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Related Party Transactions | 6 Months Ended
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Jun. 30, 2025
Related Party Transactions [Abstract] |
Related Party Transactions | Related Party Transactions Promissory Note Receivable On January 24, 2024, the Company entered into a revolving promissory note receivable with Terra REIT. The promissory note receivable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days. The promissory note does not contain current interest payment obligations in cash and instead adds such interest amount to the principal balance of the promissory note on the last day of each calendar quarter. The promissory note matures on March 31, 2027. For the six months ended June 30, 2025 and 2024, the Company provided funding under the promissory note receivable of $9.9 million and $34.3 million, respectively, received repayment of $7.8 million and zero, respectively. As of June 30, 2025 and December 31, 2024, the amount outstanding under the promissory note receivable was $47.2 million and $45.1 million, respectively. For the three months ended June 30, 2025 and 2024, interest income recognized on the promissory note receivable was $0.9 million and $0.4 million, respectively, and for the six months ended June 30, 2025 and 2024, interest income recognized on the promissory note receivable was $1.7 million and $0.5 million, respectively, which was included in Interest income on the consolidated statements of operations and comprehensive loss. Cost Sharing Agreement On November 8, 2022, the Company entered into the Cost Sharing Agreement with Terra REIT effective October 1, 2022, pursuant to which the Company reimburses Terra REIT for its allocable portion of management and transaction fees and operating expenses incurred by Terra REIT, including fees paid by Terra REIT to the REIT Manager. The following table presents a summary of such fees and reimbursements incurred pursuant to the Cost Sharing Agreement between Terra LLC and Terra REIT:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Amounts Included in the Statements of Operations
Asset management and asset servicing fees |  | $ | 203,852 |  |  | $ | 277,621 |  |  | $ | 407,919 |  |  | $ | 667,679 |
Operating expense reimbursement to Adviser (1) |  | 129,656 |  |  | 320,214 |  |  | 306,094 |  |  | 702,508 |
Origination, extension and disposition fees |  | 655 |  |  | 137,405 |  |  | 4,209 |  |  | 356,397 |
_______________ (1)Amounts were primarily compensation for time spent supporting the Company’s day-to-day operations. Terra REIT’s Management Agreement with the REIT Manager Terra REIT is the Company’s parent and sole member. The Company is party to a cost sharing arrangement with Terra REIT pursuant to which the Company is responsible for its allocable share of Terra REIT’s expenses, including fees paid by Terra REIT to its manager, the REIT Manager. Terra REIT currently pays the following fees to the REIT Manager pursuant to a management agreement (the “Management Agreement”): Origination and Extension Fee. An origination fee in the amount of 1.0% of the amount used to originate, acquire, fund or structure investments, including any third-party expenses related to such investments. In the event that the term of any loan is extended, the REIT Manager also receives an origination fee equal to the lesser of (i) 1.0% of the principal amount of the loan being extended or (ii) the amount of fee paid by the borrower in connection with such extension. 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 investment and cash held by Terra REIT. 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 investment held by Terra REIT (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 REIT from the disposition of an investment, 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 REIT takes ownership of a property as a result of a workout or foreclosure of a loan, Terra REIT 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 REIT receive 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 investment or disposition transaction, the REIT Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the REIT Manager with respect to its evaluation and pursuit of such transactions. In addition to the fees described above, Terra REIT reimburses the REIT Manager for operating expenses incurred in connection with services provided to the operations of Terra REIT, including its allocable share of the REIT Manager’s overhead, such as rent, employee costs, utilities, and technology costs. Terra REIT’s Management Agreement Amendment As discussed herein, Terra REIT may make real estate and non-real estate related investments of any type that align with its investment objectives and criteria. Accordingly, on May 8, 2025, Terra REIT and the REIT Manager entered into an amendment to the Management Agreement, effective as of January 1, 2025 (the “Amendment”), in order to clarify that the origination, asset management, asset servicing, disposition and breakup fees that Terra REIT pays to the REIT Manager pursuant to the Management Agreement are payable with respect to all real estate and non-real estate investments of any type that Terra REIT originates or acquires. Unless otherwise specifically noted, all references herein to the “Management Agreement” refer to the Management Agreement as modified by the Amendment. Participation Agreements The Company may enter into participation agreements with related and unrelated parties, primarily other affiliated funds of the REIT Manager. The participation agreements provide the Company with the opportunity to invest along the same terms, conditions, price and rights in the specified investment. The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified investment when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other participants or it may be a participant to an investment held by another entity. ASC Topic 860, Transfers and Servicing (“ASC 860”), establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC Topic 860. Participation interest purchased by the Company: The below tables list the investment interests purchased by the Company via participation agreements (each, a “PA”) as of June 30, 2025 and December 31, 2024. In accordance with the terms of each PA, each participant’s rights and obligations, including interest income and other income (e.g., exit fee and prepayment income) and related fees/expenses are based upon its respective pro-rata participation interest in such investments, as specified in the respective PA. The Company’s share of the investment is repayable only from the proceeds received from the related borrower/ issuer of the investment, and therefore the Company is also subject to the credit risk (i.e., risk of default by the underlying borrower/issuer). Pursuant to each PA, the affiliated fund receives and allocates the interest income and other related investment incomes in respect of the investment to the Company. The Company paid related expenses (i.e., the base management fee) directly to Terra REIT.
|  | June 30, 2025 |  | December 31, 2024
|  | Participating Interests |  | Principal Balance |  | Carrying Value |  | Participating Interests |  | Principal Balance |  | Carrying Value
Loan A (1)(2) |  | 35.0 | % |  | $ | 24,491,877 |  |  | $ | 7,503,988 |  |  | 35.0 | % |  | $ | 24,491,877 |  |  | $ | 9,238,721 |
Loan B (2)(3) |  | 50.0 | % |  | 2,958,384 |  |  | 2,623,384 |  |  | 50.0 | % |  | 2,843,280 |  |  | 2,573,280 |
Total |  |  |  | $ | 27,450,261 |  |  | $ | 10,127,372 |  |  |  |  | $ | 27,335,157 |  |  | $ | 11,812,001 |
_______________ (1)Carrying value is net of specific allowance for loan losses of $17.0 million and $15.5 million as of June 30, 2025 and December 31, 2024, respectively. (2)The loan is held in the name of Terra REIT, the Company’s parent entity. (3)The increase in principal balance as of June 30, 2025 when compared to December 31, 2024 is primarily related to legal fees incurred in connection with the Company's ongoing litigation to seek full repayment of the loan from the sponsor. Transfers of participation interests by the Company: The following table summarizes the investment that was subject to a PA with investment partnership affiliated with the REIT Manager as of:
|  |  |  |  |  | June 30, 2025
|  |  |  |  |  | Transfers treated as obligations under participation agreements
|  | Principal |  | Carrying Value |  | % Transferred |  | Principal |  | Carrying Value
Loan C (1) |  | $ | 20,224,740 |  |  | $ | 20,426,987 |  |  | 96.9 | % |  | $ | 19,606,804 |  |  | $ | 19,802,872 |
|  |  |  |  |  | December 31, 2024
|  |  |  |  |  | Transfers treated as obligations under participation agreements
|  | Principal |  | Carrying Value |  | % Transferred |  | Principal |  | Carrying Value
Loan C (1) |  | $ | 18,567,296 |  |  | $ | 18,575,895 |  |  | 96.9 | % |  | $ | 18,000,000 |  |  | $ | 18,173,962 |
________________ (1)Participant is a certain separately managed account, an investment partnership managed by the REIT Manager. This investment is held in the name of the Company, but the Participant’s rights and obligations, including interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon its pro rata participation interest in such participated investment, as specified in the participation agreement. The Participant’s share of the investment is repayable only from the proceeds received from the related borrower/issuer of the investment and, therefore, the Participant also is subject to credit risk (i.e., risk of default by the underlying borrower/issuer). Pursuant to the participation agreement with this entity, the Company receives and allocates the interest income and other related investment income to the Participant based on its pro rata participation interest. The Participant pays any expenses, including any fees to the REIT Manager, only on its pro rata participation interest, subject to the terms of the governing fee arrangements.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 850 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147483326/850-10-50-1 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480990/946-20-50-2 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480990/946-20-50-5 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480990/946-20-50-6 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 235 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org/1943274/2147477968/946-235-50-2 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 235 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147477968/946-235-50-2 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 220 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-07(2)(g)(3)) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 220 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-07(2)(c)) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 220 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-07(2)(e)) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 850 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/850/tableOfContent Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 850 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Publisher FASB -URI https://asc.fasb.org/1943274/2147483326/850-10-50-6 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 850 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147483326/850-10-50-1 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 850 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147483326/850-10-50-1 + Details
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