Terra Property Trust, Inc. (TPTA)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 showed sequential improvement in GAAP results: net loss narrowed to $1.3MM ($0.05/share) from $15.6MM ($0.64/share) in Q4 2024 and $7.8MM ($0.32/share) in Q3 2024, as loss drivers remained credit/workout related rather than core yield compression .
• Credit provisioning moderated quarter-over-quarter (CECL build $2.1MM vs $12.9MM in Q4), and TPT realized $2.5MM of default interest on a repaid non-accrual loan, evidencing progress on workouts .
• Balance sheet metrics improved: leverage fell to 1.59x (from 1.76x in Q4), with 95% floating-rate loans and weighted average portfolio rates at 13.9% gross/14.4% net; average cost of debt was 7.0% and 111 consecutive monthly distributions had been made through March 31, 2025 .
• Management reiterated multiple liquidity pathways (direct listing, IPO, strategic transaction, or conversion to a non-traded REIT with repurchase plan), making “liquidity event clarity” a key potential stock catalyst from here .
• Street consensus (S&P Global) for Q1 2025 EPS and revenue was unavailable, limiting beat/miss analysis versus estimates; focus centers on credit normalization pace and liquidity execution [Values retrieved from S&P Global].

What Went Well and What Went Wrong

• What Went Well

  • Realized $2.5MM of default interest on a full repayment of a previously non-accrual loan, signaling traction on resolutions .
  • Provisioning cadence improved with CECL reserve build of $2.1MM in Q1 versus $12.9MM in Q4; depreciation/amortization was $1.9MM, broadly consistent with recent quarters .
  • Leverage improved to 1.59x and management highlighted 111 consecutive monthly distributions through March 31, 2025, underpinned by portfolio yields (13.86% gross) materially above cost of debt (7.0%) .

• What Went Wrong

  • GAAP remained in loss due to reduced interest income from non-performing loans; Q1 GAAP net loss was $1.3MM ($0.05/share) and management again cited NPL-driven pressure on earnings quality .
  • CRE macro remains challenging; management’s materials continue to depict MREITs “in defensive mode” amid depressed originations and dividend reductions across peers, implying continued workout-heavy activity sector-wide .
  • Despite sequential improvement, credit costs (CECL) continue, and recent quarters illustrate volatility: Q4’s large CECL build ($12.9MM) and Q3’s loss on loan repayment ($5.6MM) underscore ongoing resolution risk in the portfolio .

Financial Results

Notes: Revenue and margin figures were not disclosed in the Q1 investor update materials; Street estimates (S&P Global) for revenue/EPS were unavailable for Q1 2025 [Values retrieved from S&P Global].

KPIs and Portfolio Metrics

Segment/Exposure Snapshot (as of March 31, 2025)

• Investment Structure (by deals): Equity 50% (8), First Mortgage 31% (6), Preferred Equity 16% (4), Mezzanine 3% (2) .
• Property Type (by deals): Industrial 30% (4), Office 20% (5), Multifamily 18% (4), Corporate 16% (3), Infill Land 13% (2), Mixed Use 3% (2) .
• Investment Profile (by deals): Value-Add 54% (9), Pre-Development 17% (3), Stabilized 7% (2), Other 17% (4), Construction 5% (2) .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “GAAP Net loss of $1.3MM or $0.05/share… The loss was driven primarily by reductions in interest income as a result of non-performing loans, as well as non-cash charges ($2.1MM incremental CECL reserves).”
• “Realized $2.5MM of default interest on full repayment in Q1 of a loan on non‑accrual status.”
• “Low leverage – Debt to Equity of 1.59x… Avg cost of debt 7.0% vs Avg (gross) loan portfolio yield of 13.86%… 111 consecutive monthly distributions [through March 31, 2025].”
• “Potential future liquidity transactions include: Direct listing of TPT; IPO; Strategic transactions…; Converting TPT into a traditional ‘non‑traded REIT,’ including the adoption of a share repurchase plan.”
• Macro frame: “MREITs remain in defensive mode as they can’t raise capital accretively, remain in protracted workouts, increase reserves, and cut dividends.”

Q&A Highlights

• A live webcast and call were held on May 22, 2025, with playback available through June 5, 2025, but no transcript was filed in the SEC document set reviewed; therefore, Q&A specifics are not available for citation .
• The session was positioned to discuss Q1 2025 financial/operational details and liquidity plans .

Estimates Context

• Wall Street consensus (S&P Global) for Q1 2025 EPS and revenue was unavailable; as a result, we cannot quantify beats/misses versus consensus for this quarter [Values retrieved from S&P Global].
• Given the credit-driven earnings dynamics (CECL, workout items), Street models—where they exist—likely need to reflect reduced non-accrual drag as workouts resolve (e.g., realized default interest) but still incorporate ongoing provisioning risk .

Key Takeaways for Investors

• Sequential improvement in GAAP loss and moderation in CECL charges suggest progress on credit normalization; watch for additional resolutions/default interest recoveries as near-term earnings swing factors .
• Spread remains attractive (gross portfolio yields ~13.9% vs cost of debt ~7.0%), supporting medium-term earning power once NPL drag abates .
• Leverage retraced from Q4’s high, offering some flexibility; continued discipline on debt/equity and liquidity planning is a key risk mitigant .
• Liquidity event optionality (direct listing/IPO/strategic/convert to non-traded REIT) is the primary potential stock catalyst; monitor disclosures for timeline and structure .
• Distributions have been consistent historically (111 consecutive months as of 3/31/25), but sustainability is linked to workout outcomes and macro CRE conditions .
• Macro headwinds for CRE credit persist; expect a workout-heavy environment to continue driving quarter-to-quarter volatility in GAAP results .
• With consensus data unavailable, trading may hinge more on qualitative updates (workout milestones, liquidity path communications) than on conventional beat/miss constructs [Values retrieved from S&P Global].