The externally managed REIT reported a net loss of $27.8 million for 2025 while racing to refinance maturing debt through exchange offers and asset sales.

March 20, 2026

Debt Maturity Pressure

Terra Property Trust, a Maryland-based real estate investment trust focused on commercial real estate credit investments, disclosed significant liquidity challenges in its annual report for the fiscal year ended December 31, 2025. The company faces approximately $118.8 million in unsecured notes coming due in the first half of 2026 and has acknowledged it does not currently have sufficient liquidity to satisfy those obligations.

The New York City-headquartered REIT, which originates and manages a portfolio of first mortgage loans, mezzanine loans, and preferred equity investments primarily in the middle market range of $10 million to $50 million, reported a net loss of $27.8 million for 2025, an improvement from a $37.2 million net loss in 2024. Total revenues declined to $35.4 million from $49.7 million in the prior year, driven largely by lower interest income as the weighted average principal balance of performing loans decreased.

The most pressing concern for the company centers on two tranches of unsecured senior notes. Terra Income Fund 6, LLC, a wholly owned subsidiary, has $38.4 million in 7.00% senior notes maturing on March 31, 2026, while Terra Property Trust itself has $80.4 million in 6.00% senior notes maturing on June 30, 2026. The company stated that as of December 31, 2025, it had $33.2 million in cash and cash equivalents — far short of the total amount needed.

To address the looming maturities, the company filed a registration statement in February 2026 for exchange offers that would swap both tranches of outstanding notes for newly issued senior secured notes due 2029. The company initially proposed a 9.75% interest rate on the new notes but subsequently reduced it to 7.00% in an amended filing on March 12, 2026, while extending the expiration date to March 26, 2026.

Terra Property Trust acknowledged that limited participation in the exchange offers could result in defaults on the notes that remain outstanding. The subsidiary Terra LLC had only about $0.4 million in cash as of year-end, and Terra Property Trust is not a guarantor of the 7.00% notes and has no contractual obligation to provide funds to Terra LLC for repayment.

Shrinking Portfolio and Credit Concerns

The company’s net loan portfolio contracted significantly during 2025. As of December 31, 2025, the portfolio consisted of nine loans across seven states with an aggregate net principal balance of $192.4 million, down from $299.3 million at the end of 2024. The portfolio carried a weighted average coupon rate of 13.4% and a weighted average remaining term to maturity of just 0.7 years.

Credit quality concerns persisted throughout the year. The company recorded a provision for credit losses of $12.8 million in 2025, following a $16.6 million provision in the prior year. As of year-end, five loans were classified as non-performing with total amortized costs of $154.7 million, up from four non-performing loans totaling $128.6 million at the end of 2024. The total allowance for credit losses on non-performing loans stood at $58.9 million.

The portfolio is geographically concentrated, with California, Georgia, New Jersey, Arizona, and New York representing approximately 39.5%, 18.8%, 16.5%, 11.9%, and 9.2% of the net loan portfolio, respectively. By property type, office properties accounted for roughly 52.9% of the net portfolio, followed by infill land at 21.1% and multifamily at 19.7%.

Asset Sales and Real Estate Operations

During 2025, Terra Property Trust sold four industrial buildings in Texas for net proceeds of $69.1 million, recognizing a net loss on the sales of $2.9 million plus an impairment charge of $3.4 million to write down the carrying value of two of the buildings. The company still owns four remaining industrial buildings in Texas with a net carrying value of $47.4 million, encumbered by $20.7 million in mortgage loans.

Book value per share declined to $6.02 from $7.63 a year earlier, reflecting the continued net losses. Total equity fell to $146.5 million from $185.7 million. Distributions to shareholders were cut to $0.48 per share from $0.76 in the prior year, and the company noted that all distributions in both years constituted returns of capital rather than income.

External Management and Related-Party Transactions

Terra Property Trust is externally managed by Terra REIT Advisors, a subsidiary of Terra Capital Partners. The company has no employees and relies entirely on the management team led by Chief Executive Officer Vikram Uppal. Total fees and reimbursements paid to the manager declined to $12.9 million from $17.4 million, reflecting the smaller portfolio.

The company also holds equity interests in affiliated investment vehicles, including a 14.9% stake in Mavik Real Estate Special Opportunities Fund and a newly acquired 1.5% interest in Mavik Real Estate Special Opportunities VS2, both of which invest in performing and non-performing mortgages and other credit instruments. These equity interests carried a combined value of $94.2 million at year-end.

Looking Ahead

The company continues to evaluate potential liquidity transactions including a possible direct listing of its Class A Common Stock on a national securities exchange or conversion into a traditional non-traded REIT with a share repurchase plan. However, no assurances were provided that any such transaction would be pursued or completed.

In a subsequent event disclosed in the annual report, the company entered into a loan purchase agreement in February 2026 to sell a $22.9 million senior loan for $15.0 million in cash plus potential profit participation of up to $7.0 million. That transaction was expected to close within 60 days. Additionally, in January 2026, the company foreclosed on a multifamily property in California that had been securing a defaulted loan.

The near-term trajectory of Terra Property Trust hinges largely on the success of its exchange offers and its ability to generate sufficient liquidity through asset dispositions and loan repayments to navigate the coming months.