

The financial highlights represent the per unit operating performance, return and ratios for the non-managing members’ class, taken as a whole, for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021. These financial highlights consist of the operating performance, the internal rate of return (“IRR”) since inception of the Company, and the expense and net investment income ratios which are annualized except for the non-recurring expenses.

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

The following summarizes the Company’s financial highlights for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021:


		Three Months Ended March 31,							Nine Months Ended September 30,
		2022			2021				2022			2021
Per unit operating performance:	Per unit operating performance:							Per unit operating performance:
Net asset value per unit, beginning of period	Net asset value per unit, beginning of period	$	32,860		$	35,467		Net asset value per unit, beginning of period	$	32,860		$	35,467
Increase in members’ capital from operations (1):	Increase in members’ capital from operations (1):							Increase in members’ capital from operations (1):
Net investment income	Net investment income	95			152			Net investment income	631			119
Net change in unrealized appreciation on investment		153			74
Total increase in members’ capital from operations		248			226
Net change in unrealized appreciation (depreciation) on investment								Net change in unrealized appreciation (depreciation) on investment	810			(348)
Total increase (decrease) in members’ capital from operations								Total increase (decrease) in members’ capital from operations	1,441			(229)
Distributions to members (2):	Distributions to members (2):							Distributions to members (2):
Capital distributions	Capital distributions	(449)			(449)			Capital distributions	(1,286)			(1,346)
Net decrease in members’ capital resulting from distributions	Net decrease in members’ capital resulting from distributions	(449)			(449)			Net decrease in members’ capital resulting from distributions	(1,286)			(1,346)
Capital share transactions:								Capital share transactions:
Capital redemption and other								Capital redemption and other	—			(5)
Net decrease in members’ capital resulting from capital share transactions								Net decrease in members’ capital resulting from capital share transactions	��			(5)
Net asset value per unit, end of period	Net asset value per unit, end of period	$	32,659		$	35,244		Net asset value per unit, end of period	$	33,015		$	33,887

Ratios to average net assets:	Ratios to average net assets:							Ratios to average net assets:
Expenses	Expenses	0.23		%	0.21		%	Expenses	0.24		%	0.20		%
Net investment income	Net investment income	1.13		%	1.72		%	Net investment income	2.56		%	0.45		%

IRR, beginning of period	IRR, beginning of period	4.91		%	5.82		%	IRR, beginning of period	4.91		%	5.82		%
IRR, end of period	IRR, end of period	4.86		%	5.73		%	IRR, end of period	5.03		%	5.24		%

_______________

(1)The per unit data was derived by using the weighted average units outstanding during the applicable periods, which were ~~6,636.6~~6,629.4 and ~~6,637.8~~6,636.0 for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021.

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

Notes to Unaudited Financial Statements

Note 8. Subsequent Events

Management has evaluated subsequent events through the date the financial statements were available to be issued. Management has determined that there are no material events other than the ~~one described~~ones below that would require adjustment to, or disclosure in, the Company’s financial statements.

Terra BDC Merger

On ~~May 2,~~October 1, 2022 (the “Closing Date”), pursuant to the Terra ~~Property Trust, Terra Fund 6, Merger Sub, Terra Income Advisors, LLC and Terra REIT Advisors, LLC, entered into the~~BDC Merger Agreement, ~~pursuant to which, subject to the terms and conditions therein,~~ Terra ~~Fund 6 will be~~BDC merged with and into ~~Merger Sub,~~Terra LLC, with ~~Merger Sub~~Terra LLC surviving as a wholly owned subsidiary of Terra Property Trust. The Certificate of Merger and Articles of Merger with respect to the Terra 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”).

~~Notes to Unaudited Financial Statements~~

~~Pursuant to~~At the ~~terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”),~~Effective Time, except for any shares of common stock, par value $0.001 per share, of Terra ~~Fund 6~~BDC (“Terra BDC Common Stock”) held by Terra Property Trust or any ~~of its~~ wholly owned subsidiary of Terra Property Trust or Terra ~~Fund 6,~~BDC, which ~~will be~~shares were automatically retired and ~~cease~~ceased to exist with no consideration paid therefor, each issued and outstanding share of Terra BDC Common Stock ~~will be~~was automatically cancelled and retired and converted into the right to receive (i) 0.595 shares ~~(as such number may be adjusted in accordance with the Merger Agreement, the “Exchange Ratio”)~~ of the newly designated Class B Common Stock, par value $0.01 per share, of Terra Property Trust (“TPT Class B Common Stock”), and (ii) cash, without interest, in lieu of any fractional shares of TPT 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 TPT Class B Common Stock to which such holder would otherwise be entitled by (y) $14.38.

~~Prior~~Pursuant to the terms of the transactions described in the Terra BDC Merger Agreement, approximately 4,847,910 shares of TPT Class B Common Stock were issued to former Terra BDC stockholders in connection with the Terra BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of the Closing Date. Following the consummation of the Terra BDC Merger, former Terra BDC stockholders owned approximately 19.9% of the common equity of Terra Property Trust and the Company indirectly beneficially owned approximately 61.3% of the common equity of Terra Property Trust.

Assumption of Notes

As previously reported by Terra BDC, on February 3, 2021, Terra BDC and Terra Income Advisors, LLC entered into an Underwriting Agreement with Ladenburg Thalmann & Co. Inc., on behalf of the underwriters named in Schedule I thereto (the “Underwriters”), in connection with the offer and sale by Terra BDC to the Underwriters of $34,750,000 aggregate principal amount of Terra BDC’s 7.00% Notes due 2026 (the “TIF6 Notes”), which closed on February 10, 2021. On February 25, 2021, the Underwriters partially exercised their over-allotment option to purchase an additional $3,635,000 aggregate principal amount of the TIF6 Notes, which closed on February 26, 2021.

Pursuant to the Terra BDC Merger Agreement, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the TIF6 Notes 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 U.S. Bank National Association (the “TIF6 Trustee”), as supplemented by the First Supplemental Indenture, dated February 10, 2021, by and between Terra BDC and the TIF6 Trustee (the “First Supplemental Indenture”), to be performed or observed by Terra BDC, including, without limitation, the execution and delivery to the TIF6 Trustee of a supplement to the TIF6 Indenture in form satisfactory to the TIF6 Trustee.

On the Closing Date, Terra BDC, Terra LLC and the TIF6 Trustee entered into a Second Supplemental Indenture (the “Second Supplemental Indenture”) pursuant to which Terra LLC assumed the payment of the TIF6 Notes 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 TIF6 Notes will mature on March 31, 2026, unless earlier repurchased or redeemed. The TIF6 Notes 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 TIF6 Notes 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

Notes to Unaudited Financial Statements

may redeem the TIF6 Notes 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 Investment Company Act of 1940, as amended, 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 TIF6 Notes to become or to be declared due and payable.

Amendment to Credit Facility

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 $25,000,000 and (ii) additional incremental loans in a minimum amount of $1,000,000 and multiples of $500,000 in excess thereof, which may be approved by a Lender in its sole discretion.

On September 27, 2022, Terra BDC, Terra LLC, Eagle Point and the Lenders entered into a Consent Letter and Amendment (the “Credit Facility Amendment”). Pursuant to the Credit Facility Amendment (i) Eagle Point and the Lenders consented to the consummation of the Terra 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.

Amendment to the Charter

On the Closing Date, Terra Property Trust ~~will file~~filed with the ~~State Department of Assessments and Taxation of Maryland~~SDAT Articles of Amendment to the Articles of Amendment and Restatement of Terra Property Trust (the ~~“Charter~~“TPT Charter Amendment”). Pursuant to the TPT Charter Amendment, (i) the authorized shares of stock which Terra Property Trust has authority to issue ~~will be~~were increased 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 (“TPT Class A Common Stock”), 450,000,000 shares of TPT Class B Common Stock, and 50,000,000 shares of Preferred Stock, $0.01 par value per share, and (ii) each share of Terra Property Trust’s common stock issued and outstanding immediately prior to the Effective Time ~~will be~~was automatically changed into one issued and outstanding share of TPT Class B Common Stock.

~~Except with respect to conversion, each share of~~The TPT Class B Common Stock ~~will~~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 Terra Property Trust’s common ~~stock.~~ 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 TPT Class A Common Stock for trading on a national securities exchange or such earlier date as approved by the Terra Property ~~Trust’s~~Trust board of directors (the ~~“First Conversion Date”~~“TPT Board”), one-third of the issued and outstanding shares of TPT 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 TPT 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 TPT Class A Common Stock for trading on a national securities exchange or such earlier date following the First Conversion Date as approved by ~~Terra Property Trust’s board of directors~~the TPT Board (the “Second Conversion Date”), one-half of the issued and outstanding shares of TPT 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 TPT 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 TPT Class A Common Stock for trading on a national securities exchange or such earlier date following the Second Conversion Date as approved by ~~Terra Property Trust’s board of directors,~~the TPT Board, all of the issued and outstanding shares of TPT 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 TPT Class A Common Stock.

~~Pursuant to the Merger Agreement, Terra Property Trust has agreed to take all necessary corporate action so that upon and after the Effective Time, the size~~Appointment of Terra Property Trust’s board of directors is increased from three to six, and three individuals designated by Terra Fund 6 (the “Terra BDC Designees”) are elected to the Board. If a Terra BDC Designee is not able or willing to serve on Terra Property Trust’s board of directors asDirectors

As of the Effective Time and in accordance with the Terra ~~Fund 6 will select~~BDC Merger Agreement, the size of the TPT Board was increased by three members and each of Spencer Goldenberg, Adrienne Everett and Gaurav Misra (each a ~~replacement within a reasonable period~~“Terra BDC Designee”, and collectively, the “Terra BDC Designees”) were elected to the TPT Board to fill the vacancies created by such increase, with each Terra BDC Designee to serve until Terra Property Trust’s next annual meeting of ~~time~~stockholders and until his

Notes to Unaudited Financial Statements

or her successor is duly elected and qualifies. Each of the other members of the TPT Board immediately prior to the Effective Time will continue as members following the Effective Time.

Voting Support Agreement

On the Closing Date, Terra Property Trust, Terra JV and Terra ~~Property Trust’s board~~Offshore REIT entered into a Voting Support Agreement (the “Voting Support Agreement”). Pursuant to the Voting Support Agreement, effective as of ~~directors will elect such replacement as a member~~the Closing Date, Terra JV and Terra Offshore REIT have agreed to, at any meeting of Terra Property Trust’s ~~board~~stockholders called for the purpose of electing directors as(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 ~~Effective Time.~~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 Voting Support Agreement) or (iii) an amendment and restatement of the Amended and Restated Management Agreement between Terra Property Trust and TPT Advisor approved by the TPT Board, including the Terra BDC Designees.

Indemnification Agreements

Terra Property Trust has entered into customary indemnification agreements with each member of the TPT Board (including each Terra BDC Designee).These agreements, among other things, require Terra Property Trust 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 Terra Property Trust, arising out of his or her service as a director.

The Merger is expected to close during the third quarter of 2022, subject to the required approvals by Terra Fund 6’s stockholders and other customary closing conditions. There can be no assurances that the Merger will close.

2124

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

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

FORWARD-LOOKING STATEMENTS

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

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

•the potential negative impacts the of the coronavirus (“COVID-19”) pandemic on the global economy and the impacts of COVID-19 on our financial condition, results of operations, liquidity and capital resources and business operations;

•actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impact;

•the efficacy of the vaccines or other remedies and the speed of their distribution and administration;

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

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

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

•changes in our investment objectives and business strategy;

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

•the performance and financial condition of our borrowers;

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

•borrower defaults or decreased recovery rates from our borrowers;

•changes in prepayment rates on our loans;

•our use of financial leverage;

•actual and potential conflicts of interest with any of the following affiliated entities: Terra Fund Advisors, LLC (“Terra Fund Advisors” or ~~the~~our “Manager”), Terra REIT Advisors, LLC (“Terra REIT Advisors”), Terra Income Advisors, LLC; Terra Capital Partners, LLC (“Terra Capital Partners”), our sponsor; Terra JV, LLC (“Terra JV”); Terra Property Trust, Inc. (“Terra Property Trust”); Terra Income Fund 6, LLC (formerly Terra Merger Sub, LLC), Terra Property Trust’s wholly owned subsidiary (“Terra LLC”); Terra Income Fund 6, Inc. (“Terra ~~Fund 6”~~BDC”);Terra Secured Income Fund 5 International; Terra Income Fund International; Terra Secured Income Fund 7, LLC (“Terra Fund 7”); Terra ~~Property Trust, Inc. (“Terra Property Trust”); Terra~~ Offshore Funds REIT, LLC (“Terra Offshore REIT”); Mavik Real Estate Special Opportunities Fund, LP (“RESOF”); or any of their affiliates;

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

•liquidity transactions that may be available to us or our subsidiaries or affiliates in the future, including a liquidation of assets, a sale of our company or its subsidiaries or affiliates, or a strategic business combination, a listing of the shares

of common stock of Terra Property Trust on a national securities exchange, or an adoption of a share repurchase plan, in each case, which may include the distribution of our common stock of Terra Property Trust indirectly owned by our company and certain other fund vehicles managed by Terra Capital Partners or its affiliates to the ultimate investors in these vehicles, and the timing of any such transactions;

•~~Terra Property Trust’s ability to complete the contemplated acquisition of Terra Fund 6 (as defined herein) and~~ achieve the expected synergies, cost savings and other benefits from the ~~acquisition of~~ Terra ~~Fund 6;~~BDC Merger (as defined below);

•risks associated with achieving expected synergies, cost savings and other benefits from acquisitions or mergers, including the ~~contemplated acquisition of~~ Terra ~~Fund 6,~~BDC Merger, and Terra Property Trust’s increased scale;

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

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

•the degree and nature of our competition.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Part I — Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2021 and in “Part II - Item 1A. Risk Factors” in this quarterly report on Form 10-Q. Other factors that could cause actual results to differ materially include:

•changes in the economy;

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

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

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

Overview

We are 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 throughout the United States. Our loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. We focus on the origination of middle market loans in the approximately $10 million to $50 million range, to finance properties primarily in primary and secondary markets. We believe loans in this size range are subject to less competition, offer higher risk adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. We were formed as a Delaware limited liability company on April 24, 2013 and commenced operations on August 8, 2013. We make substantially all of our investments, and conduct substantially all of our real estate lending business, through Terra Property Trust, which has elected to be taxed as a REIT for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2016. Our investment objectives are to (i) preserve our members’ capital contributions, (ii) realize income from our investments and (iii) make monthly distributions to our members from cash generated from investments. There can be no assurances that we will be successful in meeting our investment objectives.

2326

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

On March 2, 2020, Terra Fund 1, Terra Fund 2 and Terra Fund 3 merged with and into Terra Fund 4, with Terra Fund 4 continuing as the surviving company (the “Terra Fund Merger”), and we consolidated our holdings of shares of common stock of Terra Property Trust in Terra Fund 4. Subsequent to the Terra Fund Merger, the legal name of Terra Fund 4 was changed to Terra JV, LLC. On March 2, 2020, Terra Property Trust engaged in a series of transactions pursuant to which Terra Property Trust 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 that Terra Property Trust owned, cash of $25.5 million and other working capital. As of ~~March 31,~~September 30, 2022, Terra JV held 87.4% of the issued and outstanding shares of Terra Property Trust’s common stock with the remainder held by Terra Offshore REIT; and we and Terra Fund 7 owned an 87.6% and 12.4% percentage interest, respectively, in Terra JV. Accordingly, as of ~~March 31,~~September 30, 2022, we indirectly beneficially owned 76.5% of the outstanding shares of common stock of Terra Property Trust through Terra JV.

As previously disclosed, we continue to explore alternative liquidity transactions on an opportunistic basis to maximize value for our investors. Examples of the alternative liquidity transactions that, depending on market conditions, may be available to us, or our subsidiaries or affiliates, include a listing of our shares of common stock of Terra Property Trust on a national securities exchange, adoption of a share repurchase plan, a liquidation of assets, a sale of our company or its subsidiaries or affiliates or a strategic business combination, in each case, which may include the in-kind distribution of shares of common stock of Terra Property Trust indirectly owned by our company and certain other fund vehicles managed by Terra Capital Partners or its affiliates to the ultimate investors in these vehicles. We cannot provide any assurance that any alternative liquidity transaction will be available to us or, if available, that we will pursue or be successful in completing any such alternative liquidity transaction.

Recent Developments

Terra BDC Merger

On October 1, 2022 (the “Closing Date”), pursuant to certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Terra BDC Merger Agreement”), Terra ~~Property Trust,~~BDC merged with and into Terra ~~Fund 6,~~LLC (formerly Terra Merger Sub, ~~LLC,~~LLC), a wholly owned subsidiary of Terra Property Trust, ~~(“Merger Sub”),~~with Terra ~~Income Advisors,~~ LLC ~~and Terra REIT Advisors, entered into an Agreement and Plan~~continuing as the surviving entity of ~~Merger~~the merger (the ~~“Merger Agreement”~~“Terra BDC Merger”) ~~pursuant to which, subject to the terms~~ and ~~conditions therein, Terra Fund 6 will be merged with and into Merger Sub, with Merger Sub surviving~~ as a wholly owned subsidiary ofTerra Property ~~Trust (such surviving company,~~Trust. The Certificate of Merger and Articles of Merger with respect to the ~~“Surviving Company”~~Terra BDC Merger were filed with the Secretary of State of the State of Delaware and ~~such transaction,~~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 ~~“Merger”~~Closing Date (the “Effective Time”).

~~Pursuant to~~At the ~~terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share~~Effective Time, except for any shares of common stock, par value $0.001 per share ~~of Terra Fund 6~~ (“Terra BDC Common Stock”) ~~will be~~, of Terra BDC held by Terra Property Trust or any of its wholly owned subsidiaries 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 ~~(as such number may be adjusted in accordance with the Merger Agreement, the “Exchange Ratio”)~~ of ~~the~~Terra Property Trust’s newly designated Class B Common Stock, par value $0.01 per share ~~of Terra Property Trust~~ (“TPT Class B Common Stock”), and (ii) cash, without interest, in lieu of any fractional shares of TPT 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 TPT Class B Common Stock to which such holder would otherwise be entitled by (y) $14.38.

~~Prior~~Pursuant to the ~~Effective Time,~~terms of the transactions described in the Terra BDC Merger Agreement, approximately 4,847,910 shares of TPT Class B Common Stock were issued to former Terra BDC stockholders in connection with the Terra BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of the Closing Date. Following the consummation of the Terra BDC Merger, former Terra BDC stockholders owned approximately 19.9% of the common equity of Terra Property Trust ~~will file~~and we indirectly beneficially owned approximately 61.3% of the common equity of Terra Property Trust.

On the Closing Date, Terra Property Trust filed with ~~Maryland~~the SDAT its Articles of Amendment to the Articles of Amendment and Restatement ~~of Terra Property Trust~~ (the ~~“Charter~~“TPT Charter Amendment”). Pursuant to the TPT Charter Amendment, (i) the authorized shares of its stock which Terra Property Trust has authority to issue ~~will be~~were increased 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 (“TPT Class A Common Stock”), 450,000,000 shares of TPT Class B Common Stock, and 50,000,000 shares of Preferred Stock, $0.01 par value per share, and (ii) each share of Terra Property Trust’s common stock issued and outstanding immediately prior to the Effective Time ~~will be~~was automatically ~~converted~~changed into one issued and outstanding share of TPT Class B Common Stock.

~~Each share of~~The TPT Class B Common Stock ~~will~~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 ~~Terra Property~~our common stock, except as set forth below with respect to conversion.

~~Trust’s common stock.~~ 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 TPT Class A Common Stock for trading on a national securities exchange or such earlier date as is approved by the Terra Property ~~Trust’s~~Trust board of directors (the ~~“First Conversion Date”~~“TPT Board”), one-third of the issued and outstanding shares of TPT 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 TPT 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 TPT Class A Common Stock for trading on a national securities exchange or such earlier date following the First Conversion Date as ~~shall be~~ approved by ~~Terra Property Trust’s board of directors~~the TPT Board (the “Second Conversion Date”), one-half of the issued and outstanding shares of TPT 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 TPT 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 TPT Class A Common Stock for trading on a national securities exchange or such earlier date following the Second Conversion Date as ~~shall be~~ approved by ~~Terra Property Trust’s board of directors,~~the TPT Board, all of the issued and outstanding shares of TPT 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 TPT Class A Common Stock.

Pursuant to the Merger Agreement, Terra Property Trust has agreed to take all necessary corporate action so that upon and after the Effective Time, the size of Terra Property Trust’s board of directors is increased from three to six, and three individuals designated by Terra Fund 6 (the “Terra BDC Designees”) are elected to the Board. If a Terra BDC Designee is not able or willing to serve on Terra Property Trust’s board of directors asAs of the Effective Time and in accordance with the Terra ~~Fund 6 will select~~BDC Merger Agreement, the size of the TPT Board was increased by three members and each of Spencer Goldenberg, Adrienne Everett and Gaurav Misra (each a ~~replacement within a reasonable period~~“Terra BDC Designee”) were elected to the TPT Board to fill the vacancies created by such increase, with each Terra BDC Designee to serve until Terra Property Trust’s next annual meeting of ~~time~~stockholders and until his or her successor is duly elected and qualifies. Each of the other members of the TPT Board immediately prior to the Effective Time ~~and Terra Property Trust’s board of directors~~ will ~~elect such replacement~~continue as ~~a member of Terra Property Trust’s board of directors as of~~members following the Effective Time.

COVID-19 Pandemic

~~The~~As the COVID-19 pandemic has evolved from its emergence in early 2020, so has its global impact. Many countries have at times re-instituted, or strongly encouraged, varying levels of quarantines and restrictions on travel and in some cases have at times limited operations of certain businesses and taken other restrictive measures designed to help slow the spread of COVID-19 and its variants. Governments and businesses have also instituted vaccine mandates and testing requirements for employees. While vaccine availability and uptake has increased, the longer-term macro-economic effects on global supply chains, inflation, labor shortages and wage increases continue to impact many industries, including the collateral underlying certain of our loans. Moreover, with the potential for new strains of COVID-19 ~~to emerge,~~or outbreaks of other infectious diseases, governments and businesses may re-impose aggressive measures ~~such as quarantines and restrictions on travel,~~ to help slow ~~its~~the spread of infectious diseases in the future. For this reason, among others, as the COVID-19 pandemic continues, the potential global impacts are uncertain and difficult to assess.

Portfolio Summary

The following tables provide a summary of Terra Property Trust’s net loan portfolio as of ~~March 31,~~September 30, 2022 and December 31, 2021:


		March 31, 2022																September 30, 2022
		Fixed Rate			Floating Rate (1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements and Secured Borrowing			Total Net Loans				Fixed Rate			Floating Rate (1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements			Total Net Loans
Number of loans	Number of loans	7			18			25			5			25			Number of loans	4			17			21			3			21
Principal balance	Principal balance	$	97,914,340		$	469,606,633		$	567,520,973		$	95,283,106		$	472,237,867		Principal balance	$	44,218,162		$	465,046,452		$	509,264,614		$	36,831,634		$	472,432,980
Amortized cost	Amortized cost	99,264,597			458,754,403			558,019,000			96,090,690			461,928,310			Amortized cost	44,483,378			445,695,865			490,179,243			36,952,837			453,226,406
Fair value	Fair value	99,045,593			457,961,364			557,006,957			95,483,175			461,523,782			Fair value	43,983,296			442,446,124			486,429,420			33,423,769			453,005,651
Weighted average coupon rate	Weighted average coupon rate	12.92		%	7.16		%	8.15		%	11.07		%	7.56		%	Weighted average coupon rate	13.67		%	9.68		%	10.03		%	12.74		%	9.81		%
Weighted-average remaining term (years)	Weighted-average remaining term (years)	1.98			1.32			1.44			0.97			1.53			Weighted-average remaining term (years)	1.86			1.01			1.08			0.34			1.14


	December 31, 2021
	Fixed Rate			Floating Rate (1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements and Secured Borrowing			Total Net Loans
Number of loans	6			15			21			4			21
Principal balance	$	74,880,728		$	405,270,423		$	480,151,151		$	76,569,398		$	403,581,753
Amortized cost	75,520,212			394,153,102			469,673,314			76,818,156			392,855,158
Fair value	75,449,410			391,752,209			467,201,619			75,900,089			391,301,530
Weighted average coupon rate	12.39		%	7.01		%	7.85		%	10.40		%	7.37		%
Weighted-average remaining term (years)	1.93			1.45			1.53			0.82			1.66

_______________

(1)These loans pay a coupon rate of London Interbank Offered Rate (“LIBOR”) or Secured Overnight Financing Rate (“SOFR”) plus a fixed spread. Coupon rate shown was determined using LIBOR of ~~0.45% and~~3.14%, average SOFR of ~~0.16%~~2.47% and forward-looking term rate based on SOFR (“Term SOFR”) of 3.04% as of ~~March 31,~~September 30, 2022 and LIBOR of 0.10% as of December 31, 2021.

(2)As of ~~March 31,~~September 30, 2022 and December 31, 2021, amount included ~~$351.1~~$333.5 million and $290.6 million of senior mortgages used as collateral for ~~$241.5~~$219.4 million and $176.9 million of borrowings under credit facilities, respectively.

(3)As of ~~March 31,~~September 30, 2022 and December 31, 2021, ~~sixteen~~fifteen and thirteen of these loans, respectively, are subject to a LIBOR or SOFR floor, as applicable.

In addition to ~~its~~Terra Property Trust’s net loan portfolio, as of ~~March 31,~~September 30, 2022, Terra Property Trust owned a multi-tenant office building acquired pursuant to a foreclosure and as of December 31, 2021, Terra Property Trust owned 4.9 acres of ~~adjacent~~ land acquired pursuant to a deed in lieu of foreclosure and athe multi-tenant office ~~building acquired pursuant to a foreclosure.~~building. The land ~~and building~~was sold in the second quarter of 2022. The real estate and related lease intangible assets and liabilities had a net carrying value of ~~$53.0~~$41.7 million and $56.1 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. The mortgage loan payable encumbering the office building had an outstanding principal amount of ~~$31.8~~$31.3 million and $32.0 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

Additionally, as of ~~March 31,~~September 30, 2022 and December 31, 2021, Terra Property Trust owned ~~44.2%~~30.9% and 50.0%, respectively, of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. During 2022 and 2021, weTerra Property Trust purchased equity interests in three joint ventures. As of ~~March 31,~~September 30, 2022 and December 31, 2021, these equity interests had total carrying value of ~~$91.7~~$57.1 million and $69.7 million, respectively.

Portfolio Investment Activity

For the three months ended ~~March 31,~~September 30, 2022 and ~~2020,~~2021, Terra Property Trust invested ~~$26.0~~$94.8 million and ~~$15.5~~$56.5 million in new and add-on investments and had ~~$1.4~~$31.6 million and ~~$25.0~~$37.7 million of repayments, resulting in net investments of ~~$24.6~~$63.2 million and ~~net repayments of $9.5~~$18.8 million, respectively. Amounts are net of obligations under participation agreements, secured borrowing, borrowings under the master repurchase agreement, the term loan, the repurchase agreements and the revolving line of credit.

For the nine months ended September 30, 2022 and 2021, Terra Property Trust invested $120.5 million and $85.9 million in new and add-on investments and had $43.5 million and $69.0 million of repayments, resulting in net investments of $77.0 million and $16.9 million, respectively. Amounts are net of obligations under participation agreements, secured borrowing, borrowings under the master repurchase agreement, the term loan, the repurchase agreements and the revolving line of credit.

Portfolio Information

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

March 31, 2022 December 31, 2021
Investment Structure Principal Balance Amortized Cost Fair
Value % of Total Principal Balance Amortized Cost Fair
Value % of Total
First mortgages $ 373,263,411 $ 376,115,508 $ 376,309,856 59.6 % $ 310,933,350 $ 313,515,326 $ 312,735,452 58.3 %
Preferred equity
   investments 63,767,599 63,850,511 49,787,433 7.9 % 63,441,546 63,515,633 49,187,299 9.2 %
Mezzanine loans 17,444,357 17,615,889 17,371,312 2.8 % 17,444,357 17,622,804 17,518,902 3.3 %
Credit facility 17,762,500 18,055,179 18,055,181 2.9 % 11,762,500 11,859,876 11,859,877 2.2 %
Allowance for loan
   losses — (13,708,777) — — % — (13,658,481) — — %
Total loan
   investments $ 472,237,867 461,928,310 461,523,782 73.2 % $ 403,581,753 392,855,158 391,301,530 73.0 %
Marketable
   securities 475,201 510,151 0.1 % 1,176,006 1,310,000 0.2 %
Real estate owned 53,022,587 73,438,122 11.6 % 56,067,129 75,043,111 14.0 %
Equity investment
   in unconsolidated
   Investments 91,662,090 95,947,859 15.2 % 69,713,793 68,898,535 12.8 %
Total $ 607,088,188 $ 631,419,914 100.1 % $ 519,812,086 $ 536,553,176 100.0 %

March 31, 2022 December 31, 2021
Property Type Principal Balance Amortized
Cost Fair
Value % of Total Principal Balance Amortized Cost Fair
Value % of Total
Office $ 170,616,825 $ 171,393,890 $ 168,875,011 26.8 % $ 166,071,342 $ 166,836,320 $ 163,723,036 30.6 %
Multifamily 96,746,958 98,042,469 98,079,744 15.5 % 72,999,417 73,955,240 74,017,225 13.9 %
Hotel - full/select
   service 56,918,328 57,520,720 57,571,618 9.1 % 56,847,381 57,395,682 57,565,411 10.7 %
Industrial 54,334,108 54,255,229 55,094,623 8.7 % 18,762,500 18,859,876 18,841,978 3.5 %
Infill land 33,807,563 33,895,151 34,066,059 5.4 % 28,960,455 28,923,827 29,173,344 5.4 %
Student housing 31,000,000 31,667,292 31,891,172 5.1 % 31,000,000 31,565,670 31,911,158 5.9 %
Mixed use 28,814,085 28,862,336 15,945,555 2.5 % 28,940,658 28,977,024 16,069,378 3.0 %
Allowance for loan
   losses — (13,708,777) — — % — (13,658,481) — — %
Total loan
   investments $ 472,237,867 461,928,310 461,523,782 73.1 % $ 403,581,753 392,855,158 391,301,530 73.0 %
Marketable
   securities 475,201 510,151 0.1 % 1,176,006 1,310,000 0.2 %
Real estate owned 53,022,587 73,438,122 11.6 % 56,067,129 75,043,111 14.0 %
Equity investment
   in unconsolidated
   Investments 91,662,090 95,947,859 15.2 % 69,713,793 68,898,535 12.8 %
Total $ 607,088,188 $ 631,419,914 100.0 % $ 519,812,086 $ 536,553,176 100.0 %


	September 30, 2022								December 31, 2021
Investment Structure	Principal Balance		Amortized Cost		Fair Value		% of Total		Principal Balance		Amortized Cost		Fair Value		% of Total
First mortgages	$	370,623,912	$	374,105,299	$	370,880,124	64.5	%	$	310,933,350	$	313,515,326	$	312,735,452	58.3	%
Preferred equity investments	57,727,211		57,727,213		38,267,729		6.7	%	63,441,546		63,515,633		49,187,299		9.2	%
Mezzanine loans	32,319,357		32,446,235		31,987,599		5.6	%	17,444,357		17,622,804		17,518,902		3.3	%
Credit facility	11,762,500		11,870,198		11,870,199		2.1	%	11,762,500		11,859,876		11,859,877		2.2	%
Allowance for loan losses	—		(22,922,539)		—		—	%	—		(13,658,481)		—		—	%
Total loan investments	$	472,432,980	453,226,406		453,005,651		78.9	%	$	403,581,753	392,855,158		391,301,530		73.0	%
Marketable securities			—		—		—	%			1,176,006		1,310,000		0.2	%
Real estate owned			41,748,898		65,043,111		11.3	%			56,067,129		75,043,111		14.0	%
Equity investment in unconsolidated Investments			57,071,597		56,448,852		9.8	%			69,713,793		68,898,535		12.8	%
Total			$	552,046,901	$	574,497,614	100.0	%			$	519,812,086	$	536,553,176	100.0	%

2730

March 31, 2022 December 31, 2021
Geographic Location Principal Balance Amortized Cost Fair
Value % of Total Principal Balance Amortized Cost Fair
Value % of Total
United States
California $ 191,026,179 $ 192,975,258 $ 193,108,596 30.6 % $ 187,209,547 $ 189,082,380 $ 189,447,577 35.3 %
New York 63,767,599 63,850,511 49,787,433 7.8 % 63,441,546 63,515,633 49,187,299 9.1 %
Georgia 53,970,491 54,221,854 53,083,178 8.4 % 53,289,288 53,536,884 52,031,363 9.7 %
North Carolina 45,781,188 46,026,460 45,797,474 7.3 % 44,492,971 44,704,699 44,453,133 8.3 %
New Jersey 35,571,608 35,391,604 36,368,139 5.8 % — — — — %
Utah 28,000,000 28,529,857 28,861,172 4.6 % 28,000,000 28,420,056 28,851,547 5.4 %
Washington 24,424,855 24,487,967 24,600,471 3.9 % 3,523,401 3,382,683 3,553,330 0.7 %
Texas 13,695,947 13,824,587 13,832,906 2.2 % 13,625,000 13,725,690 13,735,569 2.6 %
Massachusetts 7,000,000 7,000,000 6,862,858 1.1 % 7,000,000 7,000,000 6,982,101 1.3 %
Pennsylvania 6,000,000 6,191,554 6,191,555 1.0 % — — — — %
South Carolina 3,000,000 3,137,435 3,030,000 0.5 % 3,000,000 3,145,614 3,059,611 0.6 %
Allowance for loan
   losses — (13,708,777) — — % — (13,658,481) — — %
Total loan
   investments $ 472,237,867 461,928,310 461,523,782 73.2 % $ 403,581,753 392,855,158 391,301,530 73.0 %
Marketable
   securities 475,201 510,151 0.1 % 1,176,006 1,310,000 0.2 %
Real estate owned 53,022,587 73,438,122 11.6 % 56,067,129 75,043,111 14.0 %
Equity investment
   in unconsolidated
   Investments 91,662,090 95,947,859 15.2 % 69,713,793 68,898,535 12.8 %
Total $ 607,088,188 $ 631,419,914 100.1 % $ 519,812,086 $ 536,553,176 100.0 %


	September 30, 2022								December 31, 2021
Property Type	Principal Balance		Amortized Cost		Fair Value		% of Total		Principal Balance		Amortized Cost		Fair Value		% of Total
Office	$	153,619,338	$	154,112,318	$	145,246,819	25.3	%	$	166,071,342	$	166,836,320	$	163,723,036	30.6	%
Multifamily	119,902,801		121,113,385		120,970,601		21.1	%	72,999,417		73,955,240		74,017,225		13.9	%
Industrial	50,112,186		50,264,172		49,953,643		8.7	%	18,762,500		18,859,876		18,841,978		3.5	%
Infill land	48,079,150		48,619,458		49,024,524		8.5	%	28,960,455		28,923,827		29,173,344		5.4	%
Hotel - full/select service	43,222,382		43,738,349		42,388,236		7.4	%	56,847,381		57,395,682		57,565,411		10.7	%
Mixed use	29,497,123		29,558,901		16,654,640		2.9	%	28,940,658		28,977,024		16,069,378		3.0	%
Student housing	28,000,000		28,742,362		28,767,188		5.0	%	31,000,000		31,565,670		31,911,158		5.9	%
Allowance for loan losses	—		(22,922,539)		—		—	%	—		(13,658,481)		—		—	%
Total loan investments	$	472,432,980	453,226,406		453,005,651		78.9	%	$	403,581,753	392,855,158		391,301,530		73.0	%
Marketable securities			—		—		—	%			1,176,006		1,310,000		0.2	%
Real estate owned			41,748,898		65,043,111		11.3	%			56,067,129		75,043,111		14.0	%
Equity investment in unconsolidated Investments			57,071,597		56,448,852		9.8	%			69,713,793		68,898,535		12.8	%
Total			$	552,046,901	$	574,497,614	100.0	%			$	519,812,086	$	536,553,176	100.0	%


	September 30, 2022								December 31, 2021
Geographic Location	Principal Balance		Amortized Cost		Fair Value		% of Total		Principal Balance		Amortized Cost		Fair Value		% of Total
United States
California	$	164,305,740	$	166,047,515	$	164,079,474	28.6	%	$	187,209,547	$	189,082,380	$	189,447,577	35.3	%
New York	57,727,211		57,727,213		38,267,729		6.7	%	63,441,546		63,515,633		49,187,299		9.1	%
Georgia	55,565,351		55,824,187		54,449,071		9.5	%	53,289,288		53,536,884		52,031,363		9.7	%
Washington	51,517,559		51,778,575		51,888,460		9.0	%	3,523,401		3,382,683		3,553,330		0.7	%
New Jersey	48,428,836		48,748,885		49,343,504		8.6	%	—		—		—		—	%
Arizona	31,000,000		31,264,547		31,264,547		5.4	%	—		—		—		—	%
North Carolina	28,888,283		29,015,661		28,445,761		5.0	%	44,492,971		44,704,699		44,453,133		8.3	%
Utah	28,000,000		28,742,362		28,767,188		5.0	%	28,000,000		28,420,056		28,851,547		5.4	%
Massachusetts	7,000,000		7,000,000		6,499,917		1.1	%	7,000,000		7,000,000		6,982,101		1.3	%
Texas	—		—		—		—	%	13,625,000		13,725,690		13,735,569		2.6	%
South Carolina	—		—		—		—	%	3,000,000		3,145,614		3,059,611		0.6	%
Allowance for loan losses	—		(22,922,539)		—		—	%	—		(13,658,481)		—		—	%
Total loan investments	$	472,432,980	453,226,406		453,005,651		78.9	%	$	403,581,753	392,855,158		391,301,530		73.0	%
Marketable securities			—		—		—	%			1,176,006		1,310,000		0.2	%
Real estate owned			41,748,898		65,043,111		11.3	%			56,067,129		75,043,111		14.0	%
Equity investment in unconsolidated Investments			57,071,597		56,448,852		9.8	%			69,713,793		68,898,535		12.8	%
Total			$	552,046,901	$	574,497,614	100.0	%			$	519,812,086	$	536,553,176	100.0	%

Factors Impacting Operating Results

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

Market Risk

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

Credit Risk

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

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

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

The COVID-19 pandemic has significantly impacted the commercial real estate markets, causing reduced occupancy, requests from tenants for rent deferral or abatement, and delays in construction and development projects currently planned or underway. These negative conditions may persist into the future and impair Terra Property Trust’s borrowers’ ability to pay principal and interest due to Terra Property Trust under its loan agreements.

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

Concentration Risk

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

Liquidity Risk

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

Interest Rate Risk

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

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

Prepayment Risk

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

Extension Risk

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

Real Estate Risk

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

Use of Leverage

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

Results of Operations

The following table presents the comparative results of our operations for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021:


		Three Months Ended March 31,			Three Months Ended September 30,								Nine Months Ended September 30,
			2022			2021		Change			2022			2021		Change		2022		2021		Change
Investment income	Investment income									Investment income
Dividend income	Dividend income		$	758,110		$	1,126,895	$	(368,785)	Dividend income	$	3,054,348		$	—	$	3,054,348	$	4,569,442	$	1,126,895	$	3,442,547
Other operating income	Other operating income		11			20		(9)		Other operating income	19			10		$	9	45		43		2
Total investment income	Total investment income		758,121			1,126,915		(368,794)		Total investment income	3,054,367			10		3,054,357		4,569,487		1,126,938		3,442,549
Operating expenses	Operating expenses									Operating expenses
Professional fees	Professional fees		127,060			120,135		6,925		Professional fees	121,588			119,508		2,080		381,787		350,488		31,299
Other	Other		1,392			385		1,007		Other	1,099			744		355		4,018		2,484		1,534
Total operating expenses	Total operating expenses		128,452			120,520		7,932		Total operating expenses	122,687			120,252		2,435		385,805		352,972		32,833
Net investment income			629,669			1,006,395		(376,726)
Net change in unrealized appreciation on investment			1,018,522			492,466		526,056
Net increase in members’ capital resulting from operations			$	1,648,191		$	1,498,861	$	149,330
Net investment income (loss)										Net investment income (loss)	2,931,680			(120,242)		3,051,922		4,183,682		773,966		3,409,716
Net change in unrealized appreciation (depreciation) on investment										Net change in unrealized appreciation (depreciation) on investment	775,976			(1,074,864)		1,850,840		5,366,985		(2,320,213)		7,687,198
Net increase (decrease) in members’ capital resulting from operations										Net increase (decrease) in members’ capital resulting from operations	$	3,707,656		$	(1,195,106)	$	4,902,762	$	9,550,667	$	(1,546,247)	$	11,096,914

Dividend Income

Dividend income associated with our indirect ownership of Terra Property Trust primarily represents our proportionate share of Terra Property Trust’s net income or loss for the period. Any excess of distributions received from Terra Property Trust over its net income is recorded as return of capital. As of both ~~March 31,~~September 30, 2022 and 2021, we indirectly beneficially owned 76.5% through Terra JV of the outstanding shares of common stock of Terra Property Trust.

For the three months ended ~~March 31,~~September 30, 2022 and 2021, we received distributions of ~~$3.0~~$2.8 million and $3.0 million, or ~~$0.20~~$0.19 and $0.20 per share, from Terra Property Trust, of which ~~$0.8~~$2.8 million and none was recorded dividend income and none and $3.0 million were returns of capital, respectively. For the nine months ended September 30, 2022 and 2021, we received distributions of $8.7 million and $9.3 million, or $0.58 and $0.63 per share, from Terra Property Trust, of which $4.6 million and $1.1 million was recorded as dividend income and ~~$2.2~~$4.1 million and ~~$1.9~~$8.2 million was recorded as return of capital, respectively.

For thethree months ended ~~March 31,~~September 30, 2022 ~~Terra Property Trust recorded a net loss of $0.8 million,~~as compared to ~~a net income of $1.5 million recorded in~~ the same period in ~~2021. The change in~~2021, Terra Property Trust’s net ~~(loss) income was~~loss increased by $6.2 million, primarily due to

an ~~impairment charge~~increase of ~~$1.6~~$8.5 million ~~recorded~~ on ~~4.9 acres of adjacent land~~provision for loan losses resulting from a decline in the ~~three months ended March 31, 2022 to reduce the carrying~~fair value of ~~the land to its estimated selling price (there was no impairment charge for the three months ended March 31, 2021)~~collateral and an increase of ~~$1.0~~$0.7 million in fees paid and operating expenses reimbursed to Terra Property Trust’s manager resulting from an increase in Terra Property Trust’s total assets under management, partially offset by an increase in net contractual interest income of $1.5 million resulting from an increase in the weighted average outstanding principal balance on net loans as well as an increase in the weighted average coupon rate, a ~~decrease~~gain of $0.8 million on the sale of interests in two entities that own three joint ventures (there was no such gain in the same prior year period), and an increase in prepayment fee income of $0.6 million resulting from an increase in loans with minimum yield provisions repaid before maturity.

For the nine months ended September 30, 2022, Terra Property Trust recorded a net loss of $6.4 million, compared to net income of $0.6 million recorded in the same period in 2021, primarily due to an increase of $7.7 million on provision for loan losses ~~of $0.2 million~~ resulting from a decline in the fair value of collateral, an increase of $2.5 million in fees paid and operating expenses reimbursed to Terra Property Trust’s manager resulting from an increase in Terra Property Trust’s total assets under management and an impairment charge of $1.6 million recognized in the current year period on the development land in order to reduce the carrying value of the land to its estimated fair value, which was the estimated selling price less the cost of sale (there was no such impairment charge in the prior year period) partially offset by an increase in net contractual interest income of $2.8 million resulting from an increase in the weighted average outstanding principal balance on net loans ~~with higher risk~~as well as an increase in the weighted average coupon rate and an increase in prepayment fee income ~~from equity investment in unconsolidated investments~~ of ~~$0.1~~$1.8 million resulting from ~~net equity income from the joint ventures that Terra Property Trust invested~~an increase in ~~in the fourth quarter of 2021 and first quarter of 2022.~~loans with minimum yield provisions repaid before maturity.

Net Loan Portfolio

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

The following tables present a reconciliation of Terra Property Trust’s loan portfolio from a gross basis to a net basis for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021:

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021
Weighted Average Principal Amount (1)
Weighted Average Coupon Rate (2)
Weighted Average Principal Amount (1)
Weighted Average Coupon Rate (2)
Total portfolio
Gross loans $ 506,206,479 7.7 % $ 408,985,092 8.4 %
Obligations under participation agreements
and secured borrowing (79,023,662) 10.4 % (88,594,532) 10.1 %
Repurchase agreement payable (102,225,409) 2.5 % — — %
Term loan payable (42,140,886) 5.3 % (107,776,898) 5.3 %
Revolving line of credit (44,891,269) 4.0 % (1,745,785) 4.0 %
Net loans (3)
$ 237,925,253 10.2 % $ 210,867,877 9.3 %
Senior loans
Gross loans 304,278,978 6.2 % 255,124,634 6.4 %
Obligations under participation agreements
and secured borrowing (49,397,683) 9.9 % (45,478,823) 8.6 %
Repurchase agreement payable (102,225,409) 2.5 % — — %
Term loan payable (42,140,886) 5.3 % (107,776,898) 5.3 %
Revolving line of credit (44,891,269) 4.0 % (1,745,785) 4.0 %
Net loans (3)
$ 65,623,731 11.3 % $ 100,123,128 6.6 %
Subordinated loans (4)
Gross loans 201,927,501 9.6 % 153,860,458 11.7 %
Obligations under participation agreements (29,625,979) 11.2 % (43,115,709) 11.6 %
Net loans (3)
$ 172,301,522 9.3 % $ 110,744,749 11.7 %


	Three Months Ended September 30, 2022				Three Months Ended September 30, 2021
	Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)		Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)
Total portfolio
Gross loans	$	533,529,996	9.8	%	$	472,048,987	8.6	%
Obligations under participation agreements and secured borrowing	(68,210,457)		10.5	%	(135,954,081)		11.4	%
Repurchase agreement payable	(193,403,018)		4.8	%	—		—	%
Term loan payable	—		—	%	(105,432,234)		5.3	%
Revolving line of credit	(42,251,492)		6.4	%	(14,284,331)		4.0	%
Net loans (3)	$	229,665,029	14.4	%	$	216,378,341	8.8	%
Senior loans
Gross loans	394,986,942		8.6	%	274,103,005		6.5	%
Obligations under participation agreements and secured borrowing	(25,547,563)		8.1	%	(58,354,524)		8.5	%
Repurchase agreement payable	(193,403,018)		4.8	%	(105,432,234)		5.3	%
Term loan payable	—		—	%	—		—	%
Revolving line of credit	(42,251,492)		6.4	%	(14,284,331)		4.0	%
Net loans (3)	$	133,784,869	15.0	%	$	96,031,916	7.1	%
Subordinated loans (4)
Gross loans	138,543,054		12.9	%	197,945,982		11.5	%
Obligations under participation agreements	(42,662,894)		12.7	%	(77,599,557)		13.6	%
Net loans (3)	$	95,880,160	13.1	%	$	120,346,425	10.2	%


	Nine Months Ended September 30, 2022				Nine Months Ended September 30, 2021
	Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)		Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)
Total portfolio
Gross loans	$	532,459,434	9.6	%	$	437,583,339	8.5	%
Obligations under participation agreements and secured borrowing	(77,530,600)		10.6	%	(113,149,622)		10.9	%
Repurchase agreement payable	(209,832,900)		4.8	%	—		—	%
Term loan payable	(13,788,746)		5.3	%	(106,764,197)		5.3	%
Revolving line of credit	(49,545,296)		6.4	%	(8,196,644)		4.0	%
Net loans (3)	$	181,761,892	15.9	%	$	209,472,876	9.0	%
Senior loans
Gross loans	394,398,316		8.4	%	265,609,382		6.5	%
Obligations under participation agreements and secured borrowing	(33,158,284)		8.1	%	(52,106,914)		8.5	%
Repurchase agreement payable	(209,832,900)		4.8	%
Term loan payable	(13,788,746)		5.3	%	(106,764,197)		5.3	%
Revolving line of credit	(49,545,296)		6.4	%	(8,196,644)		4.0	%
Net loans (3)	$	88,073,090	18.5	%	$	98,541,627	6.8	%
Subordinated loans (4)
Gross loans	138,061,118		12.9	%	171,973,957		11.6	%
Obligations under participation agreements	(44,372,316)		12.7	%	(61,042,708)		12.9	%
Net loans (3)	$	93,688,802	13.0	%	$	110,931,249	10.9	%

_______________

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

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

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

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

For the three months ended March 31, 2022 as compared to the same period in 2021, the decrease in weighted average coupon rate was primarily due to a higher volume of loan originations with lower coupon rates.

Net Change in Unrealized Appreciation (depreciation) on Investment

Net change in unrealized appreciation or depreciation on investment reflects the change in Terra Property Trust’s fair value during the reporting period. There may be fluctuations in unrealized gains and losses of the underlying portfolio as loans within

the portfolio approach their respective maturity dates. In addition, the unrealized gains or losses in the portfolio may fluctuate over time due to changes in the market yields.

For the three and nine months ended ~~March 31,~~September 30, 2022, we recorded an increase in net change in unrealized appreciation on investment of ~~$1.0~~$0.8 million and $5.4 million, respectively, primarily due to ~~an increase in the fair value of loans Terra Property Trust originated in the current period as well as~~ a decrease in the trading price of ~~its~~Terra Property Trust’s unsecured notes ~~payable.~~payable, partially offset by a decrease in the fair value of Terra Property Trust’s investments resulting from a decrease in the fair value of the collateral as well as increases in the underlying discount rates due to the macro-economic conditions. For the three and nine months ended ~~March 31,~~September 30, 2021, we recorded an increase in net change in unrealized ~~appreciation~~depreciation on investment of ~~$0.5~~$1.1 million ~~primarily due to decreases in underlying index rates~~and $2.3 million, respectively, as a result of the ~~macro-economic conditions.~~commissions and fees Terra Property Trust incurred in connection with the issuance of the unsecured notes payable, which reduced the carrying value of the notes.

Net Increase (Decrease) in Members’ Capital Resulting from Operations

For the three and nine months ended ~~March 31,~~September 30, 2022, ~~as compared to the same period in 2021,~~ the resulting net increase in members’ capital resulting from operations ~~increased by $0.1~~was $3.7 million and $9.6 million, respectively, compared to the resulting net decrease in members’ capital resulting from operations was $1.2 million and $1.5 million for the periods in 2021, respectively.

Financial Condition, Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including funding and maintaining our assets and operations, making distributions to our members and other general business needs. Our primary cash requirements for the next twelve months are making the discretionary recurring distributions to our members. We expect to use cash distributions received from Terra Property Trust to meet such cash requirements. Distributions are made at the discretion of ~~Terra Property Trust’s board of directors~~the TPT Board and will depend upon, among other things, its actual results of operations and liquidity.

A total of ~~$44.7~~$24.0 million of Terra Property Trust’s obligations under participation agreements ~~and $37.4 million of secured borrowing~~ will mature in the next twelve months, and Terra Property Trust expects to use the proceeds from the repayment of the corresponding investments to repay the participation obligations. Additionally, Terra Property Trust expects to fund approximately ~~$72.0~~$60.4 million of the unfunded commitments to borrowers during the next twelve months. Terra Property Trust expects to maintain sufficient cash on hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on its credit facilities. Additionally, Terra Property Trust had ~~$31.8~~$31.3 million of borrowings outstanding under a mortgage loan payable that bears interest at an annual rate of LIBOR plus 3.85% with a LIBOR floor of 2.23%, that is collateralized by an office building. The mortgage loan payable matures on ~~September 27,~~November 14, 2022. Terra Property Trust expects to refinance the mortgage loan payable by the time it matures. Terra Property Trust may also issue additional equity, equity-related and debt securities to fund its investment strategies. Terra Property Trust may issue these securities to unaffiliated third parties or to vehicles advised by affiliates of Terra Capital Partners or third parties. As part of its capital raising transactions, Terra Property Trust may grant to one or more of these vehicles certain control rights over its activities including rights to approve major decisions it takes as part of its business.

Summary of Financing

The table below summarizes Terra Property Trust’s debt financing as of ~~March 31,~~September 30, 2022:


Type of Financing	Type of Financing	Maximum Amount Available		Outstanding Balance		Amount Remaining Available		Interest Rate	Maturity Date	Type of Financing	Maximum Amount Available		Outstanding Balance		Amount Remaining Available		Interest Rate	Maturity Date
Fixed Rate:	Fixed Rate:									Fixed Rate:
Senior unsecured notes	Senior unsecured notes	N/A		$	85,125,000	N/A		6.00%	6/30/2026	Senior unsecured notes	N/A		$	85,125,000	N/A		6.00%	6/30/2026
				$	85,125,000								$	85,125,000
Variable Rate:	Variable Rate:									Variable Rate:
Mortgage loan payable	Mortgage loan payable	N/A		$	31,757,725	N/A		LIBOR plus 3.85% with a LIBOR floor of 2.23%	9/27/2022	Mortgage loan payable	N/A		$	31,338,350	N/A		LIBOR plus 3.85% with a LIBOR floor of 2.23%	11/14/2022
Line of credit	Line of credit	$	125,000,000	64,953,549		$	60,046,451	LIBOR plus 3.25% with a combined floor of 4.0%	3/12/2024	Line of credit	$	125,000,000	24,135,865		$	100,864,135	LIBOR plus 3.25% with a combined floor of 4.0%	3/12/2024
UBS repurchase agreement	UBS repurchase agreement	195,000,000		58,169,600		136,830,400		LIBOR or Term SOFR if LIBOR is not available plus a spread ranging from 1.60% to 2.25%	11/7/2024	UBS repurchase agreement	195,000,000		75,449,600		119,550,400		LIBOR or Term SOFR is LIBOR is not available plus a spread ranging from 1.60% to 2.25%	11/7/2024
GS repurchase agreement	GS repurchase agreement	200,000,000		118,349,549		81,650,451		Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 1.75% to 3.00%)	2/18/2024	GS repurchase agreement	200,000,000		119,826,606		80,173,394		Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 1.75% to 3.00%)	2/18/2024
		$	520,000,000	$	273,230,423	$	278,527,302				$	520,000,000	$	250,750,421	$	300,587,929

Cash Flows Provided by Operating Activities

2022 — For the ~~three~~nine months ended ~~March 31,~~September 30, 2022, cash flows provided by operating activities were ~~$2.9~~$8.3 million, primarily due to ~~$3.0~~$8.7 million of dividends received from Terra JV, of which ~~$2.2~~$4.1 million was recorded as a return of capital.

2021 — For the ~~three~~nine months ended ~~March 31,~~September 30, 2021, cash flows provided by operating activities were ~~$2.9~~$9.0 million, primarily due to ~~$3.0~~$9.3 million of dividends received from Terra JV, of which ~~$1.9~~$8.2 million was recorded as a return of capital.

Cash Flows used in Financing Activities

2022 — For the ~~three~~nine months ended ~~March 31,~~September 30, 2022, cash flows used in financing activities were ~~$3.0~~$9.0 million, primarily related to distributions paid to ~~members.~~members of $8.5 million and payment for capital redemptions of $0.4 million.

2021 — For the ~~three~~nine months ended ~~March 31,~~September 30, 2021, cash flows used in financing activities was ~~$3.0~~$9.0 million, primarily related to distributions paid to members.

Critical Accounting Policies and Use of Estimates

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

Fair Value Measurements

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

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

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

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

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

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

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

◦Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially full term of the asset or liability.

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

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

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

Management Agreement with Terra REIT Advisors

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

Origination and Extension Fee. An origination fee in the amount of 1.0% of the amount used to originate, acquire, fund, acquire or structure real estate-related investments, including any third-party expenses related to such loan. In the event that the term of any real estate-related loan is extended, Terra REIT Advisors also receives an extension fee equal to the lesser of (i) 1.0% of the principal amount of the loan being extended or (ii) the amount of fee paid by the borrower in connection with such extension.

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

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

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

Transaction Breakup Fee. In the event that Terra Property Trust receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, Terra REIT Advisors will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by Terra REIT Advisors with respect to its evaluation and pursuit of such transactions.

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

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


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
			2022		2021				2022		2021		2022		2021
Origination and extension fee expense (1)(2)	Origination and extension fee expense (1)(2)		$	686,365	$	345,384		Origination and extension fee expense (1)(2)	$	737,903	$	975,598	$	1,806,215	$	1,573,612
Asset management fee	Asset management fee		1,488,095		1,156,543			Asset management fee	1,611,934		1,420,119		4,740,657		3,733,358
Asset servicing fee	Asset servicing fee		349,329		273,207			Asset servicing fee	379,712		311,127		1,124,759		861,324
Operating expenses reimbursed to Manager			1,928,563		1,342,758
Operating expenses reimbursed to Terra REIT Advisors								Operating expenses reimbursed to Terra REIT Advisors	2,013,135		1,528,223		6,082,333		4,878,050
Disposition fee (3)	Disposition fee (3)		—		250,988			Disposition fee (3)	410,694		342,508		890,194		657,196
Total	Total		$	4,452,352	$	3,368,880		Total	$	5,153,378	$	4,577,575	$	14,644,158	$	11,703,540

_______________

(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 ~~three~~nine months ended ~~March 31,~~September 30, 2022 excluded $0.2 million of origination fee paid to Terra ~~Property Trust’s Manager~~REIT Advisors in connection with its 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

As of ~~March 31,~~September 30, 2022, Terra Property Trust had 1511 investments with an aggregate principal balance of ~~$358.5~~$308.7 million, net of obligations under participation agreements, ~~and secured borrowing,~~ that provide for interest income at an annual rate of LIBOR plus a spread, 1312 of which are subject to a LIBOR floor. A decrease of 100 basis points in LIBOR would decrease Terra Property Trust’s annual interest income, net of interest expense on participation agreements, by approximately ~~$0.6~~$3.0 million, and an increase of 100 basis points in LIBOR would increase Terra Property Trust’s annual interest income, net of interest expense on participation agreements, by approximately ~~$2.1~~$3.1 million. Additionally, Terra Property Trust had three investments with an aggregate principal balance of ~~$52.6~~$131.9 million that provide for interest income at an annual rate of SOFR plus a spread, all of which were subject to a SOFR floor. A decrease of 100 basis points in SOFR would decrease Terra Property Trust’s annual interest income by ~~$0.04~~$1.2 million, and an increase of 100 basis points would increase Terra Property Trust’s annual interest income by ~~$0.5~~$1.3 million.

Additionally, as of ~~March 31,~~September 30, 2022, Terra Property Trust had ~~$31.8~~$31.3 million of borrowings outstanding under a mortgage loan payable that bear interest at an annual rate of LIBOR plus a spread that is collateralized by an office building; a revolving line of credit with an outstanding balance of ~~$65.0~~$24.1 million that bears interest at an annual rate of LIBOR plus a spread that is collateralized by ~~$102.8~~$61.3 million of first mortgages; a repurchase agreement with an outstanding balance of ~~$58.2~~$75.4 million that bears interest at an annual rate of LIBOR or Term SOFR, as applicable, plus a spread that is collateralized by ~~$84.5~~$106.5 million of first mortgages; and another repurchase agreement with an outstanding balance of ~~$118.3~~$119.8 million that bears interest at an annual rate of Term SOFR plus a spread that is collateralized by ~~$163.8~~$165.7 million of first mortgages. A decrease of 100 basis points in LIBOR and Term SOFR would decrease Terra Property Trust’s annual interest expense by approximately ~~$0.4~~$2.5 million, and an increase of 100 basis points in LIBOR and Term SOFR would increase Terra Property Trust’s annual interest expense by approximately ~~$1.6~~$2.5 million.

In July 2017, the U.K. Financial Conduct Authority, which regulates the LIBOR administrator, IBA, announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021, which has subsequently been delayed to June 30, 2023. The Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions convened by the U.S. Federal Reserve, has recommended SOFR as a more robust reference rate alternative to U.S. dollar LIBOR. SOFR is calculated based on overnight transactions under repurchase agreements, backed by Treasury securities. SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Given that

SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR). SOFR is therefore likely to be lower than LIBOR and is less likely to correlate with the funding costs of financial institutions. Whether or not SOFR attains market traction as a LIBOR replacement tool remains in question. As such, the future of LIBOR at this time is uncertain.

Potential changes, or uncertainty related to such potential changes, may adversely affect the market for LIBOR-based loans, including Terra Property Trust’s portfolio of LIBOR-indexed, floating-rate loans, or the cost of its borrowings. In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based loans, including the value of the LIBOR-indexed, floating-rate loans in Terra Property Trust’s portfolio, or the cost of its borrowings. In the event LIBOR is unavailable, Terra Property Trust’s investment documents provide for a substitute index, on a basis generally consistent with market practice, intended to put us in substantially the same economic position as LIBOR.

We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts, subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. For the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, we did not engage in interest rate hedging activities.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including the chief executive officer and chief financial officer of our Manager (performing functions equivalent to those a principal executive officer and principal financial officer of our company would perform if we had any officers), of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~March 31,~~September 30, 2022. Based on that evaluation, the chief executive officer and chief financial officer of our Manager concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute assurance that it will detect or uncover failures within our company to disclose material information otherwise required to be set forth in our periodic reports.

Changes in Internal Control Over Financial Reporting

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

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we, Terra Property Trust, Terra JV and our Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of Terra Property Trust’s rights under contracts with its portfolio companies. Additionally, as of ~~March 31,~~September 30, 2022, Terra Property Trust 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. Terra Property Trust 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. Terra Property Trust believes this determination should be based on comparable sales, while the landlord insists that the rent under the ground lease itself is also relevant. Terra Property Trust’s position has prevailed in all three of the prior arbitrations to reset the ground rent. Terra Property Trust intends vigorously to pursue the litigation. While Terra Property Trust believes its arguments will likely prevail, the outcome of the legal proceeding cannot be predicted with certainty. If the landlord prevails, the future rent reset determinations could result in significantly higher ground rent, which would likely result in a significant diminution in the value of Terra Property Trust’s interest in the ground lease and the office building.

Item 1A. Risk Factors.

There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2021 other than the one below.

Inflation in the U.S. has accelerated recently and is currently expected to continue at an elevated level in the near-to medium-term.Further, heightened competition for workers, supply chain issues, the relocation of foreign production and manufacturing businesses to the U.S., and rising energy and commodity prices have contributed to increasing wages and other economic inputs.Higher inflation and rising input costs may have adverse effects on our commercial real estate-related loans, commercial real estate-related debt securities and select commercial real estate equity investments, which are subject to the risks typically associated with real estate.Inflation can negatively impact the profitability of real estate assets with long-term leases that do not provide for short-term rent increases or that provide for rent increases with a lower annual percentage increase than inflation.Continued inflation, particularly at higher levels, may have an adverse impact on the valuation of our investments.

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

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

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


Exhibit No.						Description and Method of Filing

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

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

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


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

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

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

2.7						Agreement and Plan of Merger, dated February 28, 2020, by and among Terra Property Trust, Inc., Terra Property Trust 2, Inc. and Terra Secured Income Fund 7, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 000-56117) filed with the SEC on March 5, 2020).

2.8						Agreement and Plan of Merger, dated as of May 2, 2022, by and among Terra Property Trust, Inc., Terra Income Fund 6, Inc., Terra Merger Sub, LLC, Terra Income Advisors, LLC and Terra REIT Advisors, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Terra Income Fund 6, Inc. with the SEC on May 5, 2022).
3.1						Amended and Restated Limited Liability Company Agreement of the registrant, dated January 1, 2016 (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10 (File No. 000-55780) filed with the SEC on April 28, 2017).

10.1						~~Second Amendment to Loan Documents~~Voting Support Agreement, dated ~~as of January 4,~~September 30, 2022, by and ~~amount Terra Mortgage Portfolio II, LLC, as Borrower,~~among Terra Property Trust, Inc., ~~as Guarantor,~~Terra JV, LLC and ~~Western Alliance Bank, as Lender~~Terra Offshore Funds REIT, LLC (incorporated by reference to Exhibit ~~10.15~~10.1 to the ~~Company's Annual~~Current Report on Form ~~10-K (File No 000-55780)~~8-K filed by Terra Property Trust, Inc. with the SEC on ~~March 11,~~October 3, 2022).

10.2						~~Uncommitted Master Repurchase and Securities Contract~~Form of Indemnification Agreement ~~dated as of February 18, 2022, by and amount Terra Mortgage Capital I, LLC, as Seller, Goldman Sachs Bank USA, as Buyer~~ (incorporated by reference to Exhibit ~~10.16~~10.2 to the ~~Company's Annual~~Current Report on Form ~~10-K (File No 000-55780)~~8-K filed by Terra Property Trust, Inc. with the SEC on ~~March 11,~~October 3, 2022).

10.3 *						~~Guarantee Agreement~~Consent and Amendment Letter, dated as of ~~February 18,~~September 27, 2022, by and ~~amount~~among Terra ~~Property Trust,~~Income Fund 6, Inc., ~~as Guarantor, in favor~~Terra Merger Sub, LLC, Eagle Point Credit Management LLC, and certain lenders on the signature pages thereto.


Exhibit No.						Description and Method of ~~Goldman Sachs Bank USA, as Buyer (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K (File No 000-55780) filed with the SEC on March 11, 2022).~~Filing


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

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

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

101.INS**						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH**						XBRL Taxonomy Extension Schema Document

101.CAL**						XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB**						XBRL Taxonomy Extension Label Linkbase Document

101.PRE**						XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File Included as Exhibit 101 (embedded within the Inline XBRL document)

_______________

* Filed herewith.

** Furnished herewith.

3843

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned in the capacities indicated* thereunto duly authorized.

Date: ~~May 12,~~November 10, 2022


			TERRA SECURED INCOME FUND 5, LLC

			By:			/s/ Vikram S. Uppal
						Vikram S. Uppal
						Chief Executive Officer
						(Principal Executive Officer)

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

___________

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

3944


	Three Months Ended March 31, 2022				Three Months Ended March 31, 2021
	Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)		Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)
Total portfolio
Gross loans	$	506,206,479	7.7	%	$	408,985,092	8.4	%
Obligations under participation agreements and secured borrowing	(79,023,662)		10.4	%	(88,594,532)		10.1	%
Repurchase agreement payable	(102,225,409)		2.5	%	—		—	%
Term loan payable	(42,140,886)		5.3	%	(107,776,898)		5.3	%
Revolving line of credit	(44,891,269)		4.0	%	(1,745,785)		4.0	%
Net loans (3)	$	237,925,253	10.2	%	$	210,867,877	9.3	%
Senior loans
Gross loans	304,278,978		6.2	%	255,124,634		6.4	%
Obligations under participation agreements and secured borrowing	(49,397,683)		9.9	%	(45,478,823)		8.6	%
Repurchase agreement payable	(102,225,409)		2.5	%	—		—	%
Term loan payable	(42,140,886)		5.3	%	(107,776,898)		5.3	%
Revolving line of credit	(44,891,269)		4.0	%	(1,745,785)		4.0	%
Net loans (3)	$	65,623,731	11.3	%	$	100,123,128	6.6	%
Subordinated loans (4)
Gross loans	201,927,501		9.6	%	153,860,458		11.7	%
Obligations under participation agreements	(29,625,979)		11.2	%	(43,115,709)		11.6	%
Net loans (3)	$	172,301,522	9.3	%	$	110,744,749	11.7	%