The Company entered into the Management Agreement with the Manager whereby the Manager is responsible for its day-to-day operations. The Management Agreement runs co-terminus with the amended and restated operating agreement for Terra Fund 5, which is scheduled to terminate on December 31, 2023 unless Terra Fund 5 is dissolved earlier. The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations:


	Years Ended December 31,
		2022		2021
Origination and extension fee expense (1)(2)		$	2,967,291	$	2,729,598
Asset management fee		6,556,492		5,134,149
Asset servicing fee		1,560,044		1,181,924
Operating expenses reimbursed to Manager		8,076,321		6,916,371
Disposition fee (3)		890,194		1,006,302
Total		$	20,050,342	$	16,968,344

(2)Amount for the years ended December 31, 2022 and 2021 excluded $0.2 million and $0.3 million of origination fee, respectively, paid to the Manager in connection with the Company’s equity investment in an unconsolidated investment. This origination fee was capitalized to the carrying value of the unconsolidated investment as a transaction cost.

Pursuant to the Management Agreement, the Manager or its affiliates receives an origination fee in the amount of 1% of the amount used to originate, fund, acquire or structure real estate-related investments, including any third-party expenses related to such loans. In the event that the term of any real estate-related loan held by the Company is extended, the Manager also receives an extension fee equal to the lesser of (i) 1% of the principal amount of the loan being extended or (ii) the amount of fee paid to the Company by the borrower in connection with such extension.

Under the terms of the Management Agreement, the Manager or its affiliates provides the Company with certain investment management services in return for a management fee. The Company pays a monthly asset management fee at an annual rate of 1% of the aggregate funds under management, which includes the loan origination price or aggregate gross acquisition price, as defined in the Management Agreement, for each real estate related loan and cash held by the Company.

The Manager or its affiliates receives from the Company a monthly servicing fee at an annual rate of 0.25% of the aggregate gross origination price or acquisition price, as defined in the Management Agreement, for each real estate-related loan held by the Company.

In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any loan or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of December 31, 2022 and 2021, the Company has not received any breakup fees.

The Company reimburses the Manager for operating expenses incurred in connection with services provided to the operations of the Company, including the Company’s allocable share of the Manager’s overhead, such as rent, employee costs, utilities, and technology costs.

Pursuant to the Management Agreement, the Manager or its affiliates receives a disposition fee in the amount of 1% of the gross sale price received by the Company from the disposition of any real estate-related loan, or any portion of, or interest in, any real estate-related loan. The disposition fee is paid concurrently with the closing of any such disposition of all or any portion of any real estate-related loan or any interest therein, which is the lesser of (i) 1% of the principal amount of the loan or debt-related loan prior to such transaction or (ii) the amount of the fee paid by the borrower in connection with such transaction. If the Company takes ownership of a property as a result of a workout or foreclosure of a loan, the Company will pay a disposition fee upon the sale of such property equal to 1% of the sales price.

The Company and Terra LLC have entered into a cost sharing and reimbursement agreement effective October 1, 2022, pursuant to which Terra LLC is responsible for its allocable share of the Company’s expenses, including fees paid by the

For the years ended December 31, 2022 and 2021, the Company made distributions to investors totaling $16.0 million and $17.1 million, respectively, of which $6.5 million and $14.6 million were returns of capital, respectively (Note 11).

As of December 31, 2022 and 2021, approximately $3.9 million and $2.4 million was due to the Manager, respectively, as reflected on the consolidated balance sheets, primarily related to the present value of the disposition fees on individual loans due to the Manager.

As of December 31, 2022, there was no amount due from related party. As of December 31, 2021, amount due from a related party was $2.6 million, primarily related to the reserve funding on a loan that was held by an affiliate. The reserve funding was transferred to the Company in February 2022.

On August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. For more information on this investment, please see Note 5.

In the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the “Participants”). The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity.

ASC 860, Transfers and Servicing (“ASC 860”), establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (See “Participation interests” in Note 2 and “Obligations under Participation Agreements and Secured Borrowing” in (Note 9).

From time to time, the Company may purchase investments from affiliates pursuant to participation agreements. In accordance with the terms of each participation agreement, each Participant’s rights and obligations, as well as the proceeds received from the related borrower/issuer of the loan, are based upon their respective pro rata participation interest in the loan.


	December 31, 2022
	Participating Interests	Principal Balance		Carrying Value

Havemeyer TSM LLC (1)(2)	23.00%	$	3,282,208	$	3,313,813
Mesa AZ Industrial Owner, LLC (1)(3)	38.27%	31,000,000		31,276,468
UNJ Sole Member, LLC (1)	40.80%	7,444,357		7,482,547
		$	41,726,565	$	42,072,828

(4)The loan was held in the name of Terra BDC, a formerly affiliated fund that was advised by Terra Income Advisors, LLC, an affiliate of the Company’s sponsor and Manager. In connection with the BDC Merger, the Company contributed the loan to Terra BDC and the related obligation under participation agreement was released.


					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2022
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
610 Walnut Investors LLC (1)	$	18,625,738	$	18,738,386	67.57	%	$	12,584,958	$	12,680,594
	$	18,625,738	$	18,738,386			$	12,584,958	$	12,680,594


					Transfers Treated as Obligations Under Participation Agreements as of December 31, 2021
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
370 Lex Part Deux, LLC (2)(3)	$	60,012,639	$	60,012,639	35.00	%	$	21,004,424	$	21,004,423
RS JZ Driggs, LLC (2)(3)	15,606,409		15,754,641		50.00	%	7,806,370		7,880,516
William A. Shopoff & Cindy I. Shopoff (2)(3)	25,000,000		25,206,964		52.95	%	13,237,500		13,347,088
	$	100,619,048	$	100,974,244			$	42,048,294	$	42,232,027

(3)In connection with the BDC Merger, the obligations under participation agreements were effectively extinguished and the Company recognized a gain on extinguishment of obligations under participation agreements of $3.4 million (Note 3).

These investments are held in the name of the Company, but each of the Participant’s rights and obligations, including interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon their respective pro rata participation interest in such participated investments, as specified in the respective participation agreement. The Participants’ share of the investments is repayable only from the proceeds received from the related borrower/issuer of the investments and, therefore, the Participants also are subject to credit risk (i.e., risk of default by the underlying borrower/issuer). Pursuant to the participation agreements with these entities, the Company receives and allocates the interest income and other related investment income to the Participants based on their respective pro rata participation interest. The Participants pay any expenses, including any fees to the Manager, only on their respective pro rata participation interest, subject to the terms of the respective governing fee arrangements.

In March 2020, the Company entered into a financing transaction where a third-party purchased an A-note position. However, the sale of the A-note position did not qualify for sale accounting under ASC 860 and therefore, the gross amount of the loan remains in the consolidated balance sheets and the proceeds from the sale on the portion transferred are recorded as secured borrowing. Interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the transferred interest is recorded within “Interest expense on secured borrowing” in the consolidated statements of operations. In August 2022, the secured borrowing was repaid in full.


					Transfers Treated as Secured Borrowing as of December 31, 2021
	Principal Balance		Carrying Value		% Transferred		Principal Balance		Carrying Value
Windy Hill PV Five CM, LLC	$	49,954,068	$	50,264,568	69.11	%	$	34,521,104	$	34,586,129
	$	49,954,068	$	50,264,568			$	34,521,104	$	34,586,129