XML 21 R11.htm IDEA: XBRL DOCUMENT
v3.25.2

Fair Value Measurements | 6 Months Ended
--- | ---
Jun. 30, 2025
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements The Company follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows: Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access. Level 2 — Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs. Level 3 — Significant unobservable inputs are based on the best information available in the circumstances, to the extent observable inputs are not available, including the Company’s own assumptions used in determining the fair value of investments. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and the Company considers factors specific to the investment. As of June 30, 2025 and December 31, 2024, the Company had not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, promissory note receivable, obligation under participation agreement and unsecured notes payable. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Financial Instruments Carried at Fair Value on a Recurring Basis From time to time, the Company may invest in debt securities. These securities are classified as available-for-sale debt securities and are carried at fair value. Changes in the fair value of the available-for-sale debt securities are reported in other comprehensive income or loss until a gain or loss on the securities is realized. Additionally, the Company may invest in short-term money market funds. These funds are included in cash and cash equivalents on the consolidated balance sheet due to their short-term nature and can be easily converted to cash. The following tables present fair value measurements of financial instruments that were carried at fair value, by major class, according to the fair value hierarchy:
|  | June 30, 2025
|  | Fair Value Measurements
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Available-for-sale debt securities |  | $ | 526,099 |  |  | $ | — |  |  | $ | — |  |  | $ | 526,099 |
Total |  | $ | 526,099 |  |  | $ | — |  |  | $ | — |  |  | $ | 526,099 |
|  | December 31, 2024
|  | Fair Value Measurements
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Available-for-sale debt securities |  | $ | 425,357 |  |  | $ | — |  |  | $ | — |  |  | $ | 425,357 |
Total |  | $ | 425,357 |  |  | $ | — |  |  | $ | — |  |  | $ | 425,357 |
The following table presents the activities of the marketable securities:
|  | Six Months Ended June 30,
|  | 2025 |  | 2024
Beginning balance |  | $ | 425,357 |  |  | $ | 507,266 |
Unrealized gain (loss) on available-for-sale debt securities |  | 100,742 |  |  | (8,563) |
Ending balance |  | $ | 526,099 |  |  | $ | 498,703 |
Financial Instruments Not Carried at Fair Value The following table presents the carrying value, which represents the amortized cost of loans, net of applicable allowance for credit losses, and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of:
|  |  |  | June 30, 2025 |  | December 31, 2024
|  | Level |  | Principal Balance |  | Carrying Value |  | Fair Value |  | Principal Balance |  | Carrying Value |  | Fair Value
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans held for investment |  | 3 |  | $ | 20,224,740 |  |  | $ | 20,426,987 |  |  | $ | 20,423,739 |  |  | $ | 18,567,296 |  |  | $ | 18,575,895 |  |  | $ | 18,830,181 |
Loans held for investment acquired through participation |  | 3 |  | 27,450,261 |  |  | 10,127,372 |  |  | 10,127,372 |  |  | 27,335,157 |  |  | 11,812,001 |  |  | 11,812,001 |
Total loans |  |  |  | $ | 47,675,001 |  |  | $ | 30,554,359 |  |  | $ | 30,551,111 |  |  | $ | 45,902,453 |  |  | $ | 30,387,896 |  |  | $ | 30,642,182 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Unsecured notes payable (1)(2) |  | 1 |  | $ | 38,375,000 |  |  | $ | 37,232,292 |  |  | $ | 35,734,800 |  |  | $ | 38,375,000 |  |  | $ | 36,521,684 |  |  | $ | 37,008,850 |
Obligation under participation agreement |  | 3 |  | 19,606,804 |  |  | 19,802,872 |  |  | 19,799,722 |  |  | 18,000,000 |  |  | 18,173,962 |  |  | 18,254,853 |
Total liabilities |  |  |  | $ | 57,981,804 |  |  | $ | 57,035,164 |  |  | $ | 55,534,522 |  |  | $ | 56,375,000 |  |  | $ | 54,695,646 |  |  | $ | 55,263,703 |
_______________ (1)Carrying value is net of unamortized purchase discount of $1.1 million and $1.9 million as of June 30, 2025 and December 31, 2024, respectively. (2)Valuation falls under Level 1 of the fair value hierarchy, which is based on the trading price of $23.28 and $24.11 as of the close of the business day on June 30, 2025 and December 31, 2024, respectively. Valuation Methodology The fair value of the Company’s investment in corporate bonds, preferred stock and common stock within the marketable securities portfolio, if any, is determined based on quoted prices in an active market and is classified as Level 1 of the fair value hierarchy. Additionally, the fair value of the Company’s unsecured notes payable is determined based on quoted price in an active market and is also classified as Level 1. Market quotations are not readily available for the Company’s real estate-related loan investments, all of which are included in Level 3 of the fair value hierarchy, as these investments are valued utilizing a yield approach, i.e., a discounted cash flow methodology to arrive at an estimate of the fair value of each respective investment in the portfolio using an estimated market yield. In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, including available current market data on applicable yields of comparable debt/preferred equity instruments; market credit spreads and yield curves; the investment’s yield; covenants of the investment, including prepayment provisions; the ability of the Company’s borrowers and investees to make payments, net operating income and debt service coverage ratio; construction progress reports and construction budget analysis; the nature, quality and realizable value of any collateral (and loan-to-value ratio); the forces that influence the local markets in which the asset (the collateral) is purchased and sold, such as capitalization rates, occupancy rates, rental rates and replacement costs; and the anticipated duration of each real estate-related loan investment. These valuation techniques are applied in a consistent and verifiable manner to all investments that are categorized within Level 3 of the fair value hierarchy and the REIT Manager provides the board of directors of Terra REIT (the “Terra REIT Board”), (a majority of which is made up of independent directors) with the investment valuations that are based on this discounted cash flow methodology. Valuations are prepared quarterly, or more frequently as needed, with each asset in the portfolio subject to a valuation prepared by a third-party valuation service at a minimum of once during every 12-month period. REIT Manager reviews the preliminary valuation with the Terra REIT Board and, together with an independent valuation firm, if applicable, responds and supplements the preliminary valuation to reflect any comments provided by the Terra REIT Board. The REIT Manager discusses valuations and determines the fair value of each investment in the portfolio in good faith based on various metrics and other factors, including the input and recommendation provided by the Terra REIT Board and any third-party valuation firm, if applicable. Significant Unobservable Inputs The following tables summarize the significant unobservable inputs used by the Company to value the Level 3 financial instruments as of June 30, 2025 and December 31, 2024. The following tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.
June 30, 2025
|  |  |  | Primary Valuation Technique |  | Unobservable Input |  | Range |  | Weighted
Asset Category |  | Fair Value |  |  |  | Minimum |  | Maximum |  | Average
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 20,423,739 |  |  | Discounted cash flow |  | Discount rate |  | 19.32 | % |  | 19.32 | % |  | 19.32 | %
Loans through participation interest |  | 10,127,372 |  |  | Discounted cash flow |  | Discount rate |  | 6.75 | % |  | 6.75 | % |  | 6.75 | %
|  |  |  | Discounted cash flow |  | Terminal capitalization rate |  | 5.75 | % |  | 5.75 | % |  | 5.75 | %
Total Level 3 Assets |  | $ | 30,551,111 |  |  |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Obligation under participation agreement |  | $ | 19,799,722 |  |  | Discounted cash flow |  | Discount rate |  | 19.32 | % |  | 19.32 | % |  | 19.32 | %
December 31, 2024
|  |  |  | Primary Valuation Technique |  | Unobservable Input |  | Range |  | Weighted
Asset Category |  | Fair Value |  |  |  | Minimum |  | Maximum |  | Average
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 18,830,181 |  |  | Discounted cash flow |  | Discount rate |  | 14.78 | % |  | 14.78 | % |  | 14.78 | %
Loans through participation interest |  | 11,812,001 |  |  | Discounted cash flow |  | Discount rate |  | 6.75 | % |  | 6.75 | % |  | 6.75 | %
|  |  |  | Discounted cash flow |  | Terminal capitalization rate |  | 5.75 | % |  | 5.75 | % |  | 5.75 | %
Total Level 3 Assets |  | $ | 30,642,182 |  |  |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Obligation under participation agreement |  | $ | 18,254,853 |  |  | Discounted cash flow |  | Discount rate |  | 14.78 | % |  | 14.78 | % |  | 14.78 | %
If the weighted average discount rate used to value the Company’s investments were to increase, the fair value of the Company’s investments would decrease. Conversely, if the weighted average discount rate used to value the Company’s investments were to decrease, the fair value of Company’s investments would increase.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (bbb)(1) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 3: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration