Terra Property Trust Posts $10.5M Loss

Declining interest income and strategic asset sales signal a continued pivot in Terra's lending and investment focus.

August 19, 2025

A Leaner Balance Sheet

Terra Property Trust closed the first half of 2025 with a net loss of $10.5 million, narrowing its year-over-year loss from $13.7 million. The company is actively reshaping its portfolio, scaling back loan exposure and rebalancing real estate holdings in response to evolving market conditions.

Between January and June, Terra reduced its total assets from $543 million to $459 million. That change reflects a deliberate move away from certain legacy positions. Loans held for investment dropped by nearly $77 million as repayments outpaced new originations. At the same time, two properties were designated for sale and another was sold, resulting in a $2.1 million loss and a $3.4 million impairment charge.

On the liability side, the company made meaningful progress in lowering its debt load. Secured financing agreements were down $67 million from year-end 2024. Terra also wound down multiple credit facilities, shrinking its interest burden and positioning itself for greater flexibility going forward.

Revenue Pressures and Non-Performing Loans

The rebalancing came with trade-offs. Interest income for the six-month period declined to $16.8 million, compared to $20.6 million a year earlier. Real estate revenue also pulled back, falling roughly 24% year-over-year.

Operational expenses were generally in line with prior-year levels, but interest expense and impairment charges weighed on results. Notably, Terra stopped accruing interest on two loans totaling $6.9 million in income suspension, adding to pressure on earnings. As of June 30, roughly 61% of the company’s loan portfolio was classified as non-performing, up from 40% at the end of last year.

Equity Investments Playing a Larger Role

Terra’s equity investments picked up some of the slack. The company’s $107 million in unconsolidated joint ventures and fund interests generated $4.8 million in income during the first half—more than triple the prior-year figure. That growth reflects both capital deployments and performance from existing investments, including a $50 million commitment to a real estate special opportunities fund.

The company also formalized its ability to collect fees across a broader asset base. An amendment to its management agreement in May clarified that fee income now applies to non-real estate holdings, which could support additional diversification over time.

Capital Management and Shareholder Distributions

Terra declared distributions of $0.29 per share for the period, all categorized as return of capital. That figure was down from $0.38 per share in the first half of 2024. Share counts remained stable, with 24.3 million shares of Class B common stock outstanding and no active trading market in place.

The company ended the quarter with $32.7 million in cash, restricted cash, and cash held in escrow—up from $19 million at year-end. That cash cushion, combined with incoming loan repayments and planned asset sales, is expected to fund near-term obligations, including two debt maturities in 2026 totaling over $123 million.

Looking Ahead

Terra is maintaining its REIT status and remains in compliance with all regulatory requirements. Management continues to monitor credit exposures and economic conditions, particularly in commercial real estate. With a trimmed-down balance sheet and rising contribution from equity investments, the firm is realigning itself to better navigate today’s environment—while keeping flexibility at the center of its strategy.