Terra Property Trust Reports Narrowed Loss

Reduced loan exposure and improved equity returns helped Terra offset income declines in a challenging market.

May 12, 2025

Fewer Loans, More Focus

Over the past few months, Terra has been actively reducing its loan holdings. The company ended Q1 with $225 million in loans, down from $275 million at year-end. That reduction came mostly from principal repayments totaling $54 million. Terra isn’t standing still, though—it also originated or funded close to $8 million in new loans, selectively putting capital to work where the risk-return profile aligns with its investment goals.

The loan mix is also shifting. First mortgages remain the core of the portfolio, but preferred equity is taking up a bigger share—rising to 21.5% from 18.2% the quarter before. Mezzanine loans dropped to just over 3%. With a tighter focus, Terra is keeping credit risk in check. Total credit loss reserves declined over the past year, and nearly all of the current allowance relates to four non-performing positions.

A Look at the Financials

Revenue came in at $12.5 million—down from $15 million year-over-year. Most of that dip came from lower interest income as the loan book slimmed down. Real estate revenue also declined slightly, reflecting lower rental activity. Operating expenses moved in the right direction, falling 20% to $8.4 million. That drop was spread across asset management, depreciation, and professional services.

Despite the net loss, the company generated positive operating cash flow of $861,000. That’s a strong turnaround from the $4.2 million in cash used during the same period last year. Investing cash flow also jumped, thanks to loan paydowns. On the flip side, financing activities pulled down $46 million, largely due to debt repayments and distributions.

Equity Investments Are Gaining Ground

Equity investments are playing a bigger role in Terra’s performance. The company’s holdings in joint ventures and funds delivered $2.6 million in income this quarter—compared to a loss in Q1 last year. These investments now total more than $108 million in carrying value. Terra continues to build exposure here, taking stakes in both real estate-focused and non-real estate-related ventures.

These positions are helping to balance the impact of declining interest income, and they’re aligned with Terra’s long-term strategy of combining income generation with selective capital appreciation.

Capital and Liquidity Snapshot

The balance sheet remains strong. Terra ended the quarter with $20 million in combined cash and escrow balances—up slightly from December. The overall asset base shrank to $495 million as the company continued winding down select positions. On the debt side, secured financing dropped to $166 million from $206 million.

Distributions stayed level at $0.19 per share, and equity dipped modestly to $180 million after accounting for payouts and fair value changes.

What’s Ahead

Terra remains a REIT and continues to meet all distribution requirements. The company is actively exploring liquidity options—including a potential direct listing or transition to a non-traded REIT structure—but hasn’t made a formal move. Until then, it’s business as usual: disciplined loan management, targeted capital deployment, and a steady hand on credit oversight.

With tighter positioning and stronger equity income, Terra is keeping itself flexible in a market that continues to evolve. Every capital decision appears grounded in a clear view of risk, return, and opportunity.