TERRA INTERNATIONAL FUND 3, L.P. LIMITED PARTNERSHIP ... · CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM Dated May 30, 2019 This confidential private placement memorandum (the “memorandum”)

TERRA INTERNATIONAL FUND 3, L.P. LIMITED PARTNERSHIP INTERESTS

U.S. $50,000,000 MAXIMUM OFFERING

CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

Dated May 30, 2019

This confidential private placement memorandum (the “memorandum”) is being furnished to a limited number of prospective

investors on a confidential basis to consider an investment in limited partnership interests (the “Interests”) of Terra International Fund

3, L.P. (the “Partnership”), a recently formed Cayman Islands exempted limited partnership. Substantially all of the assets of the

Partnership will be invested in shares of common stock of its affiliate, Terra Property Trust, Inc. (“Terra Property Trust”), a Maryland

corporation that has elected to be taxed for federal income tax purposes as a real estate investment trust (a “REIT”) under the Internal

Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2016. The Partnership will

invest in Terra Property Trust through Terra International Fund 3 REIT, LLC (the “REIT Subsidiary”), a recently organized Delaware

limited liability company that intends to qualify and elect to be taxed for federal income tax purposes as a REIT for its taxable year

ended December 31, 2019. For ease of reference, the Partnership together with the REIT Subsidiary and Terra Property Trust, may be

referred to herein collectively or individually, as the context may dictate, as “we,” “us,” “our,” and the “Partnership” except as otherwise

stated in this memorandum.

Terra International Fund 3 GP LLC, a recently organized Delaware limited liability company (the “General Partner”) will serve as

general partner of the Partnership and as manager of the REIT Subsidiary.

Terra REIT Advisors, LLC (the “Adviser”), a Delaware limited liability company, has been engaged to act as investment manager

of each of the Partnership, the REIT Subsidiary, and Terra Property Trust. The General Partner has delegated to the Adviser certain

advisory and management services pursuant to the investment management agreement. The Adviser is registered with the U.S. Securities

and Exchange Commission (the “SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended. The parent

company of the Adviser and the General Partner is Terra Capital Partners, LLC, a Delaware limited liability company.

We are seeking aggregate subscriptions of up to U.S. $50,000,000 (subject to increase at the sole discretion of the General Partner)

for Interests. The Interests are being offered for sale exclusively to persons that are not “United States persons” as defined in

Section 7701(a)(30) of the Code. Each investor will need to comply with the suitability requirements of his or her country of residence.

An investment in the Interests involves a substantial degree of risk. See “Risk Factors.”

No securities regulatory authority or securities commission has approved or disapproved these securities or passed upon the

adequacy or accuracy of this memorandum. Any representation to the contrary may be a criminal offense.

The Interests are subject to restrictions on transferability and resale and may not be transferred or resold except as

permitted under applicable law, pursuant to registration or exemption therefrom. Investors should be aware that they will be

required to bear the financial risks of this investment for an indefinite period of time.

Maximum Price

to Investors

Maximum Selling Commissions and

Fees(1)

Minimum Net

Proceeds

Minimum Offering ........................... $1,000,000 $50,000 $950,000

Maximum Offering .......................... $50,000,000 $2,500,000 $47,500,000

(1) We have engaged IDB Capital Corp. (“IDB”) to serve as placement agent to solicit investors for this offering, and we may

also engage one or more additional placement agents. We will pay aggregate selling commissions to IDB and any other

placement agents we may engage of up to 5.0% of the gross proceeds from the sale of our Interests, payable as follows: (i) up

to 2.0% of the gross proceeds payable at the time of such sale plus (ii) up to 1.0% of the gross proceeds payable for each of

the three years thereafter on the anniversary of the offering termination date; provided, however, that aggregate selling

commissions payable shall not exceed 5.0% of the gross proceeds of the sale of our Interests. The selling commissions may

be waived or reduced for certain categories of purchasers. See “Plan of Distribution.”

We will not sell any Interests unless we receive and accept a minimum of U.S. $1,000,000 in subscriptions by August 31, 2019. Pending

satisfaction of this condition, your subscription payments will be placed in an account held by the escrow agent, UMB Bank, N.A.

(the “Escrow Agent”), and will be held in trust for your benefit, pending release to us. If we do not meet this condition, we will return

all funds in the escrow account, without interest, and we will stop offering the Interests. We will not receive any fees or expenses out of

any funds returned to investors, and neither IDB nor any other placement agents we may engage will receive any fees related to such

returned funds.

THIS MEMORANDUM SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY,

NOR SHALL THERE BE ANY OFFER, SOLICITATION OR SALE OF THE INTERESTS IN ANY JURISDICTION IN WHICH

ii

SUCH OFFER, SOLICITATION OR SALE IS NOT AUTHORIZED OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO

MAKE ANY SUCH OFFER, SOLICITATION OR SALE. THE DISTRIBUTION OF THIS MEMORANDUM AND THE OFFERING

OF INTERESTS IN CERTAIN JURISDICTIONS MAY BE RESTRICTED AND, ACCORDINGLY, PERSONS INTO WHOSE

POSSESSION THIS MEMORANDUM COMES ARE REQUIRED TO INFORM THEMSELVES ABOUT AND TO OBSERVE

SUCH RESTRICTIONS.

.

iii

TABLE OF CONTENTS

CERTAIN DEFINITIONS ............................................................................................................................. iv

FORWARD-LOOKING STATEMENTS ........................................................................................................ v

NOTICE TO INVESTORS ............................................................................................................................ vi

CAYMAN NOTICE ..................................................................................................................................... vii

WHO MAY INVEST ................................................................................................................................... viii

HOW TO SUBSCRIBE .................................................................................................................................. x

SUMMARY OF THE OFFERING .................................................................................................................. 1

INVESTMENT STRUCTURE ........................................................................................................................ 8

TERRA OVERVIEW..................................................................................................................................... 8

INVESTMENT OBJECTIVES, STRATEGIES, AND POLICIES ................................................................. 10

RISK FACTORS........................................................................................................................................... 19

THE GENERAL PARTNER, THE REIT MANAGER, THE ADVISER, AND TERRA PROPERTY TRUST 40

SUMMARY OF FEES, COMMISSIONS, AND REIMBURSEMENTS ........................................................ 45

PRIOR INVESTMENT HISTORY OF THE ADVISER AND ITS AFFILIATES ......................................... 48

CURRENT PORTFOLIO OF TERRA PROPERTY TRUST ......................................................................... 50

CONFLICTS OF INTEREST ........................................................................................................................ 55

PLAN OF DISTRIBUTION .......................................................................................................................... 60

DESCRIPTION OF OUR INTERESTS......................................................................................................... 62

VALUATION OF PARTNERSHIP ASSETS ................................................................................................ 63

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS ................................................................ 64

CAYMAN ISLANDS TAX CONSIDERATIONS ........................................................................................ 73

RESTRICTIONS ON TRANSFERABILITY ................................................................................................ 75

MUTUAL FUNDS LAW .............................................................................................................................. 75

CAYMAN ISLANDS EXEMPTED LIMITED PARTNERSHIPS.................................................................. 75

ANTI-MONEY LAUNDERING ................................................................................................................... 76

LITIGATION................................................................................................................................................ 77

COUNSEL .................................................................................................................................................... 77

REPORTS TO LIMITED PARTNERS ......................................................................................................... 77

ADDITIONAL INFORMATION .................................................................................................................. 77

iv

CERTAIN DEFINITIONS

For ease of reference, the Partnership together with the REIT Subsidiary and Terra Property Trust, may be referred

to herein collectively or individually, as the context may dictate, as “we,” “us,” “our,” and the “Partnership” except as

otherwise stated in this memorandum. Additionally the following defined terms are used in this memorandum.

• “Terra Capital Advisors” refers to Terra Capital Advisors, LLC, a subsidiary of Terra Capital Partners;

• “Terra Capital Advisors 2” refers to Terra Capital Advisors 2, LLC, a subsidiary of Terra Capital

Partners;

• “Terra Capital Markets” refers to Terra Capital Markets, LLC, an affiliate of Terra Capital Partners;

• “Terra Capital Partners” refers to Terra Capital Partners, LLC, our sponsor;

• “Terra Fund 1” refers to Terra Secured Income Fund, LLC; “Terra Fund 2” refers to Terra Secured

Income Fund 2, LLC; “Terra Fund 3” refers to Terra Secured Income Fund 3, LLC; “Terra Fund 4”

refers to Terra Secured Income Fund 4, LLC; “Terra Fund 5” refers to Terra Secured Income Fund 5,

LLC; “Fund 5 International” refers to Terra Secured Income Fund 5 International; “Terra Fund 6” refers

to Terra Income Fund 6, Inc.; “Terra International” refers to Terra Income Fund International; “Terra

Fund 7” refers to Terra Secured Income Fund 7, LLC;

• “Terra Income Advisors” refers to Terra Income Advisors, LLC, an affiliate of Terra Capital Partners;

• “Terra Income Advisors 2” refers to Terra Income Advisors 2, LLC, an affiliate of Terra Capital Partners;

• “Terra Property Trust” refers to Terra Property Trust, Inc., an affiliate of Terra Capital Partners;.

• “Terra Property Trust 2” refers to Terra Property Trust 2, Inc., a subsidiary of Terra Fund 7;

• “Adviser,” “Terra REIT Advisors” or the “REIT Manager” refers to Terra REIT Advisors, LLC, a

subsidiary of Terra Capital Partners; and

• “Interests” refer to regular units of limited partnership interest in our Partnership issued to Limited

Partners.

v

FORWARD-LOOKING STATEMENTS

Statements included in this memorandum that are not historical facts (including, but not limited to, any statements

concerning investment objectives, our other plans and objectives for future operations or economic performance or

assumptions or forecasts related thereto) are forward looking statements. These statements are only predictions. We

caution that forward looking statements are not guarantees. Actual events or our investments and results of operations

could differ materially from those expressed or implied in the forward looking statements. Forward looking statements

are typically identified by (but are not limited to) the use of terms such as “may,” “will,” “should,” “expect,” “could,”

“intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms

and other comparable terminology.

The forward looking statements included in this memorandum are based upon our current expectations, plans,

estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the

foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions

and future business decisions, all of which are difficult or impossible to predict accurately and many of which are

beyond our control. Although we believe that the expectations reflected in such forward looking statements are based

on reasonable assumptions, our actual results and performance could differ materially from those set forth in the

forward looking statements. Factors which could have a material adverse effect on our operations and future prospects

include, but are not limited to:

• our ability to effectively deploy the proceeds raised in this offering;

• changes in economic conditions generally;

• changes in the real estate markets, securities markets and credit markets specifically;

• interest rates; and

• the other risks described in the “Risk Factors” section of this memorandum.

Any of the assumptions underlying forward looking statements could be inaccurate. Investors are cautioned not

to place undue reliance on any forward looking statements included in this memorandum. All forward looking

statements are made as of the date of this memorandum and the risk that actual results will differ materially from the

expectations expressed in this memorandum will increase with the passage of time. Except as otherwise required by

the applicable securities laws, we undertake no obligation to update or revise any forward looking statements after the

date of this memorandum, whether as a result of new information, future events, changed circumstances or any other

reason. In light of the significant uncertainties inherent in the forward looking statements included in this

memorandum, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward

looking statements should not be regarded as a representation by us or any other person that the objectives and plans

set forth in this memorandum will be achieved.

vi

NOTICE TO INVESTORS

This memorandum has been prepared in connection with the private placement of the Interests being offered

hereby and constitutes an offer only to the proposed investor to whom this memorandum is delivered.

We are offering Interests in reliance upon exemptions from the registration requirements of the applicable

securities laws of each of Argentina, Bahamas, Belize, Brazil, British Virgin Islands, Canada, Chile, Colombia, Costa

Rica, Israel, Mexico, New Zealand, Panama, Peru, Portugal, St Kitts and Nevis, Thailand, United Kingdom, Uruguay,

and Venezuela, and any other jurisdictions as approved by the General Partner in its sole discretion. Accordingly, the

Interests will be restricted securities under the applicable securities laws of each jurisdiction as approved by the

General Partner in its sole discretion, and therefore, subject to significant restrictions on resale. No prospective investor

should purchase Interests unless such person is able to meet the relevant investor suitability requirements as set forth

in the subscription agreement, and as otherwise required by the securities laws of the relevant jurisdiction. In addition,

you may not transfer the Interests that you purchase in this offering without the prior written consent of the General

Partner, which will not be unreasonably withheld.

No person has been authorized to give any information or to make any representations other than those contained

in this memorandum and, if given or made, such information or representations must not be relied upon. This

memorandum does not constitute an offer or solicitation in any jurisdiction to any person to whom it is unlawful to

make such offer or solicitation in such jurisdiction.

Acceptance of this memorandum constitutes agreement on the part of the recipient that the information in this

memorandum is confidential and proprietary. The recipient agrees that this memorandum is confidential and is

intended solely for the recipient’s limited use and benefit in determining the recipient’s desire to invest in us. The

recipient agrees to keep this memorandum permanently confidential and not to give a copy of it to anyone other than

the recipient’s advisors solely for the purpose of advising the recipient in connection with this offering. If the recipient

of this memorandum determines not to invest in us, this memorandum must be returned to us.

Information in this memorandum is presented as of the date hereof. This memorandum may be supplemented

from time to time to set forth material subsequent events or information. Neither the delivery of this memorandum nor

any sale made hereunder shall, under any circumstances, create an implication that there has been no change in our

affairs since the date hereof.

vii

CAYMAN NOTICE

This memorandum is based on the law and practice currently in force in the Cayman Islands and is subject to

changes therein. No invitation to the public in the Cayman Islands to subscribe for any Interests in the Partnership is

permitted to be made. This memorandum should be read in conjunction with the exempted limited partnership

agreement of the Partnership (the “Limited Partnership Agreement”).

Prospective investors should not construe the contents of this memorandum or any prior or subsequent

communications as legal, tax or investment advice. Prospective investors should consult their own counsel, accountant

or business advisor as to legal, tax and related matters covering the Interests offered hereby.

We reserve the unconditional right to cancel or modify the offering, to reject subscriptions for Interests in whole

or in part and to waive conditions pertaining to the purchase of Interests. See “Plan of Distribution”.

viii

WHO MAY INVEST

The offer and sale of the Interests is being made in reliance on an exemption from the registration requirements

of the applicable securities laws of each of Argentina, Bahamas, Belize, Brazil, British Virgin Islands, Canada, Chile,

Colombia, Costa Rica, Israel, Mexico, New Zealand, Panama, Peru, Portugal, St Kitts and Nevis, Thailand, United

Kingdom, Uruguay, and Venezuela, and any other jurisdictions as may be determined by the General Partner in its sole

discretion from time to time. Accordingly, distribution of this memorandum has been strictly limited to persons who

meet the investor suitability requirements and make the representations set forth in the subscription agreement. Such

requirements represent investor minimums only. The General Partner reserves the right to declare any prospective

investor ineligible to purchase Interests based on any information that may become known or available to the General

Partner concerning the suitability of such prospective investor. In addition, the General Partner may, in its sole

discretion, reject any subscription in whole or in part for any reason or no reason.

Investor Suitability Requirements

Investment in the Interests is suitable only for persons of substantial financial means who have no need for

liquidity in their investment in the Interests. This investment will only be made available to investors who:

• subscribe for at least U.S. $100,000, unless waived in the General Partner’s sole discretion, all of which

will be due and payable upon acceptance of such investor’s subscription agreement by the General

Partner, in its sole discretion; provided, however, that the General Partner may permit investments for

an amount less than the minimum investment amount; and

• represent in writing that they meet the investor suitability requirements established by the General

Partner and as may be required under applicable law.

In order to purchase Interests, you must represent in writing that you meet, among others, all of the suitability

requirements as listed in our subscription agreement. Our subscription agreement contains, among others, the

following representations:

• You understand that an investment in the Interests involves substantial risks and you are fully cognizant

of and understand all of the risks relating to a purchase of the Interests, including, but not limited to,

those risks set forth under “Risk Factors” in this memorandum;

• Your overall commitment to investments that are not readily marketable is not disproportionate to your

individual net worth, and your investment in the Interests will not cause such overall commitment to

become excessive;

• You have adequate means of providing for your financial requirements, both current and anticipated, and

have no need for liquidity in this investment;

• You can bear and are willing to accept the economic risk of losing your entire investment;

• You are acquiring the Interests for your own account and for investment purposes only and have no

present intention, agreement or arrangement for the distribution, transfer, assignment or resale of the

Interests;

• You have such knowledge and experience in financial and business matters that you are capable of

evaluating the merits and risks of an investment in the Interests and have the ability to protect your own

interests in connection with such investment; and

• You meet the income and net worth requirements as set forth in the subscription agreement.

The investor suitability requirements listed in our subscription agreement represent minimum suitability

requirements only. Accordingly, the satisfaction of such suitability requirements by an investor will not necessarily

mean that the Interests are a suitable investment for such investor or that we will accept the investor as a limited

ix

partner. Furthermore, the General Partner may modify such requirements in its sole discretion from time to time, and

any such modification may raise the suitability requirements for investors.

x

HOW TO SUBSCRIBE

Prospective investors who would like to subscribe for Interests must first carefully read this memorandum, the

Limited Partnership Agreement and the attached appendices. If you meet the applicable suitability standards described

in “Who May Invest” and wish to purchase Interests, you must:

• complete and execute the subscription agreement attached hereto as Appendix A; and

• wire funds as described in the subscription agreement in the amount of at least U.S. $100,000.

All cash received from prospective investors prior to the acceptance of their respective subscriptions will be placed

in a non-interest bearing segregated account at a commercial banking institution or brokerage firm to be selected by

the General Partner. Cash payments will be returned as promptly as practicable to prospective investors whose

subscriptions are not accepted.

Unless otherwise agreed to by the General Partner, subscriptions are payable in full, in readily available funds in

U.S. dollars only, at least three Business Days prior to the closing date specified by the Partnership. A “Business Day”

shall be any day on which commercial banks are open for business in New York City and the Cayman Islands.

The Partnership has engaged IDB Capital Corp. (“IDB”) to serve as placement agent for the offering.

Subscriptions for Interests may be accepted or rejected in whole or in part by the General Partner in its sole

discretion for any reason or no reason. We will generally inform the subscriber within 30 days of receipt of a completed

subscription agreement whether its subscription has been accepted or rejected. If we reject a subscription, we will

promptly return the investor’s funds, without interest. We will not receive any fees or expenses out of any funds

returned to investors, and neither IDB nor any other placement agents we may engage will receive any fees related to

such returned funds.

The Interests may not be withdrawn by the investors.

Until we sell the minimum subscription amount of U.S. $1,000,000, all subscription proceeds will be sent to

UMB Bank, N.A. (the “Escrow Agent”), which will deliver your subscription agreement and supporting

documentation to Conduent Securities Services, Inc., our transfer agent and registrar (the “Administrator”). The

Escrow Agent will promptly deposit such funds, or the escrow deposit, into a designated escrow account. Upon receipt

of the escrow deposit, the escrow deposit will be held in a designated escrow account until the earlier of (1) the sale

of the minimum subscription amount of U.S. $1,000,000, (2) August 31, 2019 and (3) such earlier date as the General

Partner shall determine. The Escrow Agent will release the funds to us only after we have sold U.S. $1,000,000 in this

offering. If we have not sold the minimum offering of U.S. $1,000,000 on or before August 31, 2019, all escrow funds

will be returned to subscribers, without interest. We will not receive any fees or expenses out of any funds returned to

investors, and neither IDB nor any other placement agents we may engage will receive any fees related to such returned

funds.

1

SUMMARY OF THE OFFERING

The following summary and other information appearing in this memorandum does not purport to be complete

and is subject to, and qualified in its entirety by, reference to the more complete and detailed terms and information

set forth in the constituent documents and agreements of the Partnership (as defined below), including the exempted

limited partnership agreement of the Partnership (the “Limited Partnership Agreement”), the Partnership’s

subscription agreement (the “Subscription Agreement”) and in our other constituent documents and agreements, such

as, without limitation, the limited liability company agreement of Terra International Fund 3 REIT, LLC, the charter

and bylaws of Terra Property Trust, Inc. and our respective investment management agreements as each such

document may be amended, restated or supplemented from time to time (the “Management Agreements”). In the event

of a conflict between (a) the following summary and other information appearing in this Memorandum and (b) the

aforementioned documents, such aforementioned documents will control. Capitalized terms not otherwise defined in

this memorandum shall have the meaning given such terms in the Limited Partnership Agreement.

Terra Secured Income Fund 5, LLC (“Terra Fund 5”), a direct investor in Terra Property Trust, Inc., is required

to make public filings on the Securities and Exchange Commission (“SEC”) website. For information about Terra

Property Trust, prospective investors are urged to carefully review the SEC filings for Terra Fund 5. Prospective

investors should, however, note, that the terms of an investment in Terra Fund 5 are materially different from the terms

of an investment in the Partnership.

The Partnership Terra International Fund 3, L.P. (the “Partnership”) is a recently organized Cayman

Islands exempted limited partnership formed on May 14, 2019. Our principal

business address is 550 Fifth Avenue, 6th Floor, New York, NY 10036. The

registered office of the Partnership is at Walkers Corporate Limited, Cayman

Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1 – 9008,

Cayman Islands.

General Partner Terra International Fund 3 GP, L.P. (the “General Partner”), a recently organized

Delaware limited partnership, is the general partner of the Partnership.

Investment Adviser Terra REIT Advisors, LLC, (the “Adviser”), a Delaware limited liability company

that is registered as an investment adviser under the Investment Advisers Act of

1940, as amended (the “Advisers Act”), will serve as adviser to the Partnership and

Terra International Fund 3 REIT, LLC (the “REIT Subsidiary”), a recently

organized Delaware limited liability company that intends to qualify and elect to be

taxed for federal income tax purposes as a real estate investment trust (a “REIT”)

under the Internal Revenue Code of 1986, as amended (the “Code”) for its taxable

year ending December 31, 2019. The Adviser currently also serves as the investment

adviser of Terra Fund 5 (and its wholly owned subsidiaries Terra Fund 1, Terra Fund

2, Terra Fund 3, and Terra Fund 4), all of which have the same investment objectives

as ours. The General Partner has delegated to the Adviser certain advisory and

management services pursuant to the Partnership’s investment management

agreement with the Adviser (the “Management Agreement”). In accordance with

the terms of the Management Agreement, and the Adviser will generally have sole

discretion to make all investment decisions concerning our business. The principal

members of the Adviser’s management team are Vikram S. Uppal, Stephen H.

Hamrick, Gregory M. Pinkus, Daniel J. Cooperman, and Michael S. Cardello. For

ease of reference, statements herein regarding reimbursement of the Adviser,

General Partner, REIT Manager, or an affiliate of the foregoing, shall refer to the

applicable reimbursement recipient(s) as the context may dictate.

Securities Offered We are seeking subscriptions of a minimum of U.S. $1,000,000 and a maximum of

U.S. $50,000,000 (subject to increase at the sole discretion of the General Partner)

for limited partnership interests (the “Interests”). Each investor must subscribe for

at least $100,000, unless waived in the General Partner’s sole discretion, all of

which will be due and payable upon acceptance of such investor’s subscription.

2

Upon acceptance of an investor’s subscription, such investor shall become a

“Limited Partner.” The Interests are not redeemable by investors.

Offering Period The Partnership intends to continue the offering until the earlier of (i) December 31,

2019, (ii) the date that all of the offered Interests have been sold or (iii) such earlier

date as the General Partner shall determine. If the offering has not been terminated

by December 31, 2019, the General Partner may extend the offering for up to two

six month periods in its sole discretion. Following the termination of the offering

period (the date of such termination, the “offering termination date”), the General

Partner may, from time to time in its sole discretion, cause the Partnership to accept

additional subscriptions, in cash or in-kind, from the General Partner, its affiliates

or entities that are sponsored by the foregoing.

Subscription Dates Interests will be offered in fully registered book-entry form. Ownership of Interests

will be reflected on the books and records of the Partnership. Interests may be

purchased at such times as the General Partner in its sole discretion may determine

(each such date, a “Subscription Date”). A “Business Day” shall be any day on

which commercial banks are open for business in New York City and the Cayman

Islands.

Estimated Use of Proceeds The Partnership will indirectly invest substantially all of its assets in shares of

common stock of its affiliate, Terra Property Trust, Inc. (“Terra Property Trust”), a

Maryland corporation that has qualified and elected to be taxed for federal income

tax purposes as a REIT. The Partnership will invest in Terra Property Trust through

the REIT Subsidiary. The Partnership will own 100% of the non-voting common

interests of the REIT Subsidiary and the General Partner will own 100% of the

voting common interests of the REIT Subsidiary. The Partnership will also make

loans to the REIT Subsidiary. The REIT Subsidiary will issue between 100 and 125

shares of nonvoting preferred interests to U.S. investors in order to satisfy the REIT

qualification requirement that a REIT have at least 100 shareholders. For ease of

reference, the Partnership together with the REIT Subsidiary and Terra Property

Trust, may be referred to herein collectively or individually, as the context may

dictate, as “we,” “us,” and “our,” and the “Partnership” except as otherwise stated

in this memorandum.

Investment Objectives The Partnership’s principal investment objectives will be to:

• preserve Limited Partners’ capital;

• realize income from the Partnership’s investment in Terra Property

Trust; and

• make regular distributions to Limited Partners from the Partnership’s

investments.

Terra Property Trust

Investment Strategies The Partnership has the same investment objectives and strategies as Terra Property

Trust, which was formed to acquire real estate-related loans, including mezzanine

loans, first and second mortgage loans, subordinated mortgage loans, bridge loans,

preferred equity investments, and other loans related to high quality commercial

real estate in the United States.


Investment Advisor Terra REIT Advisors, LLC (the “REIT Manager”), a subsidiary of Terra Capital

Partners, serves as adviser to Terra Property Trust.

Terra Property Trust Fees Terra Property Trust currently pays the following fees to the REIT Manager

pursuant to a management agreement. Fees and expenses borne by the Terra

Property Trust will indirectly reduce the Partnership’s capital and the funds

available for payment of Partnership distributions.

3

Origination Fee. Terra Property Trust pays to the Manager an origination fee in the

amount of 1.0% of the amount funded by Terra Property Trust to originate, fund,

structure, or acquire real estate-related loans, including first and second mortgage

loans, mezzanine loans, bridge loans, convertible mortgages, and other loans related

to high quality real estate, as well as the acquisition of any equity participations in

the underlying collateral of such loans, and also including any acquisition of real

estate directly (each, a “TPT Asset” and collectively, “TPT Assets”), including any

third-party expenses related to such investment and any debt Terra Property Trust

uses to fund the origination, funding, structuring, or acquisition of such TPT Asset.

The origination fee is reduced by the amount of any origination or equivalent fee

paid by a borrower. In the event that the collateral backing any real estate-related

loan held by Terra Property Trust is replaced with substitute collateral, Terra

Property Trust will pay an origination fee to REIT Manager equal to the lesser of

(A) 1.0% of the principal amount of the loan backed by the substitute collateral and

(B) the amount of the fee paid to Terra Property Trust by the borrower in connection

with such substitution.

Asset Management Fee. Terra Property Trust pays the REIT Manager a monthly

asset management fee at an annual rate equal to 1.0% of the aggregate funds under

management (including the amount of any debt incurred or assumed to finance any

TPT Asset and related closing costs and expenses), as well as cash then held by

Terra Property Trust.

Asset Servicing Fee. Terra Property Trust pays to the REIT Manager a monthly

asset servicing fee at an annual rate equal to 0.25% of the aggregate gross

origination price for each TPT Asset (including the amount of any debt incurred or

assumed to finance any TPT Asset, and related closing costs and expenses).

Disposition Fee. Terra Property Trust pays to the REIT Manager a disposition fee

in the amount of 1.0% of the gross sale price (including any portion of the sale price

applied to any indebtedness to which the TPT Asset is subject) received by Terra

Property Trust from each TPT Asset sale or disposition, or each maturity,

prepayment, workout, modification, restructuring, or extension of any TPT Asset,

or any portion of or interest in any TPT Asset. The disposition fee shall be paid

concurrently with the closing of any such TPT Asset sale or disposition, or any such

maturity, prepayment, workout, modification, restructuring, or extension of any

TPT Asset or any interest thereon. No disposition fee shall be payable in the event

of any maturity, prepayment, workout, modification, restructuring, or extension of

an TPT Asset unless the borrower thereunder has paid or is obligated to pay a

corresponding fee, in which case the disposition fee will be the lesser of (A) 1.0%

of the original principal amount of the TPT Asset and (B) the amount of such fee

paid by such borrower in connection with such transaction.

Transaction Breakup Fee. Terra Property Trust pays to the REIT Manager a

transaction breakup fee in the amount of 50.0% of any termination fees or liquidated

damages received by Terra Property Trust from a third party as a result of (A) a

failure of any investment or disposition transaction to be consummated, (B) the

failure of such third party to perform its obligations and covenants to Terra Property

Trust in connection with an investment or disposition transaction, (C) the failure of

such third party to satisfy any conditions precedent to consummation of an

investment or disposition transaction or (D) the termination of any contract related

to an investment or disposition transaction.

Partnership Incentive

Allocation Once a Limited Partner has collectively received cumulative distributions with

respect to its Interests equal to aggregate capital invested in the Interests and a 9.0%

per annum, cumulative, non-compounded pre-tax return on unreturned invested

4

capital, 15.0% of amounts otherwise distributable to such Limited Partner shall be

distributed to the General Partner (the “Incentive Allocation”).

Partnership Expenses

The Partnership will reimburse the Adviser for organization and offering expenses

in the amount of the actual expenses incurred (not to exceed 2.0% of gross offering

proceeds). The Partnership will be responsible for all other costs and expenses

relating to the Partnership’s activities, investments and ongoing business, including:

(i) all costs and expenses attributable to holding, managing and disposing of

the Partnership’s assets;

(ii) legal, accounting, auditing, consulting and other fees and expenses;

(iii) all reasonable out-of-pocket Partnership fees and expenses incurred by the

Partnership, the Adviser, or the Adviser’s partners, agents, officers and

employees relating to investment and disposition opportunities for the

Partnership, whether or not consummated;

(iv) any taxes, fees and other governmental charges levied against the

Partnership;

(v) any fees or expenses paid to third parties in connection with raising capital

for the Partnership including selling commissions payable to IDB Capital

Corp. (“IDB”) or any placement agents; and

(vi) the Partnership’s allocable share of the Adviser’s employee costs,

overhead, such as rent, , utilities and technology costs, which we estimate

will equal approximately 1.0% of the gross offering proceeds; provided,

however, that the Partnership will not reimburse the Adviser or its affiliates

for Adviser employee costs in connection with services for which the

Adviser earns any separate fees.

The Partnership will not be responsible for the payment or reimbursement of any

costs and expenses for which the Adviser has been reimbursed separately by Terra

Property Trust.


Expenses In addition to the expenses described above, Terra Property Trust reimburses the

REIT Manager for operating expenses incurred in connection with services

provided to the operations of Terra Property Trust, including their allocable share of

the REIT Manager’s employee costs, overhead, such as rent, , utilities, and

technology costs. Fees and expenses borne by the Terra Property Trust will

indirectly reduce the Partnership’s capital and the funds available for payment of

Partnership distributions.

How to Subscribe Each investor is required to enter into a subscription agreement for its investment

in the Partnership and must send its completed subscription agreement along with

the subscription payment to the wiring information of IDB or any other placement

agents we may engage, as provided in the subscription agreement.

We will generally inform the subscriber within 30 days of receipt of a completed

subscription agreement whether its subscription has been accepted or rejected. If we

reject a subscription, we will promptly return the investor’s funds, without interest.

We will not receive any fees or expenses out of any funds returned to investors, and

IDB and any other placement agents we may engage will not receive any fees related

to such returned funds. The subscriptions to the Partnership will generally be made

in U.S. dollars.

5

Suitability The Interests are suitable only for sophisticated investors for whom an investment

in the Partnership does not constitute a complete investment program and who fully

understand, and are willing to assume, and have the financial resources to withstand,

the risks involved in our specialized investment program and to bear the potential

loss of their entire investment in the Interests.

The Interests are being offered for sale by IDB only to persons who are not “United

States persons” as defined in Section 7701(a)(30) of the Code. Each investor will

need to comply with the suitability requirements of his or her country. See

Appendix A — Subscription Agreement. The Interests may not be withdrawn by

investors.

Escrow Period Subscription proceeds will be held in the Partnership escrow account with the

Escrow Agent until the earlier of (1) the sale of the minimum offering of

U.S. $1,000,000, (2) December 31, 2019 and (3) such earlier date as the General

Partner shall determine. The Escrow Agent will release the funds to us only after we

have sold U.S. $1,000,000 in this offering. If we have not sold the minimum

offering of U.S. $1,000,000 on or before December 31, 2019, all escrow funds will

be returned to subscribers, without interest. We will not receive any fees or expenses

out of any funds returned to investors, and IDB and any other placement agents we

may engage will not receive any fees related to such returned funds.

Plan of Offering The Partnership has engaged IDB to serve as placement agent for the offering. IDB

is not required to sell any specific dollar amount of Interests. The Partnership may

engage one or more additional placement agents to solicit investors.

The Partnership will pay aggregate selling commissions of up to 5.0% of the gross

proceeds from subscriptions, payable as follows: (a) up to 2.0% of the gross

proceeds payable at the time of such sale, plus (b) up to 1.0% of the gross proceeds

payable for each of the three years thereafter on the anniversary of the offering

termination date; provided, however, that aggregate selling commissions payable

shall not exceed 5.0% of the gross proceeds of subscriptions.

Distributions Subject to the provisions in the Limited Partnership Agreement and applicable law,

it is currently anticipated that we will make quarterly distributions not later than the

end of the first full calendar quarter following the release of subscription proceeds

to the Partnership from the Escrow Agent. The General Partner may elect not to

declare and pay a distribution from time to time at its sole discretion and instead

reserve such funds, invest such funds or otherwise expend such funds for any proper

fund purpose. The availability of funds for distribution will depend on the amount

of distributions from Terra Property Trust to the REIT Subsidiary and, in turn, the

amount of distributions and debt payments from the REIT Subsidiary to the

Partnership.

Investment Terms The Interests will not be listed for trading on any securities exchange or

over-the-counter market. Because it is not anticipated that a trading market will ever

develop, investors should expect to hold their Interests for an extended period of

time.

Upon the repayment, sale or other disposition of all or substantially all of our assets

or upon the election of the General Partner, to commence the winding down,

liquidation and thereafter termination of the Partnership, a special resolution of the

Limited Partners will be sought for the purpose of placing the Partnership into

voluntary liquidation pursuant to the Limited Partnership Agreement.

The business of the Partnership includes the realization and distribution of the

Partnership’s assets to Limited Partners during a wind down of the Partnership’s

operations.

6

Term of the Partnership The term of the Partnership will end five years from the offering termination date,

subject to subsequent additional extensions of one year each, in each case as

determined at the sole discretion of the General Partner. While the General Partner’s

discretion to extend the term is not subject to limitation, it is currently expected that

the General Partner will not elect to extend the term for more than two additional

years.

An investment in the Partnership requires a long-term commitment, with no

certainty of return. The Partnership’s investments are relatively illiquid, and there

can be no assurance that the Partnership will be able to realize on such investments

in a timely manner. Dispositions of investments may require a lengthy time period

or may result in distributions in-kind to the Limited Partners.

Transfer of Interests A Limited Partner may not sell, assign or transfer all or a portion of his or her

Interests without the prior written consent of the General Partner, which will not be

unreasonably withheld. No transfers will be permitted that would cause the

Partnership to be taxed as a publicly traded partnership for U.S. federal income tax

purposes or would cause the REIT Subsidiary or Terra Property Trust to fail to

qualify as a REIT for U.S. federal income tax purposes.

Notwithstanding the general restrictions on transfers, a Limited Partner will be

allowed to transfer all or a portion of such Limited Partner’s Interests to a member

of that Limited Partner’s immediate family or a trust or other entity created or

controlled by that Limited Partner or members of that Limited Partner’s immediate

family; provided, however, that in no event may any sale, assignment or transfer be

made if it would cause certain adverse disposition events and that any sale shall at

all times comply with applicable law, including anti-money laundering standards.

See “Anti-Money Laundering” below.

Valuation of Partnership

Assets Valuation of the Partnership’s assets will be carried out annually or more frequently

as needed by the General Partner. The net asset value of the Partnership will be

equivalent to all the assets less all the liabilities of the Partnership as at the relevant

day of valuation. The net asset value per Interest is determined by dividing the value

of the assets of the Partnership attributable to the Interest less all liabilities

attributable to the Interests by the number of such Interests as at the relevant

valuation day.

Indemnification None of the Adviser, the General Partner or any of their respective affiliates will be

liable to the Partnership for any losses or damages suffered by the Partnership due

to the Adviser’s, the General Partner’s or any of their respective affiliates’ acts or

omissions, provided that the Adviser, the General Partner or such affiliates were

acting in good faith and were not guilty of willful misconduct or gross negligence.

The Partnership will indemnify the Adviser, the General Partner and their respective

affiliates from and against any losses or damages incurred by them in furtherance

of the Partnership’s business, provided that the Adviser, the General Partner or such

affiliate is not guilty of gross negligence or willful misconduct and was acting in

good faith within what it reasonably believed to be the scope of its authority.


Investment Guidelines Terra Property Trust’s board of directors has adopted investment guidelines relating

to the criteria to be used by the REIT Manager’s senior management team to

evaluate specific investments. Terra Property Trust’s board of directors will review

its compliance with the investment guidelines periodically and receive an

investment report at each quarter-end in conjunction with the review of Terra

Property Trust’s quarterly results by its board of directors.

Terra Property Trust’s investment guidelines are as follows:

7

• no acquisition shall be made that would cause Terra Property Trust to

fail to qualify as a REIT;

• no acquisition shall be made that would cause Terra Property Trust or

any of its subsidiaries to be required to register as an investment

company under the Investment Company Act of 1940, as amended

(the “1940 Act”); and

• until appropriate investments can be identified, Terra Property Trust

may invest the proceeds of any future offerings of its equity or debt

securities in interest-bearing, short-term investments, including

money market accounts and/or funds, that are consistent with Terra

Property Trust’s intention to qualify as a REIT.

These investment guidelines may be changed from time to time by a majority of

Terra Property Trust’s board of directors without the approval of Terra Property

Trust’s stockholders.

Ownership Limitations The REIT Subsidiary expects to elect to be taxed as a REIT. One of the requirements

for qualification as a REIT is that five or fewer individuals (and certain entities

treated as individuals for this purpose) not own (or be treated as owning, taking into

account applicable attribution rules) more than 50% (by value) of the stock of the

REIT. The Limited Partnership Agreement contains restrictions on ownership of

Interests that are intended to prevent the REIT Subsidiary from failing to qualify as

a REIT. For example, if beneficial ownership of Interests would cause the REIT

Subsidiary to be closely held under the five or fewer test, ownership of sufficient

Interests would be transferred from such Limited Partners as determined by the

General Partner and in such amounts determined by the General Partner to a

charitable trust so that the REIT Subsidiary would not be closely held. Prospective

investors should review Exhibit B of the Limited Partnership Agreement.

Mutual Funds Law The Partnership does not fall within the definition of a “mutual fund” pursuant to

the Mutual Funds Law of the Cayman Islands, as amended, and therefore is not

expected to be registered with, or regulated by, the Cayman Islands Monetary

Authority.

8

INVESTMENT STRUCTURE

The following structure chart provides a general overview of the currently anticipated investment structure. The

depiction of the structure is not comprehensive and the structure itself remains subject to change. The structure chart

is provided solely for informational purposes and ease of review.

9

TERRA OVERVIEW

The Partnership is externally managed by the Adviser, which is a subsidiary of Terra Capital Partners, a real estate

finance and investment firm based in New York City that focuses primarily on the origination and management of

mezzanine loans, as well as first mortgage loans, bridge loans and preferred equity investments in all major property

types through multiple public and private pooled investment vehicles. Since its formation in 2001 and its

commencement of operations in 2002, Terra Capital Partners has been engaged in providing financing on commercial

properties of all major property types throughout the United States. In the lead up to the global financial crisis in 2007,

believing that the risks associated with commercial real estate markets had grown out of proportion to the potential

returns from such markets, Terra Capital Partners sold 100% of its interests in certain managers of pooled investment

vehicles. It was not until mid-2009, after its assessment that commercial mortgage markets would begin a period of

stabilization and growth, that Terra Capital Partners began to sponsor new investment vehicles, which included the

Terra Income Funds, to again provide debt capital to commercial real estate markets. The financings provided by all

vehicles managed by Terra Capital Partners from January 2004 through December 31, 2018 have been secured by

approximately 11.6 million square feet of office properties, 3.5 million square feet of retail properties, 3.8 million

square feet of industrial properties, 4,457 hotel rooms and 25,210 apartment units. The value of the properties

underlying this capital was approximately $7.4 billion based on appraised values as of the closing dates. In addition

to its extensive experience originating and managing debt financings, Terra Capital Partners and its affiliates have

owned and operated over six million square feet of office and industrial space between 2005 and 2007, and this

operational experience further informs its robust origination and underwriting standards and would be beneficial

should the Adviser need to foreclose on a property underlying a financing.

Terra Capital Partners

Terra Capital Partners has been wholly owned by Axar Terra LLC (“Axar”), an affiliate of Axar Capital

Management L.P. (“Axar Capital Management”) since November 30, 2018. Axar is an investment manager registered

under the Advisers Act with over $800 million in assets under management, headquartered in New York City and

founded by Andrew M. Axelrod. Axar focuses on value-oriented and opportunistic investing across the capital

structure and multiple sectors. The firm seeks attractive prices relative to intrinsic value and invests in event-driven

situations with clear catalysts and asymmetric return potential. Axar’s senior real estate team has worked together for

over five years, having previously built the $3 billion real estate business at Mount Kellett Capital Management, LP,

or Mount Kellett Capital Management. Axar has a deep network of industry relationships including institutional

investors (for both public and private investments), operators, advisers and senior lenders.

Terra Capital Partners is led by Vikram S. Uppal (Chief Executive Officer), Andrew M. Axelrod (Chairman),

Bruce D. Batkin (Vice Chairman), Simon J. Mildé (Vice Chairman), Gregory M. Pinkus (Chief Financial Officer) and

Daniel Cooperman (Chief Originations Officer). Mr. Batkin, the co-founder of Terra Capital Partners, has served as

Vice Chairman since December 1, 2018, prior to which he served as Chief Executive Officer. Mr. Uppal has served as

Chief Executive Officer since December 1, 2018 and as Chief Investment Officer since February 2018. Mr. Axelrod

assumed his current role as Chairman in February 2018. Members of the Terra Capital Partners management team

have broad based, long-term relationships with major financial institutions, property owners and commercial real

estate service providers. The entire senior management team has held leadership roles at many top international real

estate and investment banking firms, including Mount Kellett Capital Management, Jones Lang Wootton (formerly

Jones Lang LaSalle Incorporated and now JLL), Merrill Lynch, Donaldson, Lufkin and Jenrette Securities Corporation

(now Credit Suisse (USA) Inc.), ABN Amro Bank N.V. and Fortress Investment Group.

10

INVESTMENT OBJECTIVES, STRATEGIES, AND POLICIES

Market Opportunity

Commercial real estate is a capital-intensive business that relies heavily on the availability of credit to develop,

acquire, maintain, and refinance commercial properties. The financial crisis of 2008 created a significant void for

capital in the U.S. commercial real estate industry that lasted several years and generated many opportunities for

investors like Terra Capital Partners. However, with the economy in the tenth year of the upcycle, there are record

levels of liquidity in both the equity and debt capital markets. Despite the competitive environment, two fundamental

trends have allowed Terra Capital Partners and its affiliates to remain active originators of subordinated debt. First,

the historically high volume of mortgage originations indicates an abundance of potential opportunities. Second, and

more important, the recession catalyzed a secular shift among banks to a more conservative credit culture that limits

loan proceeds available to real estate borrowers. This has created an opportunity for lenders such as Terra Capital

Partners to originate bridge loans, subordinated loans, and preferred equity investments with attractive risk-reward

profiles.

Historically High Volumes of Mortgage Originations

Commercial mortgage origination volume reached a record $549 billion in 2018, catalyzed by near-record levels

of transactions and refinancings.

U.S. Commercial Mortgage Originations ($ billions)

Source: HFF, SWF Institute, Willis Towers Watson

U.S. Commercial Real Estate Transactions (excluding Entity-Level), Total Volume ($ billions)

$-

$100

$200

$300

$400

$500

$600

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

11

Source: RCA

Over the last five years, Terra Capital Partners and its affiliates originated many loans by taking advantage of the

“wall of maturities” of five- and ten-year loans originated at the prior market peak. Borrowers faced significant

difficulties refinancing these loans—which often had excessive leverage and/or weak structures—in the significantly

more conservative post-recession environment. This created the opportunity for Terra Capital Partners and its affiliates

to finance these projects at materially lower valuations, as they were often being sold or recapitalized at values at or

near the original loan amounts. While the supply of pre-recession loan maturities has diminished, total maturities will

remain above the historic average for the next several years. Furthermore, Terra Capital Partners and its affiliates

continue to benefit from exclusive follow-on opportunities with existing borrowers to finance additional projects.

U.S. Commercial Mortgage Maturities ($ billions)

Source: HFF, Trepp, Federal Reserve

Changes in the Senior Lender Landscape

Terra Capital Partners and its affiliates continue to benefit from the fundamental change in the composition of

senior lenders and the proceeds they are willing to provide. In the early-to-mid 2000s, CMBS and bank lenders

dominated the market for originations of loans secured by riskier projects, such as assets located in non-primary

markets and/or involving construction. These loans, which were often underwritten with loose underwriting standards,

increased the severity of the recession and led to significant financial regulations—such as the Dodd-Frank Wall Street

$-

$100

$200

$300

$400

$500

$600

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

$-

$50

$100

$150

$200

$250

$300

$350

$400

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22

12

Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the High Volatility Commercial Real Estate

regulation—that permanently altered the lending environment. CMBS and large national/international banks, which

accounted for approximately three-quarters of all U.S. commercial mortgage originations in 2007, accounted for

approximately half that figure in 2018; the decline is even more pronounced for higher-risk projects. This void has

been primarily filled by regional banks and alternative lenders, the latter of whom have accounted for approximately

13% of originations from 2017-2018 compared to 7% in 2007. Moreover, alternative lenders have captured an even

greater share of the financing for more complex or geographically diverse projects, which regional banks have often

been more restricted from pursuing.

U.S. Commercial Mortgage Origination, Lender Composition

Source: HFF

The stricter regulatory environment has also forced traditional senior lenders to tighten their underwriting

standards, largely by offering lower leverage (average loan-to-value ratios have declined by approximately 9 points

since 2007) and/or by demanding more recourse from borrowers, even if the project and market fundamentals remain

sound. This has created an attractive opportunity for alternative lenders such as Terra Capital Partners and its affiliates

to improve the risk-reward profiles of their investments by attaching lower in the capital stack, backfilling the void

left by the traditional lenders.

Loan-to-Value Ratios, U.S. Commercial Mortgages

Source: HFF, Federal Reserve, Morgan Stanley

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Agency Insurance Bank - Nat'l + Int'l Bank - Regional CMBS Financial + Private

50%

55%

60%

65%

70%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

13

While equity and debt capital is flowing freely to U.S. commercial real estate on the whole, Terra believes the

capital is often being allocated inefficiently, creating compelling opportunities to finance projects with attractive risk-

reward profiles but that may be more complex (e.g., development), in non-primary markets, or with sponsors who

have less access to the capital markets. For example, cap rate spreads between major and non-major metros have

remained historically wide over the past six years, indicating strong preference for more established markets. This has

impacted the availability and pricing of debt capital, which is often able to earn yields on transactions in healthy

secondary markets that are disproportionately greater than the increase in risk.

Cap Rates, Major vs. Non-Major Metros

Source: RCA

Investment Objectives

Through the REIT Subsidiary, we will invest substantially all of our investable assets in Terra Property Trust.

Through this investment in Terra Property Trust, the Partnership’s primary investment objectives are to:

• preserve Limited Partners’ capital;

• realize income from the Partnership’s investment in Terra Property Trust; and

• make regular distributions to Limited Partners from the Partnership’s investments.

There can be no assurances that we will be successful in meeting our objectives.

Investment Strategies

Through its investment in Terra Property Trust, the Partnership intends to in intend to focus on providing

commercial real estate loans to creditworthy borrowers that generate an attractive and consistent low volatility cash

income stream. Terra Property Trust focuses on originating debt and debt-like instruments emphasizes the payment of

current returns to investors and the preservation of invested capital.

The management team of the Adviser has extensive experience in originating, managing and disposing of real

estate-related loans. Through our investment in Terra Property Trust, the Adviser seeks to:

• focus on middle market loans of approximately $3 million to $50 million;

• originate loans not exceeding 80% of the current value of the underlying property;

-%

1%

2%

3%

4%

5%

6%

7%

8%

9%

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Spread Major Metros Non-Major Metros

14

• focus on the origination of new loans;

• originate loans expected to be repaid within one to five years;

• maximize current income;

• lend to creditworthy borrowers;

• provide diversification by property type, geographic location, tenancy and borrower;

• source off-market transactions; and

• hold loans until maturity unless, in the Adviser’s judgment, market conditions warrant earlier

disposition.

Financing Strategy

Terra Property Trust may borrow funds (on a secured or unsecured basis) to facilitate certain investments or

otherwise in connection with its business. Forms of borrowing may include, without limitation, first mortgage

financings, credit facilities, repurchase agreements and other credit facilities.

Current and Anticipated Use of Leverage to Facilitate Certain Investments

Terra Property Trust currently makes use of leverage to facilitate certain investments and is expected to continue

doing so.

A subsidiary of Terra Property Trust entered into an uncommitted master repurchase agreement (the “Goldman

Repurchase Agreement”) with Goldman Sachs Bank USA on December 12, 2018. The Goldman Repurchase

Agreement provides for advances of up to $150 million.

Another subsidiary of Terra Property Trust is expected to enter into a credit agreement (the “IDB Credit

Agreement”) with IDB’s parent company, Israel Discount Bank of New York (“IDB Bank”) in May 2019. The IDB

Credit Agreement will provide for IDB Bank to make revolving credit loans of up to $35 million.

Targeted Assets of Terra Property Trust

Terra Property Trust originates, structures, funds, and manages commercial real estate investments, including

mezzanine loans, first mortgage loans, subordinated mortgage loans, and preferred equity investments related to high-

quality commercial real estate in the United States. Terra Property Trust may acquire equity participations in the

underlying collateral of some of such loans. The Adviser structures, underwrites, and originates most if not all of its

investments. The Adviser uses what it considers to be conservative underwriting criteria, and its underwriting process

involves comprehensive financial, structural, operational, and legal due diligence to assess the risks of investments so

that it can optimize pricing and structuring. By originating loans directly, the Adviser is able to structure and

underwrite loans that satisfy its standards, establish a direct relationship with the borrower and utilize its

documentation. Described below are some of the types of loans Terra Property Trust owns and seeks to originate with

respect to high-quality properties in the United States that meet its investment strategy. As a result of the current credit

market disruption related to the most recent recession and the decrease in capital available in this part of the capital

structure, the Adviser and its affiliates believe that the opportunities to both directly originate and to buy these types

of loans from third-parties on favorable terms will continue to be attractive.

Mezzanine Loans. These are loans secured by ownership interests in an entity that owns commercial real estate

and that generally finance the acquisition, refinancing, rehabilitation, or construction of commercial real estate.

Mezzanine loans may be either short-term (one to five) or long-term (up to 10 years) and may include fixed or floating

interest rate terms. Terra Property Trust may own mezzanine loans directly or it may hold a participation in a

mezzanine loan or a sub-participation in a mezzanine loan. These loans are predominantly current-pay loans (although

there may be a portion of the interest that accrues) and may provide for participation in the value or cash flow

appreciation of the underlying property as described below. Generally, Terra Property Trust invests in mezzanine loans

15

with last dollar loan-to-value ratios ranging from 60% to 85%. As of March 31, 2019, Terra Property Trust owned 10

mezzanine loans with a total net principal amount of $47,150,099, which constituted 15.8% of its net investment

portfolio.

Preferred Equity Investments. These investments are structured as preferred membership interests in an entity that

owns commercial real estate and generally finance the acquisition, refinancing, rehabilitation, or construction of

commercial real estate that are intended to be treated as loans secured by mortgages or real estate for U.S. federal

income tax purposes. These investments are expected to have characteristics and returns similar to mezzanine loans.

As of March 31, 2019, Terra Property Trust owned nine preferred equity investments with a total net principal amount

of $117,054,059, which constituted 39.3% of its net investment portfolio.

First Mortgage Loans. These loans generally finance the acquisition, refinancing, rehabilitation, or construction

of commercial real estate. First mortgage loans may be either short-term (one to five) or long-term (up to 10 years),

may be fixed or floating rate and are predominantly current-pay loans. The Adviser and its affiliates originate current-

pay first mortgage loans backed by high-quality properties in the United States that fit Terra Property Trust’s

investment strategy. Certain of Terra Property Trust’s first mortgage loans finance the acquisition, rehabilitation, and

construction of infill land property and for these loans the Adviser targets a weighted average last dollar loan-to-value

of 60%. Terra Property Trust may selectively syndicate portions of its first mortgage loans, including senior or junior

participations, to provide third party financing for a portion of the loan or optimize returns which may include retained

origination fees.

First mortgage loans are expected to provide for a higher recovery rate and lower defaults than other debt positions

due to the lender’s senior position. However, such loans typically generate lower returns than subordinate debt such

as mezzanine loans, B-notes, or preferred equity investments. As of March 31, 2019, Terra Property Trust owned two

first mortgage loans with a total net principal amount of $105,100,000, which constituted 35.3% of its portfolio.

Subordinated Mortgage Loans (B-notes). B-notes include structurally subordinated mortgage loans and junior

participations in first mortgage loans or participations in these types of assets. Like first mortgage loans, these loans

generally finance the acquisition, refinancing, rehabilitation, or construction of commercial real estate. B-notes may

be either short-term (one to five) or long-term (up to 10 year), may include fixed or floating interest rate terms and are

predominantly current-pay loans. Terra Property Trust may create B-notes by tranching its directly originated first

mortgage loans generally through syndications of senior first mortgages or buy these loans directly from third-party

originators. As a result of the current credit market disruption related to the most recent recession and the decrease in

capital available in this part of the capital structure, the Adviser and its affiliates believe that the opportunities to both

directly originate and to buy these types of loans from third-parties on favorable terms will continue to be attractive.

Investors in B-notes are compensated for the increased risk of such assets from a pricing perspective but still

benefit from a mortgage lien on the related property. Investors typically receive principal and interest payments at the

same time as senior debt unless a default occurs, in which case any such payments are made only after any senior debt

is made whole. Rights of holders of B-notes are usually governed by participation and other agreements that, subject

to certain limitations, typically provide the holders of subordinated positions of the mortgage loan with the ability to

cure certain defaults and control certain decisions of holders of senior debt secured by the same properties (or

otherwise exercise the right to purchase the senior debt), which provides for additional downside protection and higher

recoveries. As of March 31, 2019, Terra Property Trust did not own any B-notes.

Equity Participations. In connection with Terra Property Trust’s loan origination activities, it may pursue equity

participation opportunities, or interests in the projects being financed, in instances when it believes that the risk-reward

characteristics of the loan merit additional upside participation because of the possibility of appreciation in value of

the underlying properties securing the loan. Equity participations can be paid in the form of additional interest, exit

fees or warrants in the borrower. Equity participation can also take the form of a conversion feature, permitting the

lender to convert a loan or preferred equity investment into equity in the borrower at a negotiated premium to the

current net asset value of the borrower. Terra Property Trust expects to obtain equity participations in certain instances

where the loan collateral consists of a property that is being repositioned, expanded, or improved in some fashion

which is anticipated to improve future cash flow. In such case, the borrower may wish to defer some portion of the

debt service or obtain higher leverage than might be merited by the pricing and leverage level based on historical

performance of the underlying property. Terra Property Trust can generate additional revenues from these equity

participations as a result of excess cash flows being distributed or as appreciated properties are sold or refinanced. As

16

of March 31, 2019, Terra Property Trust owned two equity participations with a total net principal amount of

$28,453,700, which constituted 9.5% of its portfolio.

Other Real Estate-Related Investments. Under the terms of the management agreement, the REIT Manager of

Terra Property Trust has the right to invest in other real estate-related investments, which may include commercial

mortgage-backed securities (“CMBS”) or other real estate debt or equity securities, so long as such investments do

not constitute more than 15% of Terra Property Trust’s assets. Certain of its real estate-related loans require the

borrower to make payments of principal on the fully committed principal amount of the loan regardless of whether

the full loan amount is outstanding. As of March 31, 2019, Terra Property Trust did not own any other real estate-

related investments.

Terra Property Trust Investment Guidelines

Terra Property Trust’s board of directors has adopted investment guidelines relating to the criteria to be used by

the REIT Manager’s senior management team to evaluate specific investments as well as its overall portfolio

composition. Terra Property Trust’s board of directors will review its compliance with the investment guidelines

periodically and receive an investment report at each quarter-end in conjunction with the review of Terra Property

Trust’s quarterly results by its board of directors.

Terra Property Trust’s investment guidelines are as follows:

• no acquisition shall be made that would cause Terra Property Trust to fail to qualify as a REIT;

• no acquisition shall be made that would cause Terra Property Trust or any of its subsidiaries to be

required to register as an investment company under the 1940 Act; and

• until appropriate investments can be identified, Terra Property Trust may invest the proceeds of any

future offerings of its equity or debt securities in interest-bearing, short-term investments, including

money market accounts and/or funds, that are consistent with Terra Property Trust’s intention to qualify

as a REIT.

These investment guidelines may be changed from time to time by a majority of Terra Property Trust’s board of

directors without the approval of Terra Property Trust’s stockholders.

Disposition Policies

The period Terra Property Trust holds its investments in real estate-related loans will vary depending on the type

of asset, interest rates and other factors. The REIT Manager, in determining the appropriate disposition policies for

Terra Property Trust, has developed a well-defined exit-strategy for each investment Terra Property Trust makes. The

REIT Manager continually performs a hold-sell analysis on each asset in order to determine the optimal time to hold

the asset and generate a strong return to our Limited Partners through the Partnership’s indirect investment in Terra

Property Trust. Economic and market conditions may influence Terra Property Trust to hold investments on our behalf

for different periods of time. It may sell an asset before the end of the expected holding period if the REIT Manager

believes that market conditions have maximized its value to Terra Property Trust, or the sale of the asset would

otherwise be in Terra Property Trust’s best interests. The REIT Manager intends to make any such dispositions in a

manner consistent with Terra Property Trust’s qualification as a REIT and the desire to avoid being subject to the

“prohibited transaction” penalty tax.

Term and Liquidity

The expected term of the Partnership shall be five years from the offering termination date, subject to two

extensions of one year each, to be determined at the sole discretion of the General Partner.

Operating and Regulatory Structure

REIT Qualification. Terra Property Trust has qualified and elected to be taxed as a REIT under the Code,

commencing with its taxable year ended December 31, 2016. It is believed that Terra Property Trust has been organized

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and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and it

is currently anticipated that Terra Property Trust’s organization and expected manner of operation will enable it to

continue to meet the requirements for qualification and taxation as a REIT. To qualify as a REIT, it must meet on a

continuing basis, through its organization and actual investment and operating results, various requirements under the

Code relating to, among other things, the sources of its gross income, the composition and values of its assets, its

distribution levels and the diversity of ownership of shares of its stock. If Terra Property Trust fails to qualify as a

REIT in any taxable year and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal

income tax at regular corporate rates and may be precluded from re-electing taxation as a REIT for the subsequent

four taxable years following the year during which it failed to qualify as a REIT. Even if Terra Property Trust qualifies

for taxation as a REIT, it may be subject to some U.S. federal, state and local taxes on its income or property. In

addition, subject to maintaining its qualification as a REIT, a portion of its business may be conducted through, and a

portion of its income may be earned with respect to, its “taxable REIT subsidiaries” should it decide to form taxable

REIT subsidiaries in the future, which are subject to corporate income tax. Any distributions paid by Terra Property

Trust generally will not be eligible for taxation at the preferential U.S. federal income tax rates that currently apply to

certain distributions received by individuals from taxable corporations.

1940 Act Exclusion. Neither we nor Terra Property Trust are registered as an investment company under the 1940

Act. If we or Terra Property Trust were obligated to register as an investment company, we or Terra Property Trust

would have to comply with a variety of substantive requirements under the 1940 Act that impose, among other things:

• limitations on capital structure or the use of leverage;

• restrictions on specified investments;

• prohibitions on transactions with affiliates; and

• compliance with reporting, record keeping, and other rules and regulations that would significantly

change our and Terra Property Trust’s operations.

We intend conduct our operations so that we are not required to register as an investment company under the 1940

Act. Section 3(a)(1)(A) of the 1940 Act defines an investment company as any issuer that is or holds itself out as being

engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(c)(1) of the 1940 Act

exempts from the definition of investment company “[a]ny issuer whose outstanding securities (other than short-term

securities) are beneficially owned by not more than one hundred persons and which is not making and does not

presently propose to make a public offering of its securities.” The SEC staff has taken the position that a non-U.S.

fund may make a private offering either within or without the United States if following the offering the non-U.S.

fund has no more than 100 beneficial owners resident in the United States. If a fund is organized outside the United

States, non-U.S. investors are not counted for purposes of determining whether the non-U.S. fund has no more than

100 beneficial owners, and only U.S. persons are counted for determining whether such non-U.S. fund has no more

than 100 beneficial owners. The Partnership intends to limit sales of its Interests solely to non-U.S. investors, and as

a result none of its Limited Partners is expected to be counted as beneficial owners for purposes of determining

compliance with Section 3(c)(1) of the 1940 Act.

Terra Property Trust relies on the exclusion from the definition of an investment company under Section

3(c)(5)(C) of the 1940 Act, or any other exclusions available to Terra Property Trust. Section 3(c)(5)(C) of the 1940

Act is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and

other liens on and interests in real estate.” This exclusion generally requires that at least 55% of Terra Property Trust’s

portfolio must be comprised of “qualifying real estate” assets and at least 80% of Terra Property Trust’s portfolio must

be comprised of “qualifying real estate” assets and “real estate-related” assets (and no more than 20% comprised of

miscellaneous assets) as determined in accordance with the 1940 Act and the rules and regulations promulgated

thereunder. For purposes of the exclusion provided by Section 3(c)(5)(C) of the 1940 Act, Terra Property Trust

classifies its investments based in large measure on no-action letters issued by the SEC staff and other SEC interpretive

guidance and, in the absence of SEC guidance, on its view of what constitutes a “qualifying real estate” asset and a

“real estate-related” asset. These no-action positions were issued in accordance with factual situations that may be

substantially different from the factual situations Terra Property Trust may face, and a number of these no-action

positions were issued more than ten years ago. Pursuant to this guidance, and depending on the characteristics of the

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specific investments, certain mortgage loans, participations in mortgage loans, mortgage-backed securities, mezzanine

loans, joint venture investments and the equity securities of other entities may not constitute qualifying real estate

assets and therefore investments in these types of assets may be limited. No assurance can be given that the SEC or

its staff will concur with its classification of the assets held by Terra Property Trust. Future revisions to the 1940 Act

or further guidance from the SEC or its staff may cause us to lose its exclusion from registration or force us to re-

evaluate its portfolio held through Terra Property Trust and its investment strategy. Such changes may prevent us from

operating its business successfully.

In order to maintain an exclusion from registration under the 1940 Act, we may be unable to sell assets that we

would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have

to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forgo

opportunities to acquire assets that we would otherwise want to acquire and would be important to its strategy.

Although the Adviser and its affiliates monitor our portfolio and that of Terra Property Trust periodically and prior

to each acquisition and disposition, we and Terra Property Trust may not be able to maintain an exclusion from

registration as an investment company. If we or Terra Property Trust were required to register as an investment

company, but failed to do so, we or Terra Property Trust would be prohibited from engaging in our businesses, and

legal proceedings could be instituted against Terra Property Trust or us. In addition, our contracts and those of Terra

Property Trust may be unenforceable, and a court could appoint a receiver to take control of Terra Property Trust or

us and liquidate our businesses, all of which would have an adverse effect on our businesses.

Licensing

Terra Property Trust may be required to be licensed to originate its real estate-related loans in various jurisdictions

in which it conducts its business. The General Partner believes Terra Property Trust and its wholly owned subsidiaries

are in compliance with all such material licensing requirements necessary in order to conduct its business.

Competition

We compete with REITs, numerous regional and community banks, specialty finance companies, savings and

loan associations and other entities, and the General Partner expects that others may be organized in the future. The

effect of the existence of additional REITs and other institutions may be increased competition for the available supply

of targeted assets suitable for purchase, which may cause the price for such assets to rise.

In the face of this competition, we expect to have access to the Adviser’s professionals and their industry expertise,

which may provide us with a competitive advantage in sourcing transactions and help us assess origination and

acquisition risks and determine appropriate pricing for potential assets. The more conservative underwriting standards

used by many large commercial banks and traditional providers of commercial real estate capital following the 2008

downturn has and, and the Adviser believes, will continue to constrain the lending capacity of these institutions.

However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face.

Staffing

Our sole investment, Terra Property Trust, is supervised by its board of directors consisting of eight directors.

Terra Property Trust has entered into a management agreement with the REIT Manager pursuant to which certain

services are provided by the REIT Manager and paid for by Terra Property Trust, which we will indirectly bear as a

result of our investment in Terra Property Trust. The Adviser is not obligated under the Management Agreement to

dedicate any of its personnel exclusively to us, nor is it or its personnel obligated to dedicate any specific portion of

its or their time to our business. We are responsible for the costs of our own employees; however, we do not currently

have any employees and do not currently expect to have any employees.

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RISK FACTORS

Investing in our Interests involves a high degree of risk. Investors should carefully consider the following risk

factors and all other information contained in this memorandum. If any of the following risks occur, our business,

financial condition, liquidity and results of operations could be materially and adversely affected. In that case, the

value of your Interests could decline, and Limited Partners may lose some or all of their investment. Some statements

in this section constitute forward-looking statements. See “Forward-Looking Statements.”

Risks Related to Our Business

Changes in national, regional or local economic, demographic or real estate market conditions may adversely

affect our results of operations and returns to our investors.

Through our indirect investment in the assets held by Terra Property Trust, we will be subject to risks incident to

the ownership of real estate-related assets including: changes in national, regional or local economic, demographic or

real estate market conditions; changes in supply of, or demand for, similar properties in an area; increased competition

for real estate assets targeted by Terra Property Trust; bankruptcies, financial difficulties or lease defaults by property

owners and tenants; changes in interest rates and availability of financing; and changes in government rules,

regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws. Any increase in

mortgage defaults in the residential market may have a negative impact on the credit markets generally as well as on

economic conditions generally. The Adviser is unable to predict future changes in national, regional or local economic,

demographic or real estate market conditions. These conditions, or others the Adviser cannot predict, may adversely

affect our results of operations, cash flow and returns to our investors.

The real estate-related loans owned indirectly by us may be impacted by unfavorable real estate market

conditions, which could decrease the value of Terra Property Trust’s investments.

The real estate-related loans Terra Property Trust invests in are at risk of defaults caused by many conditions

beyond our control, including local and other economic conditions affecting real estate values and interest rate levels.

The Adviser does not know whether the values of the property securing the real estate-related loans will remain at the

levels existing on the dates of origination of such loans. If the values of the underlying properties drop, Terra Property

Trust’s risks will increase and the value of our investment in it may decrease.

The lack of liquidity of the assets held by Terra Property Trust may adversely affect our business.

A portion of the real estate-related loans and other assets that Terra Property Trust acquires or originates may be

subject to legal and other restrictions on resale or will otherwise be less liquid than publicly-traded securities. The

illiquidity of these assets may make it difficult to sell such assets if the need or desire arises. In addition, if Terra

Property Trust is required to liquidate all or a portion of its portfolio quickly, we may realize significantly less value

than the previously recorded value of our investment in Terra Property Trust. As a result, Terra Property Trust’s ability

to vary its portfolio in response to changes in economic and other conditions may be relatively limited, which could

adversely affect our investment in Terra Property Trust.

The investments held indirectly by us through our investment in Terra Property Trust will be selected by the

Adviser or its affiliates and our Limited Partners will not have input into investment decisions.

The investments held indirectly by us through our investment in Terra Property Trust will be selected by the

Adviser or its affiliates and our Limited Partners will not have input into investment decisions. This will increase the

uncertainty, and thus the risk, of investing in our Interests, as Terra Property Trust may make investments with which

you may not agree. The Adviser or its affiliates intends to conduct due diligence with respect to each investment and

suitable investment opportunities may not be immediately available. The failure of the Adviser or its affiliates to find

investments that meet Terra Property Trust’s investment criteria in sufficient time or on acceptable terms could result

in unfavorable returns, could cause a material adverse effect on its business, financial condition, liquidity, results of

operations and ultimately our ability to make distributions to our Limited Partners, and could cause the value of our

Interests to decline. Even if investment opportunities are available, there can be no assurance that the due diligence

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processes of the Adviser or its affiliates will uncover all relevant facts or that any particular investment will be

successful.

From time to time, before appropriate real estate-related investments can be identified, the Adviser or its affiliates

may choose to have us invest in interest-bearing, short-term investments, including money market accounts and/or

funds. These short-term, non-real estate-related investments, if any, are expected to provide a lower net return than

Terra Property Trust will seek to achieve from investments in real estate-related loans and other commercial real estate

assets held through our investment in Terra Property Trust. Furthermore, when the Adviser or its affiliates does identify

suitable real estate-related loans and other commercial real estate assets that are the types of assets which Terra

Property Trust targets, you will be unable to influence the decision of the Adviser or its affiliates ultimately to invest

in, or refrain from investing in, such assets.

The Adviser’s or its affiliates’ due diligence of potential real estate-related loans and other commercial real

estate assets may not reveal all of the liabilities associated with such assets and may not reveal other weaknesses in

Terra Property Trust’s assets, which could lead to investment losses.

Before making an investment, the Adviser or its affiliates calculates the level of risk associated with the real

estate-related loans and other commercial real estate assets to be originated or acquired based on several factors which

include the following: top-down reviews of both the current macroeconomic environment generally and the real estate

and commercial real estate loan market specifically; detailed evaluation of the real estate industry and its sectors;

bottom-up reviews of each individual investment’s attributes and risk/reward profile relative to the macroeconomic

environment; and quantitative cash flow analysis and impact of the potential investment on the overall portfolio. In

making the assessment and otherwise conducting customary due diligence, the Adviser or its affiliates employ standard

documentation requirements and require appraisals prepared by local independent third-party appraisers selected by

us. Additionally, the Adviser or its affiliates seek to have borrowers or sellers provide representations and warranties

on loans to be originated or acquired, and if unable to obtain representations and warranties, the Adviser or its affiliates

factor the increased risk into the price paid for such loans. Despite these review process, there can be no assurance

that the due diligence process will uncover all relevant facts or that any investment will be successful.

If the Adviser or its affiliates underestimates the borrower’s credit analysis, losses may result.

The Adviser or its affiliates conducts an initial valuation on real estate-related loans based on an initial credit

analysis and the investment’s expected risk-adjusted return relative to other comparable investment opportunities

available, taking into account estimated future losses on the loans, and the estimated impact of these losses on expected

future cash flows. The loss estimates may not prove accurate, as actual results may vary from estimates. In the event

that the Adviser or its affiliates underestimates the losses relative to the price paid for a particular investment, Terra

Property Trust may experience losses with respect to such investment, and our investment in Terra Property Trust

could be adversely impacted.

The use of underwriting guideline exceptions in the loan origination process may result in increased

delinquencies and defaults.

Although the Adviser or its affiliates generally underwrite loans in accordance with pre-determined loan

underwriting guidelines, from time to time and in the ordinary course of business, the Adviser or its affiliates will

make exceptions to these guidelines. On a case by case basis, the Adviser or its affiliates may determine that a

prospective borrower that does not strictly qualify under the underwriting guidelines warrants an underwriting

exception, based upon compensating factors. Compensating factors may include a lower loan-to-value ratio, a higher

debt coverage ratio, experience as a real estate owner or investor, higher borrower net worth or liquidity, longer length

of time in business and length of time owning the property. Loans originated with exceptions may result in a higher

number of delinquencies and defaults, which could have a material and adverse effect on Terra Property Trust’s

business, results of operations and financial condition.

Deficiencies in appraisal quality in the mortgage loan origination process may result in increased principal

loss severity.

During the loan underwriting process, appraisals are generally obtained on the collateral underlying each

prospective loan. The quality of these appraisals may vary widely in accuracy and consistency. The appraiser may feel

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pressure from the broker or lender to provide an appraisal in the amount necessary to enable the originator to make

the loan, whether or not the value of the property justifies such an appraised value. Inaccurate or inflated appraisals

may result in an increase in the severity of losses on the loans, which could have a material and adverse effect on our

business, results of operations and financial condition.

The Adviser utilizes analytical models and data in connection with the valuation of real estate-related loans

and other commercial real estate assets, and any incorrect, misleading or incomplete information used in

connection therewith would subject us to potential risks.

As part of the risk management process the Adviser or its affiliates uses detailed proprietary models, including

loan level non-performing loan models, to evaluate collateral liquidation timelines and price changes by region, along

with the impact of different loss mitigation plans. Additionally, the Adviser or its affiliates uses information, models

and data supplied by third parties. Models and data are used to value potential targeted assets. In the event models and

data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential

risks. For example, by relying on incorrect models and data, especially valuation models, the Adviser or its affiliates

may be induced to buy certain targeted assets at prices that are too high, to sell certain other assets at prices that are

too low or to miss favorable opportunities altogether. Similarly, any hedging based on faulty models and data may

prove to be unsuccessful.

Changes in interest rates could adversely affect the demand for Terra Property Trust’s target loans, the value

of the loans and CMBS assets held indirectly by us through our investment in Terra Property Trust and the

availability and yield on the targeted assets held by Terra Property Trust.

Terra Property Trust invests in real estate-related loans and other commercial real estate assets, which are subject

to changes in interest rates. Interest rates are highly sensitive to many factors, including governmental monetary and

tax policies, domestic and international economic and political considerations and other factors beyond our control.

Rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing. A reduction

in the volume of mortgage loans originated may affect the volume of targeted assets available to Terra Property Trust,

which could adversely affect its ability to originate and acquire assets that satisfy its investment objectives. Rising

interest rates may also cause the targeted assets that were issued prior to an interest rate increase to provide yields that

are below prevailing market interest rates. If rising interest rates cause Terra Property Trust to be unable to originate

or acquire a sufficient volume of targeted assets with a yield that is above its borrowing cost, its ability to satisfy its

investment objectives and to generate income and make distributions may be materially and adversely affected.

Conversely, if interest rates decrease, Terra Property Trust will be adversely affected to the extent that real estate-

related loans are prepaid to it, because it may not be able to make new loans at the previously higher interest rate.

The relationship between short-term and longer-term interest rates is often referred to as the “yield curve.”

Ordinarily, short-term interest rates are lower than longer-term interest rates. If short-term interest rates rise

disproportionately relative to longer-term interest rates (a flattening of the yield curve), Terra Property Trust’s

borrowing costs may increase more rapidly than the interest income earned on its assets. Because its loans and CMBS

assets generally will bear, on average, interest based on longer-term rates than its borrowings, a flattening of the yield

curve would tend to decrease Terra Property Trust’s net income and the fair market value of its net assets, which will

negatively impact our investment in Terra Property Trust. Additionally, to the extent cash flows from loans and CMBS

assets that return scheduled and unscheduled principal are reinvested, the spread between the yields on the new loans

and CMBS assets and available borrowing rates may decline, which would likely decrease Terra Property Trust’s net

income. It is also possible that short-term interest rates may exceed longer-term interest rates (a yield curve inversion),

in which event borrowing costs may exceed Terra Property Trust’s interest income and it could incur operating losses,

which would also negatively impact our investment in Terra Property Trust.

The values of the loans and CMBS assets held by Terra Property Trust may decline without any general increase

in interest rates for a number of reasons, such as increases or expected increases in defaults, or increases or expected

increases in voluntary prepayments for those loans and CMBS assets that are subject to prepayment risk or widening

of credit spreads.

In addition, in a period of rising interest rates, Terra Property Trust’s operating results will depend in large part

on the difference between the income from its assets and its financing costs. The Adviser and its affiliates anticipate

that, in most cases, the income from such assets will respond more slowly to interest rate fluctuations than the cost of

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borrowings. Consequently, changes in interest rates, particularly short-term interest rates, may significantly influence

Terra Property Trust’s net income and our investment in it. Increases in these rates will tend to decrease Terra Property

Trust’s net income and consequently result in a negative impact on our investment in it.

Recent market conditions may make it more difficult for the Adviser and its affiliates to analyze potential

investment opportunities or Terra Property Trust’s portfolio of assets.

Our success depends, in part, on the Adviser’s and its affiliates’ ability to effectively analyze potential acquisition

and origination opportunities for Terra Property Trust in order to assess the level of risk-adjusted returns that it should

expect from any particular investment. To estimate the value of a particular asset, the Adviser and its affiliates may

use historical assumptions that may or may not be appropriate due to the unprecedented downturn in the real estate

market and general economy that began in 2007. To the extent that the Adviser or its affiliates use historical

assumptions that are inappropriate under current market conditions, Terra Property Trust may overpay for an asset or

acquire an asset that it otherwise might not acquire, which could have a material and adverse effect on its results of

operations and ultimately our ability to make distributions to our Limited Partners.

In addition, as part of an overall portfolio risk management, the Adviser and its affiliates analyze interest rate

changes and prepayment trends separately and collectively to assess their effects on the portfolio of assets held by

Terra Property Trust. In conducting this analysis, the Adviser and its affiliates rely on certain assumptions based upon

historical trends with respect to the relationship between interest rates and prepayments under normal market

conditions. Dislocations in the mortgage market or other developments may change the way that prepayment trends

respond to interest rate changes, which may adversely affect the Adviser’s and its affiliates’ ability to assess the market

value of a portfolio of assets, implement hedging strategies or implement techniques to reduce prepayment rate

volatility. If these estimates prove to be incorrect or any hedges do not adequately mitigate the impact of changes in

interest rates or prepayments, Terra Property Trust may incur losses that could materially and adversely affect its

financial condition, results of operations and ultimately our ability to make distributions to our Limited Partners.

New entrants in the market for commercial loan originations and acquisitions could adversely impact Terra

Property Trust’s ability to originate and acquire real estate-related loans at attractive risk-adjusted returns.

New entrants in the market for commercial loan originations and acquisitions could adversely impact Terra

Property Trust’s ability to execute its investment strategy on terms favorable to it, which would also adversely impact

our investment in Terra Property Trust. In originating and acquiring its targeted assets, Terra Property Trust may

compete with other REITs, numerous regional and community banks, specialty finance companies, savings and loan

associations, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms,

other lenders and other entities, and we expect that others may be organized in the future. The effect of the existence

of\additional REITs and other institutions may be increased competition for the available supply of assets suitable for

investment by Terra Property Trust, which may cause the price for such assets to rise, which may limit its ability to

generate desired returns for us and our Limited Partners. Additionally, origination of target loans by Terra Property

Trust’s competitors may increase the availability of such loans which may result in a reduction of interest rates on

these loans. Some competitors may have a lower cost of funds and access to funding sources that may not be available

to Terra Property Trust. Many of its competitors are not subject to the operating constraints associated with REIT tax

compliance or maintenance of an exemption from the 1940 Act. In addition, some of its competitors may have higher

risk tolerances or different risk assessments, which could allow them to consider a wider variety of real estate-related

loans and establish more relationships than Terra Property Trust.

We cannot assure you that the competitive pressures Terra Property Trust may face will not have a material adverse

effect on its business, financial condition and results of operations, and consequently on our investment in it. Also, as

a result of this competition, desirable investments meeting Terra Property Trust’s targeted assets profile may be limited

in the future and it may not be able to take advantage of attractive investment opportunities from time to time. We can

therefore provide you no assurance that Terra Property Trust will be able to identify and make investments that are

consistent with our investment objectives.

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The mezzanine loans, preferred equity and other subordinated loans in which Terra Property Trust will

invest involve greater risks of loss than senior loans secured by income-producing commercial properties.

Terra Property Trust invests in mezzanine loans that take the form of subordinated loans secured by second

mortgages on the underlying real property or loans secured by a pledge of the ownership interests of the entity owning

the real property. These types of investments involve a higher degree of risk than long-term senior mortgage lending

secured by income-producing real property because the investment may become unsecured as a result of foreclosure

by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as

security, Terra Property Trust may not have full recourse to the assets of such entity, or the assets of the entity may not

be sufficient to satisfy the mezzanine loan held by it. If a borrower defaults on the mezzanine loan or debt senior to

such loan held by Terra Property Trust, or in the event of a borrower bankruptcy, Terra Property Trust’s mezzanine

loan will be satisfied only after the senior debt. As a result, Terra Property Trust may not recover some or all of its

investment, which would negatively impact our investment in it. In addition, mezzanine loans may have higher loan-

to-value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk

of loss of principal.

Terra Property Trust’s investments in B-notes are generally subject to losses. The B-notes in which Terra

Property Trust may invest may be subject to additional risks relating to the privately negotiated structure and terms

of the transaction, which may result in losses to it.

As part of Terra Property Trust’s whole loan origination platform, it may retain, from whole loans it originates or

acquires, subordinate interests referred to as B-notes. B-notes are commercial real estate loans secured by a first

mortgage on a single large commercial property or group of related properties and subordinated to a senior interest,

referred to as an A-note. As a result, if a borrower defaults, there may not be sufficient funds remaining for B-note

owners after payment to the A-note owners. In addition, Terra Property Trust’s rights to control the process following

a borrower default may be subject to the rights of A-note owners whose interests may not be aligned with it. B-notes

reflect similar credit risks to comparably rated CMBS. However, since each transaction is privately negotiated, B-

notes can vary in their structural characteristics and risks. For example, the rights of holders of B-notes to control the

process following a borrower default may be limited in certain investments. We cannot predict the terms of each B-

note investment to be made by Terra Property Trust. Significant losses related to the B-notes held by Terra Property

Trust would result in operating losses for it and consequently may limit our ability to make distributions to our Limited

Partners.

Terra Property Trust’s loans are dependent on the ability of the commercial property owner to generate net

income from operating the property, which may result in the inability of such property owner to repay a loan, as

well as the risk of foreclosure.

Terra Property Trust’s loans may be secured by office, retail, mixed use, commercial or warehouse properties,

and are subject to risks of delinquency, foreclosure and of loss that may be greater than similar risks associated with

loans made on the security of single-family residential property. The ability of a borrower to repay a loan secured by

an income-producing property typically is dependent primarily upon the successful operation of such property rather

than upon the existence of independent income or assets of the borrower. If the net operating income of the property

is reduced, the borrower’s ability to repay the loan may be operating income of an income-producing property can be

adversely affected by, among other things:

• tenant mix;

• success of tenant businesses;

• property management decisions;

• property location, condition and design;

• competition from comparable types of properties;

• changes in national, regional or local economic conditions and/or specific industry segments;

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• declines in regional or local real estate values;

• declines in regional or local rental or occupancy rates;

• increases in interest rates, real estate tax rates and other operating expenses;

• costs of remediation and liabilities associated with environmental conditions;

• the potential for uninsured or underinsured property losses;

• changes in governmental laws and regulations, including fiscal policies, zoning ordinances and

environmental legislation and the related costs of compliance; and

• acts of God, terrorism, social and political unrest, armed conflict, geopolitical events and civil

disturbances.

In the event of any default under a mortgage loan held directly by Terra Property Trust and indirectly by our

investment in Terra Property Trust, we bear a risk of loss of principal to the extent of any deficiency between the value

of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect

on Terra Property Trust’s cash flow from operations and limit amounts available for distribution to our Limited

Partners. In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be

deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as

determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers

of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.

Foreclosure can be an expensive and lengthy process, and foreclosing on certain properties where Terra Property

Trust directly hold the mortgage loan and the borrower’s default under the mortgage loan is continuing could result in

actions that could be costly to its operations, in addition to having a substantial negative effect on Terra Property

Trust’s anticipated return on the foreclosed mortgage loan and consequently our investment in Terra Property Trust.

Terra Property Trust’s loan portfolio may at times be concentrated in certain property types or secured by

properties concentrated in a limited number of geographic areas, which increases its exposure to economic

downturn with respect to those property types or geographic locations.

Terra Property Trust is not required to observe specific diversification criteria. Therefore, its portfolio of assets

may, at times, be concentrated in certain property types that are subject to higher risk of foreclosure, or secured by

properties concentrated in a limited number of geographic locations.

If economic conditions in any state in which Terra Property Trust has a significant concentration of borrowers

were to deteriorate, such adverse conditions could have a material and adverse effect on its business by reducing

demand for new financings, limiting the ability of customers to repay existing loans and impairing the value of its real

estate collateral and real estate owned properties, which would also negatively impact our investment in Terra Property

Trust.

To the extent that Terra Property Trust’s portfolio is concentrated in any region, or by type of property, downturns

relating generally to such region, type of borrower or security may result in defaults on a number of its assets within

a short time period, which may reduce its net income and consequently the value of our Interests and accordingly

reduce our ability to pay distributions to our Limited Partners.

We expect that a significant portion of the mortgage loans invested in by Terra Property Trust may be

development mortgage loans on infill land, which are speculative in nature.

We expect that a significant portion of Terra Property Trust’s assets may be mortgage loans for the development

of real estate, which will initially be secured by infill land. These types of loans are speculative, because:

• until improvement, the property may not generate separate income for the borrower to make loan

payments;

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• the completion of planned development may require additional development financing by the borrower,

which may not be available; and

• there is no assurance that Terra Property Trust will be able to sell unimproved infill land promptly if it

is forced to foreclose upon it.

If in fact the land is not developed, the borrower may not be able to refinance the loan and, therefore, may not be

able to make the balloon payment when due. If a borrower defaults and Terra Property Trust forecloses on the

collateral, it may not be able to sell the collateral for the amount owed to it by the borrower. In calculating its loan-to-

value ratios for the purpose of determining maximum borrowing capacity, Terra Property Trust uses the estimated

value of the property at the time of completion of the project, which increases the risk that, if it forecloses on the

collateral before it is fully developed, Terra Property Trust may not be able to sell the collateral for the amount owed

to it by the borrower.

Loans to small businesses involve a high degree of business and financial risk, which can result in substantial

losses that would adversely affect Terra Property Trust’s business, results of operation and financial condition.

Terra Property Trust’s operations and activities include loans to small, privately owned businesses to purchase

real estate used in their operations or by investors seeking to acquire small office, retail, mixed use or warehouse

properties. Additionally, such loans are also often accompanied by personal guarantees. Often, there is little or no

publicly available information about these businesses. Accordingly, Terra Property Trust must rely on its own due

diligence to obtain information in connection with its investment decisions. Terra Property Trust’s borrowers may not

meet net income, cash flow and other coverage tests typically imposed by banks. A borrower’s ability to repay its loan

may be adversely impacted by numerous factors, including a downturn in its industry or other negative local or more

general economic conditions. Deterioration in a borrower’s financial condition and prospects may be accompanied by

deterioration in the collateral for the loan. In addition, small businesses typically depend on the management talents

and efforts of one person or a small group of people for their success. The loss of services of one or more of these

persons could have a material and adverse impact on the operations of the small business. Small companies are

typically more vulnerable to customer preferences, market conditions, and economic downturns and often need

additional capital to expand or compete. These factors may have an impact on loans involving such businesses. Loans

to small businesses, therefore, involve a high degree of business and financial risk, which can result in substantial

losses.

Terra Property Trust’s investments may include subordinated tranches of CMBS, which are subordinated classes

of securities in a structure of securities collateralized by a pool of assets consisting primarily of commercial loans and,

accordingly, are the first or among the first to bear the loss upon a restructuring or liquidation of the underlying

collateral and the last to receive payment of interest and principal. Additionally, estimated fair values of these

subordinated interests tend to be more sensitive to changes in economic conditions than more senior securities. As a

result, such subordinated interests generally are not actively traded and may not provide holders thereof with liquid

investments.

Some of the loan and CMBS assets held by Terra Property Trust and indirectly by us may be rated by Moody’s

Investors Service, by Standard & Poor’s or by Fitch Ratings. Any credit ratings on the loans and CMBS assets are

subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be

changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. Rating agencies may

assign a lower than expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings

of Terra Property Trust’s loans and CMBS assets in the future. In addition, Terra Property Trust may originate or

acquire assets with no rating or with below investment grade ratings. If the rating agencies take adverse action with

respect to the rating of the loans and CMBS assets held by Terra Property Trust, or if its unrated assets are illiquid, the

value of these loans and CMBS assets could significantly decline, which would adversely affect the value of its

investment portfolio and could result in losses upon disposition or the failure of borrowers to satisfy their debt service

obligations to it.

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Any disruption in the availability and/or functionality of Terra Property Trust’s technology infrastructure and

systems and any failure or its security measures related to these systems could adversely impact its business and

our investment in it.

Terra Property Trust’s ability to originate and acquire real estate-related loans and manage any related interest

rate risks and credit risks is critical to its success and our investment in it, and is highly dependent upon the efficient

and uninterrupted operation of its computer and communications hardware and software systems. For example, Terra

Property Trust relies on its proprietary database to track and maintain all loan performance and servicing activity data

for loans in its portfolio. This data is used to manage the portfolio, track loan performance, develop and execute asset

disposition strategies. In addition, this data is used to evaluate and price new investment opportunities. Some of these

systems are located at Terra Property Trust’s facility and some are maintained by third party vendors. Any significant

interruption in the availability and functionality of these systems could harm Terra Property Trust’s business and our

investment in it. In the event of a systems failure or interruption by Terra Property Trust’s third-party vendors, it will

have limited ability to affect the timing and success of systems restoration. If such interruptions continue for a

prolonged period of time, there could be a material and adverse impact on Terra Property Trust’s business, results of

operations and financial condition, and consequently our investment in it.

Terra Property Trust’s security measures may not effectively prohibit others from obtaining improper access to

its information. If a person is able to circumvent its security measures, he or she could destroy or misappropriate

valuable information or disrupt its operations. Any security breach could expose Terra Property Trust to risks of data

loss, litigation and liability and could seriously disrupt its operations and harm its reputation.

Cybersecurity risk and cyber incidents may adversely affect Terra Property Trust’s business by causing a

disruption to its operations, a compromise or corruption of its confidential information and/or damage to its

business relationships, all of which could negatively impact our investment in Terra Property Trust and our

financial results.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability

of information resources. These incidents may be an intentional attack or an unintentional event and could involve

gaining unauthorized access to information systems for purposes of misappropriating assets, stealing confidential

information, corrupting data or causing operational disruption. The result of these incidents may include disrupted

operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity

protection and insurance cost, litigation and damage to our relationships. As our reliance on technology has increased,

so have the risks posed to our information systems both internal and those provided by the Adviser, Terra Capital

Partners, its affiliates and third-party service providers. The Adviser and its affiliates have implemented processes,

procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well

as increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results,

operations or confidential information will not be negatively impacted by such an incident.

Risks Related to Regulation

Returns on Terra Property Trust’s real estate-related loans may be limited by regulations.

Terra Property Trust’s loan investments may be subject to regulation by federal, state and local authorities and

subject to various laws and judicial and administrative decisions. The Adviser and its affiliates may determine not to

make or invest in real estate-related loans in any jurisdiction in which they believe Terra Property Trust has not

complied in all material respects with applicable requirements. If the Adviser or its affiliates decide not to make or

invest in real estate-related loans in several jurisdictions, it could reduce the amount of income Terra Property Trust

would otherwise receive.

The increasing number of proposed U.S. federal, state and local laws may affect certain mortgage-related

assets in which Terra Property Trust invests and could materially increase its cost of doing business.

Various bankruptcy legislation has been proposed that, among other provisions, could allow judges to modify the

terms of residential mortgages in bankruptcy proceedings, could hinder the ability of the servicer to foreclose promptly

on defaulted mortgage loans or permit limited assignee liability for certain violations in the mortgage loan origination

process, any or all of which could adversely affect Terra Property Trust’s business and our investment in it, or result

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in Terra Property Trust being held responsible for violations in the mortgage loan origination process even where it

was not the originator of the loan. We do not know what impact this type of legislation, which has been primarily, if

not entirely, focused on residential mortgage originations, would have on the commercial loan market. We are unable

to predict whether U.S. federal, state or local authorities, or other pertinent bodies, will enact legislation, laws, rules,

regulations, handbooks, guidelines or similar provisions that will affect Terra Property Trust’s business or require

changes in its practices in the future, and any such changes could materially and adversely affect its cost of doing

business and profitability, as well as our investment in it.

Failure to obtain or maintain required approvals and/or state licenses necessary to operate Terra Property

Trust’s mortgage-related activities may adversely impact its investment strategy.

Terra Property Trust may be required to obtain and maintain various approvals and/or licenses from federal or

state governmental authorities, government sponsored entities or similar bodies in connection with some or all of its

activities. There is no assurance that it can obtain and maintain any or all of the approvals and licenses that it desires

or that it will avoid experiencing significant delays in seeking such approvals and licenses. Furthermore, Terra Property

Trust may be subject to various disclosure and other requirements to obtain and maintain these approvals and licenses,

and there is no assurance that it will satisfy those requirements. Terra Property Trust’s failure to obtain or maintain

licenses will restrict its options and ability to engage in desired activities, and could subject it to fines, suspensions,

terminations and various other adverse actions if it is determined that it has engaged without the requisite approvals

or licenses in activities that required an approval or license, which could have a material and adverse effect on our

investment in Terra Property Trust.

We cannot predict the unintended consequences and market distortions that may stem from far-ranging

governmental intervention in the economic and financial system or from regulatory reform of the oversight of

financial markets.

In response to the financial issues affecting the banking system and financial markets and ongoing concerns of,

and threats to, commercial banks, investment banks and other financial institutions, the Emergency Economic

Stabilization Act (“EESA”) was enacted by the U.S. Congress in 2008. There can be no assurance that the EESA or

any other U.S. Government actions will have a beneficial impact on the financial markets. To the extent the markets

do not respond favorably to any such actions by the U.S. Government or such actions do not function as intended, our

business may not receive the anticipated positive impact from the legislation and such result may have broad adverse

market implications.

In July 2010, the U.S. Congress enacted the Dodd-Frank Act, in part to impose significant investment restrictions

and capital requirements on banking entities and other organizations that are significant to U.S. financial markets. For

instance, the Dodd-Frank Act has imposed significant restrictions on the proprietary trading activities of certain

banking entities and subject other systemically significant organizations regulated by the U.S. Federal Reserve to

increase capital requirements and quantitative limits for engaging in such activities. The Dodd-Frank Act also seeks

to reform the asset-backed securitization market (including the mortgage backed securities (“MBS”) market) by

requiring the retention of a portion of the credit risk inherent in the pool of securitized assets and by imposing

additional registration and disclosure requirements. The Dodd-Frank Act also imposes significant regulatory

restrictions on the origination and securitization of commercial mortgage loans. Also, the significant changes to

Regulation AB could lead to sweeping changes to commercial and residential mortgage loan securitization markets as

well as to the market for the re-securitization of MBS. The Dodd-Frank Act also created a new regulator, the Consumer

Financial Protection Bureau (“CFPB”), which oversees many of the core laws which regulate the mortgage industry,

including the Real Estate Settlement Procedures Act and the Truth in Lending Act. While the full impact of the Dodd-

Frank Act and the role of the CFPB cannot be assessed until all implementing regulations are released, the Dodd-

Frank Act’s extensive requirements may have a significant effect on the financial markets, and may affect the

availability or terms of financing from Terra Property Trust’s lender counterparties and the availability or terms of its

targeted assets, both of which may have an adverse effect on its financial condition and results of operations.

Terra Property Trust may be exposed to environmental liabilities with respect to properties to which it takes

title, which may in turn decrease the value of the underlying properties.

In the course of its business, Terra Property Trust may take title to real estate, and, if it does take title, it could be

subject to environmental liabilities with respect to these properties. In such a circumstance, it may be held liable to a

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governmental entity or to third-parties for property damage, personal injury, investigation and clean-up costs incurred

by these parties in connection with environmental contamination, or it may be required to investigate or clean up

hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation

activities could be substantial. If Terra Property Trust ever becomes subject to significant environmental liabilities, its

business, financial condition, liquidity, and results of operations could be materially and adversely affected. In

addition, an owner or operator of real property may become liable under various federal, state and local laws, for the

costs of removal of certain hazardous substances released on its property. Such laws often impose liability without

regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances.

The presence of hazardous substances may adversely affect an owner’s ability to sell real estate or borrow using real

estate as collateral. To the extent that an owner of an underlying property becomes liable for removal costs, the ability

of the owner to make debt payments may be reduced, which in turn may adversely affect the value of the relevant

mortgage-related assets held by Terra Property Trust.

Insurance on the properties underlying the loans held by Terra Property Trust may not adequately cover all

losses and uninsured losses could materially and adversely affect it and our investment in it.

Generally, Terra Property Trust’s borrowers will be responsible for the costs of insurance coverage for the

properties it leases, including for casualty, liability, fire, floods, earthquakes, extended coverage, and rental or business

interruption loss. However, there are certain risks, such as losses from terrorism, that are not generally insured against,

or that are not generally fully insured against, because it is not deemed economically feasible or prudent to do so. In

addition, changes in the cost or availability of insurance could expose Terra Property Trust to uninsured casualty

losses. Under certain circumstances insurance proceeds may not be sufficient to restore its economic position with

respect to an affected property, and it and our investment in it could be materially and adversely affected. Furthermore,

Terra Property Trust does not have any insurance designated to limit any losses that it may incur as a result of known

or unknown environmental conditions which are not caused by an insured event.

In addition, certain of the properties underlying Terra Property Trust’s loans may be located in areas that are more

susceptible to, and could be significantly affected by, natural disasters that could cause significant damage to the

properties. If Terra Property Trust or its borrowers experience a loss, due to such natural disasters or other relevant

factors, that is uninsured or that exceeds policy limits, it could incur significant costs, which could materially and

adversely affect our investment in it.

Maintenance of our 1940 Act exclusion imposes limits on our operations.

Neither we nor Terra Property Trust are registered as an investment company under the 1940 Act. If we or Terra

Property Trust were obligated to register as an investment company, we or Terra Property Trust would have to comply

with a variety of substantive requirements under the 1940 Act that impose, among other things:

• limitations on capital structure or the use of leverage;

• restrictions on specified investments;

• prohibitions on transactions with affiliates; and

• compliance with reporting, record keeping, and other rules and regulations that would significantly

change our and Terra Property Trust’s operations.

We and Terra Property Trust conduct our operations, and intend to continue to conduct our operations, so that we

are not required to register as an investment company under the 1940 Act. Section 3(a)(1)(A) of the 1940 Act defines

an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing,

reinvesting or trading in securities. Section 3(c)(1) of the 1940 Act exempts from the definition of investment company

“[a]ny issuer whose outstanding securities (other than short-term securities) are beneficially owned by not more than

one hundred persons and which is not making and does not presently propose to make a public offering of its

securities.” The SEC staff has taken the position that a non-U.S. fund may make a private offering either within or

without the United States if following the offering the non-U.S. fund has no more than 100 beneficial owners resident

in the United States. If a fund is organized outside the United States, non-U.S. investors are not counted for purposes

of determining whether the non-U.S. fund has no more than 100 beneficial owners, and only U.S. persons are counted

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for determining whether such non-U.S. fund has no more than 100 beneficial owners. The Partnership intends to limit

sales of its Interests solely to non-U.S. investors, and as a result none of its Limited Partners is expected to be counted

as beneficial owners for purposes of determining compliance with Section 3(c)(1) of the 1940 Act.

Terra Property Trust relies on, and certain of its subsidiaries rely on, the exclusion from the definition of an

investment company under Section 3(c)(5)(C) of the 1940 Act, or any other exclusions available to Terra Property

Trust and its subsidiaries (other than Section 3(c)(1) or Section 3(c)(7)). Section 3(c)(5)(C) of the 1940 Act is available

for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and

interests in real estate.” This exclusion generally requires that at least 55% of Terra Property Trust’s (and any of its

subsidiaries relying on Section 3(c)(5)(C)) portfolio must be comprised of “qualifying real estate” assets and at least

80% of Terra Property Trust’s (and any of its subsidiaries’, if relying on Section 3(c)(5)(C)) portfolio must be

comprised of “qualifying real estate” assets and “real estate-related” assets (and no more than 20% comprised of

miscellaneous assets) as determined in accordance with the 1940 Act and the rules and regulations promulgated

thereunder. For purposes of the exclusion provided by Section 3(c)(5)(C) of the 1940 Act, Terra Property Trust (and

any of its subsidiaries relying on Section 3(c)(5)(C)) classifies its investments based in large measure on no-action

letters issued by the SEC staff and other SEC interpretive guidance and, in the absence of SEC guidance, on Terra

Property Trust’s view of what constitutes a “qualifying real estate” asset and a “real estate-related” asset. These no-

action positions were issued in accordance with factual situations that may be substantially different from the factual

situations Terra Property Trust (and any of its subsidiaries relying on Section 3(c)(5) (C)) may face, and a number of

these no-action positions were issued more than ten years ago. Pursuant to this guidance, and depending on the

characteristics of the specific investments, certain mortgage loans, participations in mortgage loans, mortgage-backed

securities, mezzanine loans, joint venture investments, preferred equity and equity securities of other entities may not

constitute qualifying real estate assets and therefore investments in these types of assets may be limited. No assurance

can be given that the SEC or its staff will concur with the classification of the assets held by Terra Property Trust (and

any of its subsidiaries relying on Section 3(c)(5)(C)). Future revisions to the 1940 Act or further guidance from the

SEC or its staff may cause us, Terra Property Trust, or any of its subsidiaries relying on Section 3(c)(5)(C) to lose its

or their exclusion from registration, or force us, Terra Property Trust, or any of its subsidiaries to re-evaluate its or

their portfolios and its or their investment strategy. Such changes may prevent us from operating its business

successfully.

In order to maintain an exclusion from registration under the 1940 Act, we may be unable to sell assets that we

would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have

to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forgo

opportunities to acquire assets that we would otherwise want to acquire and would be important to its strategy.

Although the Adviser and its affiliates monitor our portfolio and that of Terra Property Trust and its subsidiaries

periodically and prior to each acquisition and disposition, we and Terra Property Trust or its subsidiaries may not be

able to maintain an exclusion from registration as an investment company. If we or Terra Property Trust or its

subsidiaries were required to register as an investment company, but failed to do so, we or Terra Property Trust or its

subsidiaries failing to so qualify would be prohibited from engaging in our businesses, and legal proceedings could be

instituted against us or Terra Property Trust or any of its subsidiaries failing to so qualify. In addition, our contracts

and those of Terra Property Trust or any of its subsidiaries failing to so qualify may be unenforceable, and a court

could appoint a receiver to take control of us or Terra Property Trust or any of its subsidiaries failing to so qualify and

liquidate their business.

Risks Related to Our Management and Our Relationship with the Adviser and its Affiliates

We rely entirely on the management team of the Adviser and employees of the Adviser or its affiliates for our

day-to-day operations.

We have no employees and do not intend to have employees in the future. Our success depends substantially on

the efforts and abilities of the management team of the Adviser and its affiliates, including Messrs. Axelrod, Uppal,

Hamrick, Pinkus, and Cooperman. If the Adviser of its affiliates were to lose the benefit of the experience, efforts and

abilities of any of these individuals at the expiration of their employment agreement or otherwise, our operating results

could suffer.

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The Adviser and its affiliates have limited prior experience operating a REIT and therefore may have difficulty

in successfully and profitably operating our business or complying with regulatory requirements, including REIT

provisions of the Code, which may hinder their ability to achieve our objectives or result in loss of Terra Property

Trust’s qualification as a REIT.

The Adviser and its affiliates have no experience operating a REIT or complying with regulatory requirements,

including the REIT provisions of the Code. The REIT rules and regulations are highly technical and complex, and the

failure to comply with the income, asset, and other limitations imposed by these rules and regulations could prevent

us from qualifying as a REIT or could force us to pay unexpected taxes and penalties. The Adviser and its affiliates

have limited experience operating a business in compliance with the numerous technical restrictions and limitations

set forth in the Code or the 1940 Act applicable to REITs. We cannot assure you that the Adviser, its affiliates or its

management team will perform on our behalf as they have in their previous endeavors. The inexperience of the Adviser

and its affiliates described above may hinder its ability to achieve our objectives or result in loss of Terra Property

Trust’s qualification as a REIT, as well as the REIT Subsidiary’s qualification as a REIT, or in the payment of taxes

and penalties. As a result, we cannot assure you that we will be able to successfully operate as a REIT, execute our

business strategies or comply with regulatory requirements applicable to REITs.

In addition, the interests of the Partnership and the Limited Partners may differ from or conflict with the interests

of Terra Property Trust, the Adviser, and its affiliates.

Risks Related to Financing and Hedging

Terra Property Trust currently makes use of leverage to facilitate certain investments and its board of directors

may change its leverage policy, and/or investment strategy and guidelines, asset allocation and financing strategy,

without the consent of its common stockholders.

Terra Property Trust currently makes use of leverage to facilitate certain investments and is expected to continue

doing so. The governing documents of Terra Property Trust contain no limit on the amount of debt we may incur, and

we may significantly increase the amount of leverage we utilize at any time without approval of our Limited Partners.

Such borrowings may include, without limitation, credit facilities, repurchase agreements and securitizations. In

addition, Terra Property Trust may divide the loans it originates into senior and junior tranches and dispose of the

more senior tranches as an additional means of providing financing to its business. To the extent that Terra Property

Trust uses leverage to finance its assets, financing costs relating to borrowings will reduce cash available for

distributions to us and ultimately to our Limited Partners. Terra Property Trust may not be able to meet its financing

obligations and, to the extent that it cannot, it risks the loss of some or all of its assets to liquidation or sale to satisfy

such obligations. To the extent it uses repurchase agreements to finance the purchase of assets, a decrease in the value

of these assets may lead to margin calls which it will have to satisfy. It may not have the funds available to satisfy any

such margin calls and may be forced to sell assets at significantly depressed prices due to market conditions or

otherwise, which may result in losses. Any reduction in distributions to our Limited Partners as a result may cause the

value of our Interests to decline.

The Adviser and its affiliates are authorized to follow broad investment guidelines that have been approved by

Terra Property Trust's board of directors. Those investment guidelines, as well as Terra Property Trust’s target assets,

investment strategy, financing strategy and hedging policies with respect to investments, originations, acquisitions,

growth, operations, indebtedness, capitalization and distributions, may be changed at any time without notice to, or

the consent of, our Limited Partners or Terra Property Trust's stockholders. This could result in an investment portfolio

with a different risk profile. A change in our investment strategy may increase Terra Property Trust’s exposure to

interest rate risk, default risk and real estate market fluctuations. Furthermore, a change in Terra Property Trust’s asset

allocation could result in it making investments in asset categories different from those described in this memorandum.

These changes could materially and adversely affect our investment in Terra Property Trust.

Terra Property Trust may pursue and not be able to successfully complete securitization transactions, which

could limit potential future sources of financing and could inhibit the growth of its business.

Terra Property Trust may use credit facilities or repurchase agreements or other borrowings to finance the

origination and/or structuring of real estate-related loans. At the point when a sufficient quantity of eligible assets has

been accumulated, Terra Property Trust may decide to refinance these short-term facilities or repurchase agreements

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through the securitization market which could include the creation of CMBS, collateralized debt obligations

(“CDOs”), or the private placement of loan participations or other long-term financing. If Terra Property Trust employs

this strategy, it is subject to the risk that it would not be able to obtain, during the period that the short-term financing

arrangements are available, a sufficient amount of eligible assets to maximize the efficiency of a CMBS, CDO or

private placement issuance. Terra Property Trust is also subject to the risk that it may be unable to obtain short-term

financing arrangements or are not able to renew any short-term financing arrangements after they expire should it find

it necessary to extend such short-term financing arrangements to allow more time to obtain the necessary eligible

assets for a long-term financing.

The inability to consummate securitizations of Terra Property Trust’s portfolio to finance its real estate-related

loans on a long-term basis could require it to seek other forms of potentially less attractive financing or to liquidate

assets at an inopportune time or price, which could have a material and adverse effect on our investment in Terra

Property Trust.

Terra Property Trust may be required to repurchase loans or indemnify investors if it breaches representations

and warranties, which could harm its earnings and ultimately distributions to us and to our Limited Partners.

Terra Property Trust may, on occasion, consistent with Terra Property Trust’s qualification as a REIT and its desire

to avoid being subject to the “prohibited transaction” penalty tax, sell some of its loans in the secondary market or as

a part of a securitization of a portfolio of its loans. If it sells loans, it would be required to make customary

representations and warranties about such loans to the loan purchaser. The loan sale agreements may require it to

repurchase or substitute loans in the event it breaches a representation or warranty given to the loan purchaser. In

addition, it may be required to repurchase loans as a result of borrower fraud or in the event of early payment default

on a loan. Likewise, it may be required to repurchase or substitute loans if it breaches a representation or warranty in

connection with Terra Property Trust’s securitizations, if any.

The remedies available to a purchaser of loans are generally broader than those available to Terra Property Trust

against the originating broker or correspondent. Further, if a purchaser enforces its remedies against Terra Property

Trust, it may not be able to enforce the remedies it has against the sellers. The repurchased loans typically can only be

financed at a steep discount to their repurchase price, if at all. They are also typically sold at a significant discount to

the unpaid principal balance. Significant repurchase activity could harm Terra Property Trust’s cash flow, results of

operations, financial condition and business prospects, and ultimately our investment in Terra Property Trust.

Terra Property Trust’s financing arrangements may contain financial covenants that could restrict its

borrowings or subject it to additional risks.

Terra Property Trust’s financing arrangements may contain various financial and other restrictive covenants,

including covenants that require it to maintain a certain interest coverage ratio and net asset value and that create a

maximum balance sheet leverage ratio. If Terra Property Trust fails to satisfy any of the financial or other restrictive

covenants, or otherwise default under these agreements, the lender will have the right to accelerate repayment and

terminate the facility. Accelerating repayment and terminating the facility will require immediate repayment by Terra

Property Trust of the borrowed funds, which may require it to liquidate assets at a disadvantageous time, causing it to

incur further losses and adversely affecting it results of operations and financial condition, which in turn may impair

our investment in Terra Property Trust and our ability to maintain our current level of distributions.

Terra Property Trust’s inability to access funding could have a material adverse effect on its results of

operations, financial condition and business, as well as our investment in Terra Property Trust. Terra Property

Trust may rely on short-term financing and thus are especially exposed to changes in the availability of financing.

Terra Property Trust may borrow funds (on a secured or unsecured basis) to facilitate its investments or otherwise

in connection with its business. The governing documents of Terra Property Trust contain no limit on the amount of

debt it may incur, and it may significantly increase the amount of leverage we utilize at any time without approval of

our Limited Partners. Terra Property Trust’s use of financings exposes it to the risk that its lenders may respond to

market conditions by making it more difficult for Terra Property Trust to renew or replace on a continuous basis its

maturing short-term borrowings. If Terra Property Trust is not able to renew its then existing short-term facilities or

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arrange for new financing on terms acceptable to it, or if it defaults on its covenants or are otherwise unable to access

funds under these types of financing, it may have to curtail its asset origination activities and/or dispose of assets.

It is possible that the lenders that provide Terra Property Trust with financing could experience changes in their

ability to advance funds to Terra Property Trust, independent of its performance or the performance of its portfolio of

assets. Further, if many of Terra Property Trust’s potential lenders are unwilling or unable to provide it with financing,

it could be forced to sell its assets at an inopportune time when prices are depressed. In addition, if the regulatory

capital requirements imposed on its lenders change, they may be required to significantly increase the cost of the

financing that they provide to Terra Property Trust. Terra Property Trust’s lenders also may revise their eligibility

requirements for the types of assets they are willing to finance or the terms of such financings, based on, among other

factors, the regulatory environment and their management of perceived risk, particularly with respect to assignee

liability. Moreover, the amount of financing Terra Property Trust receives under its short-term borrowing arrangements

will be directly related to the lenders’ valuation of Terra Property Trust’s targeted assets that cover the outstanding

borrowings.

The dislocations in the mortgage sector in the financial crisis that began in 2007 have caused many lenders to

tighten their lending standards, reduce their lending capacity or exit the market altogether. Further contraction among

lenders, insolvency of lenders or other general market disruptions could adversely affect one or more of Terra Property

Trust’s potential lenders and could cause one or more of Terra Property Trust’s potential lenders to be unwilling or

unable to provide it with financing on attractive terms or at all. This could increase Terra Property Trust’s financing

costs and reduce its access to liquidity.

Repurchase agreements that Terra Property Trust may use to finance its assets may restrict it from leveraging

its assets as fully as desired, and may require it to provide additional collateral.

Terra Property Trust currently uses repurchase agreements to facilitate certain investments and may continue to

do so. If the market value of the assets pledged or sold by it under a repurchase agreement borrowing to a financing

institution declines, Terra Property Trust will normally be required by the financing institution to pay down a portion

of the funds advanced, but it may not have the funds available to do so, which could result in defaults. Repurchase

agreements that it may use in the future may also require it to provide additional collateral if the market value of the

assets pledged or sold by it to a financing institution declines. Posting additional collateral to support Terra Property

Trust’s credit will reduce its liquidity and limit its ability to leverage its assets, which could adversely affect its

business and ultimately our investment in Terra Property Trust. In the event Terra Property Trust does not have

sufficient liquidity to meet such requirements, financing institutions can accelerate repayment of its indebtedness,

increase interest rates, liquidate its collateral or terminate its ability to borrow. Such a situation would likely result in

a rapid deterioration of its financial condition and possibly necessitate a filing for bankruptcy protection, which would

negatively impact our investment in Terra Property Trust. In the event of Terra Property Trust’s insolvency or

bankruptcy, certain repurchase agreements may qualify for special treatment under the U.S. Bankruptcy Code, the

effect of which, among other things, would be to allow the lender under the applicable repurchase agreement to avoid

the automatic stay provisions of the U.S. Bankruptcy Code.

Further, any financial institutions providing the repurchase facilities may require Terra Property Trust to maintain

a certain amount of cash that is not invested or to set aside non-leveraged assets sufficient to maintain a specified

liquidity position which would allow Terra Property Trust to satisfy its collateral obligations. As a result, Terra

Property Trust may not be able to leverage its assets as fully as it would choose, which could reduce its return on

equity. If Terra Property Trust is unable to meet these collateral obligations, its financial condition could deteriorate

rapidly, which would negatively impact our investment in Terra Property Trust.

An increase in Terra Property Trust’s borrowing costs relative to the interest it receives on its leveraged assets

may adversely affect its profitability and ultimately our cash available for distribution to our Limited Partners.

As Terra Property Trust’s financings mature, it will be required either to enter into new borrowings or to sell

certain of its assets. An increase in short-term interest rates at the time that it seeks to enter into new borrowings would

reduce the spread between the returns on its assets and the cost of its borrowings. This would adversely affect the

returns on its assets, which might reduce earnings and, in turn, cash available for distribution to our Limited Partners.

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Terra Property Trust may enter into hedging transactions that could expose it to contingent liabilities in the

future and adversely impact its financial condition and our investment in Terra Property Trust.

Subject to maintaining Terra Property Trust’s qualification as a REIT, part of its strategy may involve entering

into hedging transactions that could require it to fund cash payments in certain circumstances (such as the early

termination of a hedging instrument caused by an event of default or other early termination event). The amount due

would be equal to the unrealized loss of the open swap positions with the respective counterparty and could also

include other fees and charges, and these economic losses will be reflected in Terra Property Trust’s results of

operations. Terra Property Trust may also be required to provide margin to its counterparties to collateralize its

obligations under hedging agreements. Terra Property Trust’s ability to fund these obligations will depend on the

liquidity of its assets and access to capital at the time. The need to fund these obligations could adversely impact its

financial condition and ultimately our investment in Terra Property Trust.

If Terra Property Trust attempts to qualify for hedge accounting treatment for any derivative instruments, but

it fails to so qualify, it may suffer because losses on the derivatives that it enters into may not be offset by a change

in the fair value of the related hedged transaction.

If Terra Property Trust attempts to qualify for hedge accounting treatment for any derivative instruments, but it

fails to so qualify for a number of reasons, including if it uses instruments that do not meet the definition of a derivative

(such as short sales), if it fails to satisfy hedge documentation and hedge effectiveness assessment requirements, or if

its instruments are not highly effective, it may suffer because losses on any derivatives it holds which may not be

offset by a change in the fair value of the related hedged transaction.

Risks Related to Owning Our Interests

Interests issued by us that you hold are not freely transferrable; thus investors may not be able to liquidate

their investment.

The issuance of our Interests are not expected to be registered under the U.S. Securities Act of 1933, as amended

(the “Securities Act”), or the equivalent laws of any state or other jurisdiction. Our Interests were offered in reliance

upon an exemption from the registration provisions of the Securities Act and the equivalent laws of any state or other

jurisdiction applicable only to offers and sales to investors meeting the suitability requirements set forth herein.

Each Limited Partner has been required to represent that, unless waived by the General Partner, he or she (i) is an

“accredited investor” within the meaning of Rule 501(a) of the Securities Act at the time of acquisition of the Interests,

(ii) acquired the Interests for investment and not with a view to distribution or resale, and (iii) understood that our

Interests have not been registered under the Securities Act or the equivalent laws of any state or other jurisdiction, are

not freely transferable, and that such Limited Partner must bear the economic risk of investment in the Interests for an

indefinite period of time, and the Interests cannot be sold unless they are subsequently registered or an exemption

from such registration is available and such Limited Partner complies with the other applicable provisions of our

Limited Partnership Agreement. There is no public market for the Interests and Limited Partners cannot expect to be

able to liquidate their Interests in the case of an emergency. Further, the sale of the Interests may have adverse federal

income tax consequences. Our Limited Partners may not sell, assign or transfer all or a portion of their Interests

without the prior written consent of the General Partner, which will not be unreasonably withheld.

The value you may receive upon the termination of the Partnership or Terra Property Trust or the

consummation of an alternative liquidity transaction is uncertain, and there can be no assurance that a Limited

Partner will receive a full return of its invested capital.

The REIT Manager or its affiliates may, in lieu of a liquidation of Terra Property Trust, pursue an alternative

liquidity transaction such as a merger of Terra Property Trust with another entity managed by the REIT Manager or

its affiliates or an IPO and listing of the Interests or shares of common stock of Terra Property Trust on a national

securities exchange. The Partnership or Terra Property Trust may opt to conduct an unlisted public offering of

Interests or shares of common stock, respectively, in each case pursuant to a registration statement filed and declared

effective by the SEC. The value a Limited Partner will receive upon the termination of the fund or the consummation

of any such alternative liquidity transaction will depend on the loans in the portfolio at the time of such transaction,

the performance of the loans, market conditions, and other factors, many of which are beyond the control of the

34

Adviser or its affiliates. It is not possible to predict the value a Limited Partner will receive upon the termination of

the Partnership or the consummation of any such alternative liquidity transaction, nor can any assurance be given that

a Limited Partner will receive any full return of its invested capital.

In addition, an alternative liquidity event could result in a fundamental change in the nature of a Limited

Partner’s investment in the Partnership. For example, if Terra Property Trust were to consummate a merger with

another entity managed by the Adviser or its affiliates, following such transaction the Limited Partner would own

interests in, and be exposed to material adverse changes affecting, a much larger, broader range of assets than Terra

Property Trust owned individually prior to such merger. In addition, if either the Partnership or Terra Property Trust

were to consummate an IPO or listing of its Interests or shares of common stock, respectively, the value of such

Interests or shares of common stock both at the IPO and thereafter would be based on a variety of factors, including

the price at which third-party investors are willing to invest and market conditions at the time of an IPO. The price at

which any of the Interests or Terra Property Trust’s shares of common stock are sold in an IPO, and the trading price

of such common stock thereafter, could be lower or higher than the Partnership's net asset value or the net asset value

of Terra Property Trust. Furthermore, in connection with an alternative liquidity transaction, the Partnership and Terra

Property Trust may enter into new agreements, or revise existing agreements, with the Adviser and its affiliates,

including a new management agreement, which may not be negotiated on an arm's length basis. There can be no

assurance that the Adviser will pursue or consummate an alternative liquidity transaction.

No Consent to Alternative Liquidity Transaction.

Under the Limited Partnership Agreement, the General Partner may cause the Partnership to consummate an

alternative liquidity transaction, such as a merger, roll-up, consolidation, or share exchange with Terra Property Trust,

without the approval of Limited Partners. Depending on the structure and type of alternative liquidity transaction, your

Interests could be exchanged or converted into an equivalent amount of shares in Terra Property Trust, which the

General Partner would be entitled to effect without your consent or approval. For the avoidance of doubt, such

exchange or conversion may take place as an in-kind distribution of Terra Property Partnership shares or interests in

a special purpose vehicle sponsored by the Adviser or its affiliates (a “Terra SPV”) which holds such shares. As a

result, you would no longer be a Limited Partner in the Partnership and would no longer be entitled to the rights,

privileges, and preferences contained in the Limited Partnership Agreement. The alternative liquidity transaction so

pursued may therefore involve a fundamental change in the nature of your investment in Interests in the Partnership.

The rights, privileges, and preferences available under the Limited Partnership Agreement may be very different from

the rights, privileges, and preferences available to a shareholder in Terra Property Trust or an investor in a Terra SPV,

and you will not have the opportunity under the Limited Partnership Agreement to consent to or dissent from such an

alternative liquidity transaction. There can be no assurance any such alternative liquidity transaction would be

considered on terms favorable by you, or that those terms will be more advantageous than the terms of a liquidity

transaction which would require your consent.

Transfer Restrictions.

If Terra Property Trust becomes a publicly traded company through an IPO, and the General Partner determines

to pursue and consummate an alternative liquidity event in which you will receive shares of Terra Property Trust in

exchange for the Interests, substantial limitations on the transferability of the Terra Property Trust shares may remain.

For example, Terra Property Trust’s charter contains ownership limits designed to protect its status as a real estate

investment trust under federal income tax laws and to address other regulatory matters, which may limit your ability

to sell your Terra Property Trust shares on the applicable stock exchange. The Terra Property Trust share prices may

be volatile or may decrease in value and you may be unable to sell your Terra Property Trust shares in response to

such volatility or decrease.

Distributions.

If an alternative liquidity event involves Terra Property Trust becoming a publicly traded company through an

IPO or listing of Terra Property Trust on an exchange, we do not expect that the distributions investors receive

following any such liquidity event would be adversely impacted. Following any such transaction, Terra Property Trust

would be expected to pay regular monthly distributions to its stockholders and would continue to be required to

distribute at least 90% of its taxable income (excluding net capital gains) to its investors each year in order to maintain

its qualification as a REIT.

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Alternative Liquidity Event.

If an alternative liquidity event involves Terra Property Trust becoming a publicly traded company through an

IPO or listing of Terra Property Trust, it is expected that Terra Property Trust will enter into a new management

agreement with the REIT Manager or an affiliate thereof. The base management fees, incentive distributions or other

amounts that would be payable by Terra Property Trust to the REIT Manager in the case of any such transaction are

expected to be market based fees determined in the case of any IPO by discussions between the General Partner, the

Adviser, and the underwriters involved in the IPO. In the event that changes occur in connection with an alternative

liquidity event, the General Partner, the Adviser, and their affiliates anticipate that they will make modifications to the

structure, terms, agreements, constituent documents, fee and expense arrangements, and any other features, in each

case that the General Partner, the Adviser, and their affiliates, in their sole discretion, deem to be necessary, advisable

or incidental in order for the economics associated with the Interests to remain functionally equivalent, to the extent

practicable, to the economics associated with the Interests prior to the alternative liquidity event. Such changes may

not be negotiated on an arm’s-length basis. Notwithstanding the foregoing, the Interests will bear their pro rata share

of any special fees and expenses incurred in connection with the IPO.

In addition, if in connection with any such alternative liquidity event or other transaction, the Partnership

distributes shares of Terra Property Trust to the Limited Partners, the General Partner may be entitled to receive a

portion of such distributed shares based on its incentive distribution interest in our Partnership, with shares of Terra

Property Trust being valued at the date of distribution at their book value (if distributed prior to an liquidity event), at

the IPO price in the case of an IPO (if distributed within 60 days after such IPO) or at the trading value for such shares

over the 10-trading period prior to such distribution (if distributed at any time after the expiration of such 60-day

period).

A compulsory withdrawal could result in adverse tax and economic consequences for Limited Partners.

The General Partner may, in its sole discretion, require a compulsory withdrawal of all or a portion of a Limited

Partner’s Interests in its sole discretion for any reason or no reason. Such compulsory withdrawal may result in adverse

tax or economic consequences for the Limited Partner.

Your interests may be diluted if we issue additional Interests in the future.

Limited Partners will not have preemptive rights to acquire any Interests issued by us in the future. Therefore,

investors may experience dilution of their investment if we sell additional Interests in the future.

Your interests may be diluted if Terra Property Trust issues additional shares in the future.

The Partnership will not have direct or indirect preemptive rights to acquire any shares issued by Terra Property

Trust in the future. Therefore, the Partnership, and in turn the investors, may experience dilution of their indirect

exposure to Terra Property Trust’s existing portfolio investments if Terra Property Trust sells additional shares in the

future.

In addition, following the conclusion of the offering period, the General Partner may, from time to time in its sole

discretion, cause the Partnership to accept additional subscriptions, in cash or in-kind, from the General Partner, the

Adviser, their affiliates or entities that are sponsored by the foregoing. This would also result the Partnership, and in

turn the investors, to experience dilution of their indirect exposure to Terra Property Trust’s existing portfolio

investments

Our Limited Partners do not have legal representation.

Pursuant to the terms of our Limited Partnership Agreement, each of our Limited Partners acknowledges and

agrees that counsel representing us, the General Partner, the Adviser, and their affiliates does not represent and shall

not be deemed under the applicable codes of professional responsibility to have represented or to be representing any

or all of our Limited Partners in any respect.

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Risks Related to U.S. Federal Income Tax Consequences

The IRS could challenge the characterization of the exemption from U.S. withholding tax of that portion of

distributions constituting interest income.

The Partnership will invest substantially all of its funds in the REIT Subsidiary which in turn will invest

substantially all of its funds in Terra Property Trust. A portion of the Partnership’s investment in the REIT Subsidiary

will be made in nonvoting common stock of the REIT Subsidiary and a portion will take the form of a loan to the

REIT Subsidiary. Accordingly, the income of the Partnership is expected to consist of dividends on the non-voting

common stock of the REIT Subsidiary and interest on the loans to the REIT Subsidiary. A Limited Partner’s share of

such dividend income will be subject to a 30% U.S. withholding tax unless such Limited Partner is entitled to a lower

rate pursuant to an applicable income tax treaty. It is intended that the Partnership’s interest income will qualify for

an exemption from U.S. withholding tax, but the IRS could challenge the application of such exemption or

characterization of the loans to the REIT Subsidiary as debt and interest thereon as interest, in which case a 30% U.S.

withholding tax would apply unless such Limited Partner is entitled to a lower rate pursuant to an applicable income

tax treaty. Limited Partners are required to provide appropriate documentation (generally an appropriate US Form W-

8) to the Partnership from time to time to claim any treaty benefits and avoid withholding under the US FATCA rules.

Future legislation could adversely affect the tax treatment of an investment in the Partnership.

The present U.S. federal income tax treatment of an investment in the Partnership may be modified by legislative,

judicial or administrative action at any time and any such action may affect investments and commitments previously

made. The U.S. federal income tax rules are constantly under review by persons involved in the legislative process

and by the IRS and the Treasury Department, resulting from time to time in the adopting of new Treasury Regulations

or changes to the existing regulations, revised interpretations of established concepts, as well as statutory changes.

Any changes in the U.S. federal tax laws or interpretations thereof could adversely affect the tax treatment of an

investment in the Partnership. There can be no assurance that legislation will not be enacted that has an unfavorable

effect on an investor’s investment in the Partnership.

Risks Related to REITs

The General Partner expects to cause the REIT Subsidiary to elect to be classified as a corporation and to elect

to be taxed as a REIT. The following risk factors assume that the REIT Subsidiary elects to be taxed as a REIT.

The failure of the REIT Subsidiary to qualify as a REIT could subject the REIT Subsidiary to U.S. federal

income tax and potentially increased state and local taxes.

The U.S. federal income tax laws governing REITs are complex, and judicial and administrative interpretations

of the U.S. federal income tax laws governing REIT qualification are limited. To qualify as a REIT, the REIT

Subsidiary must meet, on an ongoing basis, various tests regarding the nature of its assets and income, the ownership

of its outstanding shares, and the amount of its distributions. Moreover, new legislation, court decisions or

administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for the

REIT Subsidiary to qualify as a REIT. Given the highly complex nature of the rules governing REITs, the ongoing

importance of factual determinations, and the possibility of future changes in the Partnership’s circumstances, no

assurance can be given that it will so qualify for any particular year.

If the REIT Subsidiary elects to be classified as a corporation for tax purposes but fails to qualify as a REIT in

any taxable year, and does not qualify for certain statutory relief provisions, it would be required to pay U.S. federal

income tax on its taxable income, and distributions to shareholders would not be deductible by the REIT Subsidiary

in determining its taxable income. In such a case, the REIT Subsidiary might need to borrow money or sell assets in

order to pay taxes. The REIT Subsidiary’s payment of income tax would decrease the amount of income available for

distribution to shareholders. Furthermore, if the REIT Subsidiary fails to maintain its qualification as a REIT, it would

no longer be required to distribute substantially all of its net taxable income to shareholders. In addition, unless the

REIT Subsidiary were eligible for certain statutory relief provisions, it could not re-elect to qualify as a REIT until the

fifth calendar year following the year in which it failed to qualify.

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Changes in the ownership of a Limited Partner could cause the Limited Partner’s Interest in the Partnership

to become Excess Interests.

The Limited Partnership Agreement contains restrictions on ownership of Interests that are intended to prevent

the REIT Subsidiary from failing to qualify as a REIT. For example, if beneficial ownership of Interests would cause

the REIT Subsidiary to be closely held under the five or fewer test, ownership of sufficient Interests would be

transferred from such Limited Partners as determined by the General Partner and in such amounts determined by the

General Partner to a trust for a charitable beneficiary so that the REIT Subsidiary would not be closely held.

Prospective investors should review Exhibit B of the Limited Partnership Agreement.

The REIT Subsidiary may be required to borrow funds to meet the REIT distribution requirements.

The REIT Subsidiary will be required to distribute at least 90% of its REIT taxable income each year, for this

purpose determined without regard to the dividends-paid deduction and excluding any net capital gain, and it will be

subject to regular corporate income taxes to the extent that it distributes less than 100% of its REIT taxable income

each year. In addition, the REIT Subsidiary will be subject to a 4% nondeductible excise tax on the amount, if any, by

which distributions paid by it in any calendar year are less than the sum of 85% of its ordinary income, 95% of its

capital gain net income and 100% of its undistributed income from prior years. To maintain its REIT status and avoid

the payment of income and excise taxes, the REIT Subsidiary may need to borrow funds to meet the REIT distribution

requirements. These borrowing needs could result from: (i) differences in timing between the actual receipt of cash

and inclusion of income for federal income tax purposes, (ii) the effect of non-deductible capital expenditures, (iii)

the creation of reserves, (iv) required debt amortization payments or (v) limitations on deductions of interest expense.

Failure of Terra Property Trust to qualify as a REIT would cause the REIT Subsidiary to fail to qualify as a

REIT.

If Terra Property Trust fails to qualify as a REIT in any taxable year, and does not qualify for certain statutory

relief provisions, it would be required to pay U.S. federal income tax on its taxable income, and distributions to

shareholders would not be deductible by Terra Property Trust in determining its taxable income. In addition, such

failure would cause the REIT Subsidiary to fail to qualify as a REIT.

Even if the REIT Subsidiary qualifies as a REIT, it may be required to pay certain taxes.

Even if the REIT Subsidiary qualifies for taxation as a REIT, it may be subject to certain U.S. federal, state and local

taxes on its income and assets, including taxes on any undistributed income.

Complying with the REIT requirements may force Terra Property Trust to liquidate or forego otherwise

attractive investments.

In order to qualify as a REIT, Terra Property Trust annually must satisfy two gross income requirements. First, at

least 75% of its gross income for each taxable year, excluding gross income from prohibited transactions and certain

hedging and foreign currency transactions, must be derived from investments relating to real property or mortgages

on real property, including “rents from real property,” dividends received from and gain from the disposition of shares

of other REITs, interest income derived from mortgage loans secured by real property (including certain types of

qualified mezzanine loans and mortgage-backed securities), and gains from the sale of real estate assets, as well as

income from certain kinds of qualified temporary investments. Second, at least 95% of its gross income in each taxable

year, excluding gross income from prohibited transactions and certain hedging and foreign currency transactions, must

be derived from some combination of income that qualifies under the 75% income test described above, as well as

other dividends, interest, and gain from the sale or disposition of stock or securities, which need not have any relation

to real property.

Further, at the end of each calendar quarter, at least 75% of the value of Terra Property Trust total assets must

consist of cash, cash items, government securities, shares in other REITs and other qualifying real estate assets,

including certain mortgage loans, mezzanine loans and certain kinds of mortgage-backed securities. The remainder of

Terra Property Trust’s investment in securities (other than government securities, securities issued by a “taxable REIT

subsidiary,” and securities that are qualifying real estate assets) generally cannot include more than 10% of the

outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any

38

one issuer. In addition, in general, no more than 5% of the value of Terra Property Trust’s total assets (other than

government securities, taxable REIT subsidiary securities and securities that are qualifying real estate assets) can

consist of the securities of any one issuer, no more than 20% of the value of Terra Property Trust’s total assets can be

represented by securities of one or more taxable REIT subsidiaries it may own, and no more than 25% of the value of

our assets can consist of debt instruments issued by publicly offered REITs that are not otherwise secured by real

property. If Terra Property Trust fails to comply with these requirements at the end of any calendar quarter, it must

correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions

to avoid losing its REIT qualification and suffering adverse tax consequences.

As a result, Terra Property Trust may be required to liquidate from its portfolio, or contribute to a taxable REIT

subsidiary should it decide to form one in the future, otherwise attractive investments, and may be unable to pursue

investments that would be otherwise advantageous to it in order to satisfy the source of income or asset diversification

requirements for qualifying as a REIT. These actions could have the effect of reducing Terra Property Trust’s income

and amounts available for distribution to us. Thus, compliance with the REIT requirements may hinder Terra Property

Trust’s ability to make, and, in certain cases, maintain ownership of certain attractive investments.

Risk of the Internal Revenue Service successfully challenging Terra Property Trust’s treatment of its preferred

equity and mezzanine loan investments as debt for U.S. federal income tax purposes.

Terra Property Trust invests in certain real estate related investments, including mezzanine loans, first mortgage

loans, and preferred equity investments. There is limited case law and administrative guidance addressing whether

certain preferred equity investments or mezzanine loans will be treated as equity or debt for U.S. federal income tax

purposes and whether such preferred equity investments and mezzanine loans will be treated as real estate assets for

REIT qualification purposes. Terra Property Trust treats the mezzanine loans that it holds as real estate assets for REIT

qualification purposes and the preferred equity investments which it currently holds as debt for U.S. federal income

tax purposes and as real estate assets, as discussed above. No private letter rulings have been obtained on the

characterization of these investments for U.S. federal income tax purposes; therefore, no assurance can be given that

the Internal Revenue Service will not successfully challenge the treatment of such preferred equity investments and

mezzanine loans as debt and as real estate assets. If a preferred equity investment or mezzanine loan owned by Terra

Property Trust were treated as equity for U.S. federal income tax purposes, Terra Property Trust would be treated as

owning its proportionate share of the assets and earning its proportionate share of the gross income of the partnership

or limited liability company that issued the preferred equity interest or mezzanine loan. Certain of these partnerships

and limited liability companies may be engaged in activities, which could cause Terra Property Trust to be considered

as earning significant nonqualifying income which would likely cause Terra Property Trust to fail to qualify as a REIT

or pay a significant penalty tax to maintain its REIT qualification.

The failure of assets subject to repurchase agreements that Terra Property Trust may enter into to qualify as

real estate assets could adversely affect the ability of Terra Property Trust to qualify as a REIT.

Terra Property Trust has entered into financing arrangements that are structured as sale and repurchase agreements

pursuant to which Terra Property Trust nominally sells certain of its assets to a counterparty and simultaneously enters

into an agreement to repurchase such assets at a later date in exchange for a purchase price. Economically, these

agreements are financings that are secured by the assets sold pursuant thereto. We anticipate that Terra Property Trust

will be treated for REIT asset and income test purposes as the owner of the assets that are the subject of such sale and

repurchase agreement notwithstanding that such agreements may transfer record ownership of the assets to the

counterparty during the term of the agreement. It is possible, however, that the Internal Revenue Service could assert

that Terra Property Trust is not the owner of the assets during the term of the sale and repurchase agreement, in which

case Terra Property Trust could fail to qualify as a REIT.

Complying with REIT requirements may limit Terra Property Trust’s ability to hedge effectively.

The REIT provisions of the Internal Revenue Code may limit Terra Property Trust’s ability to hedge its assets and

operations. Under these provisions, any income that it generates from transactions intended to hedge its interest rate

and currency risks will generally be excluded from gross income for purposes of the 75% and 95% gross income tests

if (i) the instrument (A) hedges interest rate risk or foreign currency exposure on liabilities used to carry or acquire

real estate assets, (B) hedges risk of currency fluctuations with respect to any item of income or gain that would be

39

qualifying income under the 75% or 95% gross income tests or (C) hedges an instrument described in clause (A) or

(B) for a period following the extinguishment of the liability or the disposition of the asset that was previously hedged

by the hedged instrument, and (ii) such instrument is properly identified under the applicable regulations promulgated

by the Treasury Regulations.

Dividends payable by REITs generally do not qualify for the reduced tax rates on dividend income from regular

C corporations, which could adversely affect the value of the Interests.

The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. stockholders that are

individuals, trusts and estates is 20%. For taxable years beginning after December 31, 2017 and before January 1,

2026, under the recently enacted Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”), non-corporate taxpayers

are subject to a 37% maximum U.S. federal income tax rate on ordinary income, and are entitled to deduct up to 20%

of certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a

REIT shareholder that are not designated as capital gain dividends or qualified dividend income), subject to certain

limitations, resulting in an effective maximum U.S. federal income tax rate of 29.6% on such income. Although the

reduced U.S. federal income tax rate applicable to qualified dividends from C corporations does not adversely affect

the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends,

together with the recently reduced 21% corporate tax rate in effect for taxable years beginning after December 31,

2017, could cause non-corporate investors to perceive investments in REITs to be relatively less attractive than

investments in non-REIT corporations that pay dividends, which could adversely affect the value of REIT shares.

Because the Partnership conducts its business primarily through Terra Property Trust, this perception could adversely

affect the value of the shares of Terra Property Trust and, indirectly, of the Interests.

Future legislation governing REITs could adversely impact the Partnership.

At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations

of those laws or regulations may be changed, possibly with retroactive effect. It cannot be predicted if or when any

new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S.

federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective

or whether any such law, regulation or interpretation may take effect retroactively. The Partnership could be adversely

affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation.

40

THE GENERAL PARTNER, THE REIT MANAGER, THE ADVISER, AND TERRA PROPERTY

TRUST

The General Partner

The General Partner is responsible for managing the Partnership’s business and affairs. In such capacity, the

Partnership’s General Partner or affiliate thereof controls decisions taken by the Partnership relating to our indirect

interest in common stock of Terra Property Trust, and advises us on all matters related to the Partnership’s operations

and administration, which encompasses managing the Partnership’s relationship and communications with its Limited

Partners, managing our liquidity and the payment of quarterly and liquidating distributions to our Limited Partners,

and preparing financial statements, tax returns, and Limited Partner tax statements. The General Partner has delegated

to the Adviser certain advisory and management services pursuant to the Management Agreement.

The General Partner, pursuant to the Limited Partnership Agreement, shall, among other things:

• Have a fiduciary responsibility for the safekeeping and use of all the funds and assets of the Partnership;

• Devote such of its time and business efforts to the business of the Partnership as it shall in its discretion,

exercised in good faith, determine to be necessary to conduct the business of the Partnership;

• File and publish all certificates, statements, or other instruments required by law for formation,

qualification, and operation of the Partnership and for the conduct of its business in all appropriate

jurisdictions;

• Cause the Partnership to be protected by public liability, property damage, and other insurance

determined by the General Partner in its discretion to be appropriate to the business of the Partnership;

• At all times use its best efforts to meet applicable requirements for the Partnership to be taxed as a

partnership and not as a corporation for U.S. federal income tax purposes; and

• Amend the Limited Partnership Agreement to reflect the admission of Limited Partners not later than 90

days after the date of such admission or substitution.

Authority of the General Partner

The General Partner shall, subject to certain restrictions in the Limited Partnership Agreement, have full and

complete authority, power, and discretion to manage the Partnership’s business, affairs, and assets, to make all

decisions regarding those matters, and to perform any and all other acts or activities customary or incident to the

management of the Partnership’s business. In the course of its management, the General Partner may, in its sole

discretion, employ such persons, including, under certain circumstances, affiliates of the General Partner, as it deems

necessary for the Partnership’s efficient operation. The General Partner has significant authority to take certain actions

on behalf of the Partnership without Limited Partner consent to those actions.

The General Partner may cause the Partnership or any of its subsidiaries to enter into a management agreement

and grant any such manager the power and discretion to manage and control the business, affairs, and assets of any of

the Partnership’s subsidiaries in consideration for those fees and expenses as specified in the management agreement;

modify the Limited Partnership Agreement to make any changes necessary to enable the Partnership to make an in-

kind distribution of the Interests to any subsidiary; and admit as a manager any person or entity affiliated with the

General Partner.

The General Partner has extensive authority to act on behalf of the Partnership without consent of the

Limited Partners, and except in limited circumstances amend the Limited Partnership Agreement without

consent of the Limited Partners. Prospective investors are encouraged to read the Limited Partnership

Agreement in its entirety.

41

Executive Officers of the REIT Manager and the Adviser

The Partnership has entered into a Management Agreement with the Adviser, pursuant to which the Adviser

provides certain services to the Partnership and the Partnership pays fees associated with such services. Likewise,

Terra Property Trust has entered into a management agreement with the REIT Manager, pursuant to which the REIT

Manager provides certain services to Terra Property Trust and Terra Property Trust pays fees associated with such

services. The REIT Manager is responsible for managing Terra Property Trust’s day-to-day operations and all matters

affecting its business and affairs, including responsibility for determining when to buy and sell real estate-related

assets. The REIT Manager is not obligated under the management agreement to dedicate any of its personnel

exclusively to Terra Property Trust, nor is it or its personnel obligated to dedicate any specific portion of its or their

time to the business. The names, ages, positions and biographies of the officers of the REIT Manager and the Adviser

are as follows:

Name Age Position(s) Held with the REIT Manager Position(s) Held with the Adviser

Andrew M. Axelrod 36 Chairman of the Board of Directors N/A

Bruce D. Batkin 66 Vice Chairman N/A

Vikram S. Uppal 35 Chief Executive Officer Chief Executive Officer

Stephen H. Hamrick 67 President President

Gregory M. Pinkus 54 Chief Operating Officer and Chief

Financial Officer Chief Operating Officer and Chief

Financial Officer

Daniel J. Cooperman 44 Chief Originations Officer Chief Originations Officer

Andrew M. Axelrod has served as Chairman of the board of directors of Terra Property Trust, Terra Capital

Partners and the REIT Manager since February 8, 2018. Mr. Axelrod founded Axar Capital Management in April 2015

and currently serves as its Managing Partner and Portfolio Manager, and is responsible for all investment, risk and

business management functions. He has been the Chief Executive Officer and Executive Chairman of the board of

directors of Axar Acquisition Corp. since October 2016. Before founding Axar Capital Management in 2015, Mr.

Axelrod worked at Mount Kellett Capital Management, a private investment organization from 2009 to 2014. At

Mount Kellett Capital Management, he was promoted to Co-Head of North America Investments in 2011 and became

a Partner in 2013. Prior to joining Mount Kellett Capital Management, Mr. Axelrod worked at Kohlberg Kravis

Roberts & Co. L.P. from 2007 to 2008 and The Goldman Sachs Group, Inc. from 2005 to 2006. Mr. Axelrod graduated

magna cum laude with a B.S. in Economics from Duke University.

Bruce D. Batkin serves as Vice Chairman of Terra Capital Partners and Terra Property Trust, and served as the

Chief Executive Officer of the Adviser, the REIT Manager and Terra Income Advisors since inception until December

1, 2018. He has also served as Chief Executive Officer of Terra Capital Advisors, Terra Capital Advisors 2 and Terra

Income Advisors 2 since April 2009, September 2012 and October 2016, respectively, until December 1, 2018. Mr.

Batkin has also served as President of Terra Fund 1 since July 2009 and as Chief Executive Officer of Terra Fund 2,

Terra Fund 3, Terra Fund 4, Fund 5 International, Terra Fund 6, Terra International and Terra Fund 7 since May 2011,

January 2012, September 2012, June 2014, March 2015, October 2016 and October 2016, respectively, until December

1, 2018. He has also served as Chief Executive Officer and director of Terra Fund 6, since May 2013. As a co-founder

and former Chief Executive Officer of Terra Capital Partners, he has served in a leadership role since its formation in

2001 and its commencement of operations in 2002, managing its real estate debt and equity investment programs. Mr.

Batkin has over 35 years’ experience in real estate acquisition, finance, development, management and investment

banking. Prior to co-founding Terra Capital Partners, he held senior management positions at Merrill Lynch & Co.

Inc., Donaldson, Lufkin & Jenrette Securities Corporation (now Credit Suisse (USA) Inc.), ABN AMRO Bank N.V.

and several private real estate development partnerships. Mr. Batkin has acquired major commercial properties

throughout the United States and has acted as managing partner in over $5 billion of real estate investments for

domestic and foreign investors. He is a member of the Harvard Alumni Real Estate Board, the Cornell Real Estate

Council and the Committee for Economic Development; is on the Advisory Board of the Baker Program in Real Estate

at Cornell University; and is a participant in the semiannual Yale CEO Summit. Mr. Batkin received a Bachelor of

Architecture from Cornell University and an M.B.A. from Harvard Business School.

Vikram S. Uppal has served as Chief Executive Officer of Terra Property Trust since December 1, 2018, and as

a director and Chief Investment Officer of Terra Property Trust since February 8, 2018. He has also served as Chief

Executive Officer of Terra Property Trust, the REIT Manager, Terra Income Advisors, and Terra Fund 6 since

42

December 1, 2018, and as the Chief Investment Officer of Terra Capital Partners and the REIT Manager since February

8, 2018. Prior to joining Terra Capital Partners, Mr. Uppal was a Partner and Head of Real Estate at Axar Capital

Management since 2016. Prior to Axar, Mr. Uppal was a Managing Director on the Investment Team at Fortress

Investment Group's Credit and Real Estate Funds from 2015 to 2016. From 2013 to 2015, Mr. Uppal worked at Mount

Kellett Capital Management, a private investment organization, and served as Co-Head of North American Real Estate

Investments. Mr. Uppal holds a B.S. from the University of St. Thomas and a M.S. from Columbia University.

Stephen H. Hamrick serves as President of the Adviser and the REIT Manager. He has also served as President

of Terra Capital Advisors, Terra Capital Advisors 2 and Terra Income Advisors 2 since January 2011, September 2012

and October 2016, respectively. Mr. Hamrick has also served as President of Terra Fund 2, Terra Fund 3, Terra Fund

4, Terra Fund 5, Fund 5 International, Terra Fund 6, Terra International, Terra Fund 7, Terra Property Trust and Terra

Property Trust 2, Inc. since May 2011, January 2012, September 2012, August 2013, June 2014, May 2013, October

2016, October 2016, January 2016 and September 2016, respectively. Mr. Hamrick has over 35 years’ experience in

the investment management business. Prior to joining Terra Capital Partners in January 2011, he served as President

of Lightstone Value Plus REIT from 2006 to July 2010. From 2001 to 2006, he held various positions at W.P. Carey

& Co., including Chairman of Carey Financial, LLC and Managing Director. From 1988 until 1994, Mr. Hamrick

served as National Director of Private Investments for UBS PaineWebber, where he was also a member of that firm’s

Management Council, and from 1975 until 1988, he held positions ranging from Account Executive to National

Director of Private Placements at E.F. Hutton. In those roles, he was responsible for the creation and distribution of

alternative investment funds comprising assets in excess of $15 billion. Mr. Hamrick also had management and

offering experience with some of the earliest business development companies (“BDCs”), public or private. In 1988,

he became the first chairman of Mezzanine Capital Corporation, which served as the General Partner of Fiduciary

Capital Partners, L.P. and Fiduciary Capital Pension Partners, L.P., or the Fiduciary Funds, funds that invested

primarily in subordinated debt and related equity securities issued as the “mezzanine financing” for friendly leveraged

buyouts, acquisitions and recapitalizations and, as the Administrative General Partner for Kagan Media Partners, L.P.,

a BDC that acquired subordinated debt instruments with equity participations in cable television systems and other

media properties. Mr. Hamrick served as chairman of Mezzanine Capital Corporation, as a member of the Fiduciary

Funds’ investment committee and as chairman of the General Partner of the Fiduciary Funds’ manager until 1994. Mr.

Hamrick has been a Certified Financial Planner, a director of mutual fund families, a member of the NYSE MKT

Listings Qualifications Panel and the Listings Panel for NASDAQ as well as Chairman of the Securities Industry

Association’s Direct Investment Committee and of the Investment Program Association. Mr. Hamrick holds a B.S. in

Economics and an A.B. in English from Duke University.

Gregory M. Pinkus serves as the Chief Financial Officer and Chief Operating Officer of the Adviser, the REIT

Manager and Terra Income Advisors and serves as the Chief Financial Officer, Treasurer and Secretary of Terra

Property Trust. He has served as (i) the Chief Financial Officer of Terra Capital Advisors, Terra Capital Advisors 2

and Terra Income Advisors 2 since May 2012, September 2012 and October 2016, respectively; (ii) the Chief

Operating Officer of each of Terra Capital Advisors, Terra Capital Advisors 2 and Terra Capital Partners since July

2014; (iii) the Chief Operating Officer of Terra Income Advisors 2 since October 2016; (iv) the Chief Financial Officer,

and Secretary and Treasurer, of each of Terra Fund 1, Terra Fund 2 and Terra Fund 3 since May 2012 and, for Terra

Fund 4, since July 2014; (v) the Chief Financial Officer, Treasurer and Secretary of Terra Fund 6 since May 2013 and

Chief Operating Officer of Terra Fund 6 since July 2014; and (vi) the Chief Financial Officer and Chief Operating

Officer of Fund 5 International, Terra International and Terra Fund 7 since June 2014, October 2016 and October 2016,

respectively. Prior to joining Terra Capital Partners in May 2012, he served as Assistant Controller for W.P. Carey &

Co. from 2006 to August 2010 and as Controller from August 2010 to May 2012. Mr. Pinkus also served as Controller

and Vice President of Finance for several early-stage technology companies during the period of 1999 to 2005.

Additionally, he managed large-scale information technology budgets at New York Life Insurance Company from

2003 to 2004 and oversaw an international reporting group at Bank of America from 1992 to 1996. Mr. Pinkus is a

Certified Public Accountant and member of the American Institute of Certified Public Accountants. He holds a B.S.

in Accounting from the Leonard N. Stern School of Business at New York University.

Daniel J. Cooperman has served as Chief Originations Officer of the Adviser, the REIT Manager and Terra

Income Advisors since September 2017, September 2017 and February 2015, respectively. Mr. Cooperman has served

as Chief Originations Officer of (i) each of Terra Capital Advisors and Terra Capital Advisors 2 since January 2015,

having previously served as Managing Director of Originations until January 2015 of Terra Capital Advisors and Terra

Capital Advisors 2 since April 2009 and September 2012, respectively; (ii) each of Terra Fund 2, Terra Fund 3, Terra

43

Fund 4 and Fund 5 International since January 2015, having previously served as Managing Director of Originations

until January 2015 of Terra Fund 1, Terra Fund 2, Terra Fund 3, Terra Fund 4 and Fund 5 International since July 2009,

May 2011, January 2012, September 2012 and June 2014, respectively; (iii) Terra Property Trust since January 2016;

(iv) Terra Property Trust 2 since September 2016; (v) Terra Fund 6 since February 2015, having previously served as

Managing Director of Originations from May 2013 until February 2015; and (vi) each of Terra Income Advisors 2,

Terra International, and Terra Fund 7 since October 2016. Mr. Cooperman has 18 years’ experience in the acquisition,

financing, leasing and asset management of commercial real estate with an aggregate value of over $5 billion. Prior

to the formation of Terra Capital Partners in 2001 and its commencement of operations in 2002, Mr. Cooperman

handled mortgage and mezzanine placement activities for The Greenwich Group International, LLC. Prior to joining

The Greenwich Group, Mr. Cooperman worked in Chase Manhattan Bank’s Global Properties Group, where he was

responsible for financial analysis and due diligence for the bank’s strategic real estate acquisitions and divestitures.

Prior to that time, he was responsible for acquisitions and asset management for JGS, a Japanese conglomerate with

global real estate holdings. Mr. Cooperman holds a B.S. in Finance from the University of Colorado at Boulder.

Board of Directors of Terra Property Trust

We do not have any officers, directors or employees. Our sole investment, Terra Property Trust, is supervised by

its board of directors, comprised of eight directors, pursuant to the terms and provisions of Terra Property Trust’s

charter and bylaws. The name, age, position and biography of each member of Terra Property Trust’s board of directors

is set forth below:

Name

Age

Position Held:

Andrew M. Axelrod 36 Chairman of the Board of Directors

Bruce D. Batkin 66 Vice Chairman

Vikram S. Uppal 35 Chief Executive Officer and Director

Jeffrey M. Altman 46 Director

Roger H. Beless 57 Director

Michael L. Evans 67 Director

Spencer E. Goldenberg 36 Director

John S. Gregorits 63 Director

For biographical information regarding Messrs. Axelrod, Batkin and Uppal, see “Executive Officers of the REIT

Manager and the Adviser” above.

Jeffrey M. Altman has served as one of Terra Property Trust’s independent directors since October 2017. Mr.

Altman has served as a director of Terra Fund 6 since April 2016. Since July 2011, Mr. Altman has been the Managing

Director of the real estate and lodging investment banking group of Houlihan Lokey, Inc., an investment bank. From

December 1998 to May 2011, he served as Vice President and Director of Lazard Fréres & Co. LLC, where he led the

firm’s global hospitality and leisure effort. Mr. Altman was an Associate in the Merger and Acquisition Advisory

Group of Arthur Andersen LLP from June 1996 to June 1998, where he provided merger, acquisition and divestiture

advisory services to clients across a broad array of industries. Mr. Altman has advised on over $100 billion of real

estate transactions in his career and is a frequent speaker at real estate and lodging conferences. He is currently a

member of the New York Hospitality Council, the National Association of Real Estate Investment Trusts, the

International Council of Shopping Centers and the Samuel Zell and Robert Lurie Real Estate Center of the Wharton

School of the University of Pennsylvania. Mr. Altman received a B.S., magna cum laude, with a concentration in

accounting and finance, and an M.B.A., with a concentration in finance, from the John M. Olin School of Business at

Washington University.

Roger H. Beless has served as one of Terra Property Trust’s independent directors since February 2018. Since

May 2016, Mr. Beless has served as Chief Operating Officer at Street Lights Residential, where he oversees capital

markets, asset and portfolio management and acquisitions, and company operations. From June 2012 until March

2016, Mr. Beless served as Managing Director for Mount Kellett Capital Management, where he oversaw global real

estate asset management. Prior to joining Mount Kellett, Mr. Beless spent nearly 20 years with Goldman Sachs/Archon

44

Group where he held a number of positions, including co-head of US Real Estate and Chief Operating Officer for

Archon Residential, where he oversaw acquisitions, asset management, property management and dispositions. Mr.

Beless also spent four years in Tokyo, Japan where he led the startup of Goldman Sachs Realty Japan, Ltd. He currently

serves on the board of Lion Heart Children’s Academy and the advisory board of Apartment Life. Mr. Beless holds a

Bachelor’s of B.A. in Economics and Finance from Baylor University and a M.B.A from Southern Methodist

University.

Michael L. Evans has served as one of Terra Property Trust’s independent directors since October 2017. Mr.

Evans has served since 2013 as a member of the board of directors of Terra Capital Partners, where he is the audit

committee chair and a member of the valuation committee and as a director of Terra Fund 6 since March 2015. Since

December 2012, Mr. Evans has been the Managing Director of Newport Board Group, a CEO and board advisory

firm. From June 2010 to September 2011, Mr. Evans served as the Interim Country Manager and Advisory Board

Member for Concern Worldwide U.S. Inc., a non-profit humanitarian organization. From January 1977 until June

2010, Mr. Evans was with Ernst & Young, LLP, or Ernst & Young, and served as a partner since 1984. During his

nearly 34 years with Ernst & Young, he served as a tax, audit and consulting services partner, specializing in real estate

companies and publicly-traded entities. Mr. Evans currently serves on the Advisory Board of Marcus & Millichap,

Inc., the Independent Counsel Board of Prologis Targeted U.S. Logistics Fund and the board of directors of Newport

Board Group, CyArk.org and InfinteSmile.org. Mr. Evans is a licensed attorney and a C.P.A. (inactive) in California.

He is currently a contributing business writer for Forbes.com and Allbusiness.com. Mr. Evans received a B.S.B. in

accounting from the University of Minnesota, a J.D. from William Mitchell College of Law and an M.B.A. from

Golden Gate University.

Spencer E. Goldenberg has served as one of Terra Property Trust’s independent directors since February 2018.

He has served since June 2015 as Vice President of Corporate Development at Menin Hospitality. Prior to his time at

Menin, Mr. Goldenberg was employed as an accountant at the firm of Gerstle, Rosen & Goldenberg P.A. from February

2008 to June 2015. From October 2005 until February 2008, he served as a legislative aide to Florida State Senator

Gwen Margolis. Mr. Goldenberg holds an active certified public accountant's license in the state of Florida. He holds

a Bachelor of Arts in International Affairs from Florida State University.

John S. Gregorits has served as one of Terra Property Trust’s independent directors since October 2017. Mr.

Gregorits retired in 2014 from his position with the Specialized Funds Group at Prudential Real Estate Investors, or

PREI, the real estate investment management business of Prudential Financial, where he worked since 1998. Mr.

Gregorits was responsible for certain of PREI’s funds in its U.S. business, totaling approximately $10 billion in gross

assets. While at PREI, Mr. Gregorits served on the U.S. Executive Committee and Investment Committee. Before

joining PREI, Mr. Gregorits managed a variety of multi-billion dollar equity and debt portfolios on behalf of Prudential

Financial’s General Account, gaining extensive experience in portfolio and asset management, development,

acquisitions, sales, leasing, and joint venture management. His 36 years in real estate includes serving on a variety of

industry associations as well as the board of directors of several privately held companies. Mr. Gregorits holds a

Bachelor of Art in economics and psychology from Duke University and a Master of Arts in organizational behavior

from Fairleigh Dickson University.

Executive Compensation

The General Partner and the Advisor do not have any paid officers, directors or employees. Terra Property Trust

has entered into a management agreement with the REIT Manager, pursuant to which the REIT Manager provides

certain services to Terra Property Trust and Terra Property Trust pays fees associated with such services. The officers

of the Adviser and the REIT Manager do not receive any compensation from our Fund. The REIT Manager is

responsible for managing Terra Property Trust’s day-to-day operations and all matters affecting its business and affairs,

including responsibility for determining when to buy and sell real estate-related assets. The REIT Manager is not

obligated under the management agreement to dedicate any of its personnel exclusively to Terra Property Trust, nor

is it or its personnel obligated to dedicate any specific portion of its or their time to the business.

Compensation of the Directors of Terra Property Trust

Terra Property Trust is responsible for the payment of any compensation to its directors.

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http://allbusiness.com/

45

SUMMARY OF FEES, COMMISSIONS, AND REIMBURSEMENTS

The following table summarizes and discloses all of the compensation and fees, including reimbursement of

expenses, to be paid by the Fund to the Adviser, the General Partner, IDB and any other placement agents the

Partnership may engage. This table also summarizes fees paid by Terra Property Trust to the REIT Manager. Fees and

expenses borne by the Terra Property Trust will be indirectly borne by our Limited Partners through our investment

in Terra Property Trust and will indirectly reduce the Partnership’s capital and the funds available for payment of

Partnership distributions. Our estimated amount that we may pay with respect to such compensation, fees and

reimbursement of expenses for a maximum offering is also set forth below.

Type of Fee and Recipient Description and Method of Computation

Estimated Amount

for Maximum Offering

Organizational and Offering Stage

Selling Commission(1) — IDB The Partnership will pay aggregate selling commissions to

IDB and any other placement agents the Partnership may

engage of up to 5.0% of the gross proceeds from

subscriptions, payable as follows: (a) up to 2.0% of the gross

proceeds payable at the time of such sale, plus (b) up to 1.0%

of the gross proceeds payable for each of the three years

thereafter on the anniversary of the offering termination

date; provided, however, that aggregate selling commissions

payable shall not exceed 5.0% of the gross proceeds of

subscriptions.

U.S. $2,500,000

Organizational and Offering

Expense Reimbursement(2) —

Adviser

The Partnership will reimburse the Adviser for organization

and offering expenses in the amount of the actual expenses

incurred (not to exceed 2.0% of gross offering proceeds).

U.S. $1,000,000

Operational Stage

Incentive Allocation —

General Partner(3)

Once a Limited Partner has received cumulative

distributions equal to aggregate capital invested in its

Interests and a 9.0% per annum, cumulative,

non-compounded pre-tax return on unreturned invested

capital, 15.0% of amounts otherwise distributable to such

Limited Partner will be paid to the General Partner as an

Incentive Allocation.

Actual amounts are

dependent upon total

returns to investors and

cannot be determined

at the present time.

Origination Fee — REIT

Manager

Terra Property Trust pays to the Manager an origination fee

in the amount of 1.0% of the amount funded by Terra

Property Trust to originate, fund, structure, or acquire TPT

Assets, including any third-party expenses related to such

investment and any debt Terra Property Trust uses to fund

the origination, funding, structuring, or acquisition of such

TPT Asset. The origination fee is reduced by the amount of

any origination or equivalent fee paid by a borrower. In the

event that the collateral backing any real estate-related loan

held by Terra Property Trust is replaced with substitute

collateral, Terra Property Trust will pay an origination fee to

REIT Manager equal to the lesser of (A) 1.0% of the

principal amount of the loan backed by the substitute

collateral and (B) the amount of the fee paid to Terra

Actual amounts are

dependent upon

originations of TPT

Assets and cannot be

determined at the

present time.

46


Estimated Amount


Property Trust by the borrower in connection with such

substitution.

Asset Management Fee —

REIT Manager

Terra Property Trust pays the REIT Manager a monthly asset

management fee at an annual rate equal to 1.0% of the

aggregate funds under management (including the amount

of any debt incurred or assumed to finance any TPT Asset

and related closing costs and expenses), as well as cash then

held by Terra Property Trust.

U.S. $465,000

Asset Servicing Fee —REIT

Manager

Terra Property Trust pays to the Manager a monthly asset

servicing fee at an annual rate equal to 0.25% of the

aggregate gross origination price for each TPT Asset

(including the amount of any debt incurred or assumed to

finance any TPT Asset, and related closing costs and

expenses).

U.S. $116,250

Transaction Breakup Fee —

REIT Manager

Terra Property Trust pays to the REIT Manager a transaction

breakup fee in the amount of 50.0% of any termination fees

or liquidated damages received by Terra Property Trust from

a third party as a result of (A) a failure of any investment or

disposition transaction to be consummated, (B) the failure

of such third party to perform its obligations and covenants

to Terra Property Trust in connection with an investment or

disposition transaction, (C) the failure of such third party to

satisfy any conditions precedent to consummation of an

investment or disposition transaction or (D) the termination

of any contract related to an investment or disposition

transaction.

Actual amounts are

dependent on whether

there are

circumstances causing

a transaction breakup

and therefore cannot

be determined at the

present time.

Operating Expenses —

Adviser

The Partnership will reimburse the Adviser for all expenses

paid or incurred by the Adviser in connection with the

services provided to the Partnership, including the

Partnership’s allocable share of the Adviser’s employee

costs and overhead, such as rent, , utilities and technology

costs, which we estimate will not exceed approximately

1.0% of gross offering proceeds; provided, however, that the

Partnership will not reimburse the Adviser or its affiliates

for Adviser employee costs in connection with services for

which the Adviser earns any separate fees. The Partnership

will reimburse the Adviser no less than monthly for any such

expenses. The Partnership will not be responsible for the

payment or reimbursement of any costs and expenses for

which the Adviser has been reimbursed separately by Terra

Property Trust.

Actual amounts are

dependent upon expens

es paid or incurred and

therefore cannot be

determined at the

present time.

Liquidity Stage

Disposition Fee — REIT

Manager

Terra Property Trust pays to the REIT Manager a disposition

fee in the amount of 1.0% of the gross sale price (including

any portion of the sale price applied to any indebtedness to

which the TPT Asset is subject) received by Terra Property

Trust from each TPT Asset sale or disposition, or each

Actual amounts are

dependent upon the

sale price received

from the disposition of

any real estate-related

47


Estimated Amount


maturity, prepayment, workout, modification, restructuring,

or extension of any TPT Asset, or any portion of or interest

in any TPT Asset. The disposition fee shall be paid

concurrently with the closing of any such TPT Asset sale or

disposition, or any such maturity, prepayment, workout,

modification, restructuring, or extension of any TPT Asset

or any interest thereon. No disposition fee shall be payable

in the event of any maturity, prepayment, workout,

modification, restructuring, or extension of an TPT Asset

unless the borrower thereunder has paid or is obligated to

pay a corresponding fee, in which case the disposition fee

will be the lesser of (A) 1.0% of the original principal

amount of the TPT Asset and (B) the amount of such fee paid

by such borrower in connection with such transaction.

loans and therefore

cannot be determined

at the present time.

(1) The selling commissions may be reduced or waived in connection with certain purchasers, including but not

limited to sales made by certain placement agents, sales through investment advisers or banks acting as trustees

or fiduciaries and sales to our affiliates.

(2) Organization and offering expenses include legal, accounting, printing and miscellaneous expenses to be paid

by us in connection with the organization and formation of the Partnership, the REIT Subsidiary and related

entities, as well as this offering.

(3) For purposes of the calculation of the Incentive Allocation, distributions will first be treated as a return of

aggregate capital invested in the Partnership and then as payment of the accrued, unpaid return on unreturned

invested capital.

48

PRIOR INVESTMENT HISTORY OF THE ADVISER AND ITS AFFILIATES

The Partnership is a recently formed Cayman Islands exempted limited partnership. The information presented in

this section represents the prior investment and asset management experience of Terra Capital Partners, an affiliate of

the Adviser, and its affiliates. Our investors will not acquire any interest in the investments or investment programs

discussed in this summary. Further, investors should not assume that they will experience comparable returns.

Experience and Background

Our Adviser, Terra REIT Advisors, LLC, is a Delaware limited liability company that is registered as an

investment adviser under the Advisers Act. The Adviser currently also serves as the manager of Terra Fund 5 (and its

wholly-owned subsidiaries Terra Fund 1, Terra Fund 2, Terra Fund 3, and Terra Fund 4). Terra Income Advisors serves

as investment adviser for Terra Fund 6, an externally managed, non-diversified, closed-end management investment

company that has elected to be treated as a business development company (“BDC”) under the 1940 Act. The REIT

Manager serves as investment adviser for Terra Property Trust.

Terra Capital Partners, the parent company of the Adviser, is a real estate finance and investment company based

in New York City, and has engaged in the origination and management of debt and equity investments in over 350

properties of all major property types throughout the United States since it was formed in 2001 and commenced

operations in 2002. These investments have been made in 34 states and have been secured by approximately 16 million

square feet of office properties, 3.4 million square feet of retail properties, 4.2 million square feet of industrial

properties, 3,425 hotel rooms and 22,109 apartment units. The value of the properties underlying these investments

was approximately $6.5 billion based on appraised values as of the closing dates. Terra Capital Partners and its

affiliates have originated all the loans, which are set forth below, held by the following investment programs and have

suffered no monetary defaults or foreclosures on these loans. As of the date of this memorandum, Terra Capital

Partners and its affiliates employed 33 persons.

Terra Capital Partners is led by its chairman, Andrew M. Axelrod, and its chief executive officer, Vikram S. Uppal,

and employs a team of highly experienced real estate, finance and securities professionals. The management of Terra

Capital Partners has broad-based, long-term relationships with major financial institutions, property owners and

commercial real estate service providers. The Terra Capital Partners legacy management personnel have worked

together as a team engaged in the business of making investments in commercial real estate loans, preferred equity

investments and certain real estate-related debt securities of private companies for approximately ten years, building

on their prior experience in commercial real estate investment, finance, development and asset management with many

of the top international real estate and investment banking firms, including Jones Lang Wootton (formerly Jones Lang

LaSalle Incorporated and now JLL), Merrill Lynch & Co., Inc., Donaldson, Lufkin and Jenrette Securities Corporation

(now Credit Suisse (USA) Inc.) and ABN Amro Bank N.V. Please see “The General Partner, the REIT Manager, the

Adviser, and Terra Property Trust” for biographical information regarding these individuals. We believe that the active

and substantial ongoing participation of Terra Capital Partners in the real estate finance market, and the depth of

experience and disciplined investment approach of its management team will allow our Adviser to successfully

execute our investment strategy.

Prior Investment Programs

The Terra Secured Income Funds

In 2009, following the collapse of the real estate-related investment markets and the capital markets generally,

Terra Capital Partners determined that the market conditions were providing significant investment opportunities for

sophisticated alternative providers of capital, such as itself, to generate favorable returns for potential investors.

Accordingly, the management of Terra Capital Partners decided to sponsor a series of private real estate income funds

to capitalize on the available investment opportunities and the favorable investment terms that it could demand from

borrowers seeking capital for commercial real estate. These private real estate funds were formed to originate,

structure, fund and acquire real estate-related loans, including mezzanine loans, first and second mortgage loans,

subordinated mortgage loans, bridge loans, preferred equity investments and other loans related to high quality

commercial real estate in the United States. These six Terra Secured Income Funds are Terra Secured Income Fund,

LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income 4, LLC, Terra

49

Secured Income Fund 5, LLC and Terra Secured Income Fund 5 International. These six Terra funds collectively raised

in excess of $400 million from over 4,000 U.S. and non-U.S. investors in a series of private placement offerings.

On January 1, 2016, each of Terra Fund 1, Terra Fund 2, Terra Fund 3, and Terra Fund 4 were merged with

subsidiaries of Terra Fund 5. Terra Fund 5 elected to engage in the merger transactions in order to make its investments

through Terra Property Trust and provide its investors with a more broadly diversified portfolio of assets, while at the

same time providing us with enhanced access to capital and borrowings, lower operating costs and enhanced

opportunities for growth.

Terra Income Fund 6, Inc.

Terra Fund 6 is a real estate finance company that invests primarily in commercial real estate loans, and select

commercial real estate-related debt securities of private companies. Terra Fund 6 is a non-diversified, closed-end

management investment company that has elected to be regulated as a BDC under the 1940 Act, and to be taxed as a

REIT under the Code. Terra Fund 6 is externally managed by an affiliate of the Adviser, Terra Income Advisors LLC,

a private investment firm that is registered as an investment adviser with the SEC. Terra Income Advisors has been

responsible for managing the operations and investments of Terra Fund 6 since that fund’s inception.

50

CURRENT PORTFOLIO OF TERRA PROPERTY TRUST

Through the REIT Subsidiary, the Partnership will invest substantially all of its investable assets in Terra

Property Trust. The following tables set forth certain information with respect to Terra Property Trust’s assets as of

March 31, 2019.

Terra Property Trust Current Portfolio

Note: several construction loans have since stabilized, and for the purposes of these charts, have been reallocated to other strategies as follows:

1. 225 W 17th St: 86% Stabilized, 14% Value-Add (construction has been completed, and 86% of units have been sold)

2. Urbanea: 100% Value-Add (construction has been completed, and project is in lease-up)

3. Harlem Portfolio 80% Stabilized, 20% Predevelopment/Land (estimated 80% of allocated loan value has been completed and is

100% leased)

Stabilized, 20%

Value-Add, 41%

Construction, 28%

Predevelopment, 11%

By Strategy

Residential, 40%

Office, 31%

Hotel, 13%

Land, 11%

Other, 6%

By Property Type

51

TERRA PRO PERTY TRUST, CURRENT PO RTFO LIO

O verview TPT Commitment Rate Coverage Metrics

Name Property Type

Strategy

Maturity Loan Type $m % Current Total Fixed /

Floating

LTV LTC DSCR DY

Lakeside

Oakland, CA

Mixed Use

Construction

2.9 yrs Senior 36.5 12.3% 2.9% 9.0% Floating 70.7% 81.2% NA NA

370 Lexington

Manhattan, NY

Office

Value-Add

2.7 yrs Pref Equity 23.6 7.9% 10.7% 10.7% Floating 91.6% 87.0% NA NA

1100 Biscayne

Miami, FL

Hotel

Value-Add


Boundary

Atlanta, GA

Office

Construction


REEC Portfolio

Manhattan, NY

Mixed Use

Construction


NB Credit Facility

Multi-State

Student Housing

Stabilized

1.3 yrs Pref Equity 20.5 6.9% 14.0% 14.0% Floating NA NA NA NA

City Gardens

San Francisco, CA

Student Housing

Construction


Millennium IV

Conshohocken, PA

Infill Land

Predevelopment

NA Equity 14.9 5.0% NA NA Equity NA NA NA NA

1733 Ocean

Santa Monica, CA

Office

Value-Add

NA Equity 13.3 4.5% NA NA Equity NA NA NA NA

Bristol I

Renton, WA

Multifamily

Value-Add

3.5 yrs Pref Equity 13.0 4.4% 10.0% 12.0% Fixed 62.1% NA NA NA

East 4th Ave

San Mateo, CA

Mixed Use

Construction

1.8 yrs Pref Equity 11.2 3.8% 10.0% 12.5% Fixed 78.5% 80.1% NA NA

Uptown Newport

Newport Beach, CA

Infill Land

Predevelopment


575 4th Ave

Brooklyn, NY

Condo

Construction

0.3 yrs Mezz 9.8 3.3% 12.0% 14.5% Fixed 62.2% 70.8% NA NA

150 Blackstone

Worcester, MA

Industrial

Stabilized

8.4 yrs Mezz 7.0 2.4% 8.5% 8.5% Fixed 70.0% NA 1.3x 7.2%

Peachtree Retreat

Peachtree Corners, GA

Multifamily

Value-Add


330 S. Tryon

Charlotte, NC

Office

Stabilized

2.9 yrs Senior 6.0 2.0% 11.2% 11.2% Floating 76.2% 73.4% 0.9x 5.5%

SparQ

San Jose, CA

Multifamily

Construction


EVEN Hotel

Charlotte, NC

Hotel

Construction


Element

Milpitas, CA

Hotel

Construction

2.2 yrs Mezz 4.3 1.4% 13.0% 13.0% Floating 75.9% 71.8% NA NA

Telegraph

Berkeley, CA

Student Housing

Construction


Driggs

Brooklyn, NY

Multifamily

Construction

1.1 yrs Pref Equity 4.1 1.4% 12.3% 12.3% Fixed 75.5% 83.0% NA NA

Urbanea

Miami, FL

Multifamily

Construction


225 W 17 St

Manhattan, NY

Condo

Construction


Holiday Inn Midtown

Austin, TX

Hotel

Stabilized

1.5 yrs Mezz 2.5 0.8% 12.5% 12.5% Fixed 79.6% 80.3% 1.1x 8.8%

1333 S Orange Grove

Los Angeles, CA

Condo

Construction


Arbor Station

Montgomery, AL

Multifamily

Stabilized

3.3 yrs Pref Equity 2.1 0.7% 16.0% 16.0% Fixed 79.9% NA 1.0x 7.7%

Clemson Student Housing

Clemson, SC

Student Housing

Stabilized


Stratford Village

Montgomery, AL

Multifamily

Stabilized

3.3 yrs Pref Equity 1.6 0.5% 16.0% 16.0% Fixed 80.7% NA 0.9x 6.9%

TO TAL 297.5 100.0% 11.1% 12.1% 71.6% 76.2% 1.07x 7.0%

52

Terra’s Cumulative Track Record in Lending - 2009-2019

The following table lists all realized loans that have been originated by Terra Capital Partners or its affiliates from

2009 through March 31, 2019. The loans are organized by the closing date of the investment. This table contains

investments made by affiliates of Terra Capital Partners that are not currently held by the Partnership or Terra

Property Trust. You should not consider the performance of any of the following investments as indicative of our

future performance. You should not assume the recommendations made by the Adviser in the future will be

profitable or will equal the performance of the securities in this table:

TERRA CAPITAL PARTNERS, REALIZED TRACK RECO RD

O verview Economics Gross Returns (1)

Name Property Type

Strategy

Entry Exit $m LTV Ann

Coupon (2)

Fees IRR MO IC

1100 Biscayne

Miami, FL

Hotel

Value-Add

11/2017 11/2018 24.4 48.8% 16.0% 2.0% 18.6% 1.17x

Factory Student Housing

Logan, UT

Student Housing

Stabilized

06/2017 07/2018 5.0 86.3% 15.0% -% 16.6% 1.13x

98 14th Street NE

Atlanta, GA

Land

Pre-Development

06/2017 03/2019 27.5 38.0% 12.0% 2.0% 15.1% 1.22x

Fresenius Louisburg

Louisburg, NC

Office

Stabilized

01/2017 07/2017 3.7 89.0% 10.0% 2.0% 23.7% 1.07x

Brooklyn Hilton

Brooklyn, NY

Hotel

Value-Add

11/2016 01/2019 15.0 78.7% 12.0% 2.0% 14.0% 1.29x

2700 NW 2nd Ave

Miami, FL

Land

Pre-Development

09/2016 02/2018 21.4 63.7% 12.0% 2.0% 14.9% 1.19x

NB Credit Facility (3)

Various

Multi-Asset

Stabilized

07/2016 07/2018 10.1 NA 15.0% 2.0% 20.1% 1.30x

Lakeview MOB

Indianapolis, IN

Office

Stabilized

06/2016 09/2018 3.5 75.0% 13.1% -% 13.7% 1.28x

30 Warren Street

New York, NY

Condo

Construction

03/2016 01/2018 19.1 69.2% 12.0% 2.0% 14.7% 1.21x

302 East 96th Street

New York, NY

Condo

Construction

12/2015 01/2019 18.7 71.8% 13.0% 2.0% 16.2% 1.23x

42-50 24th Street (4)

Long Island City, NY

Land

Pre-Development

12/2015 07/2017 15.0 80.5% 7.4% 1.0% 4.6% 1.03x

BPG Hotel Portfolio

King of Prussia, PA

Hotel

Stabilized

11/2015 12/2018 5.8 72.1% 13.0% 1.0% 14.5% 1.41x

W 41st St

Miami Beach, FL

Office

Pre-Development

07/2015 01/2017 5.0 85.7% 14.0% 3.0% 17.6% 1.25x

BPG Office Portfolio

Wilmington, DE

Office

Stabilized

06/2015 08/2018 10.0 86.6% 13.5% 2.0% 15.4% 1.46x

1100 Biscayne

Miami, FL

Hotel

Value-Add

04/2015 11/2017 23.1 65.6% 15.4% 2.9% 18.1% 1.28x

San Diego DoubleTree

San Diego, CA

Hotel

Stabilized

03/2015 02/2017 6.0 64.2% 12.0% 2.0% 14.3% 1.26x

Park Central/East (5)

Greenville, SC

Office

Value-Add

03/2015 11/2016 13.8 NA 12.0% -% 30.9% 1.55x

144 S. Harrison Street

East Orange, NJ

Multifamily

Construction

01/2015 06/2017 24.1 66.4% 11.6% 4.5% 14.5% 1.25x

Crestavilla Land

Laguna Niguel, CA

Land

Pre-Development

12/2014 02/2016 11.3 60.5% 12.0% 3.0% 17.0% 1.18x

Marriott Edition Site

West Hollywood, CA

Land

Pre-Development

10/2014 12/2015 25.0 81.8% 12.0% 2.0% 15.6% 1.17x

55 Miracle Mile

Coral Gables, FL

Mixed Use

Stabilized

08/2014 01/2017 3.4 79.3% 14.0% 2.0% 17.8% 1.42x

Marriott Warner Center

Woodland Hills, CA

Hotel

Stabilized

07/2014 10/2018 32.1 77.4% 12.0% 3.0% 15.1% 1.44x

514 West 24th Street

New York, NY

Land

Pre-Development

07/2014 07/2015 11.4 80.9% 16.0% 2.0% 20.9% 1.20x

98 14th Street NE

Atlanta, GA

Land

Pre-Development

05/2014 05/2016 5.5 74.9% 18.0% 4.0% 22.5% 1.43x

Justison Landing

Wilmington, DE

Multifamily

Stabilized

02/2014 07/2015 9.0 84.4% 12.0% 2.0% 14.9% 1.20x

53



Name Property Type

Strategy


Coupon (2)

Fees IRR MO IC

Mystic Hotel

San Francisco, CA

Hotel

Stabilized

01/2014 01/2018 4.3 68.4% 12.0% 3.0% 13.5% 1.52x

Marriott Spartanburg

Spartanburg, TN

Hotel

Stabilized

01/2014 12/2016 3.0 78.0% 13.5% 2.0% 18.7% 1.53x

Kingsport MF Portfolio

Kingsport, TN

Multifamily

Stabilized

01/2014 12/2018 3.0 76.9% 13.0% 2.0% 14.8% 1.68x

Georgia REO MF

Portfolio

Multifamily

Stabilized

12/2013 04/2018 6.5 76.7% 14.0% 2.0% 16.7% 1.55x

CSRA Credit Facility

Various

Multi-Asset

Stabilized

12/2013 07/2017 16.0 NA 13.0% 2.8% 18.2% 1.39x

Museo Apartments

Austin, TX

Multifamily

Stabilized

11/2013 12/2018 4.0 83.5% 12.0% 0.8% 13.2% 1.62x

Caton Place

Brooklyn, NY

Multifamily

Value-Add

11/2013 01/2015 12.0 52.2% 15.0% 2.0% 23.2% 1.17x

UBS Tower

Nashville, TN

Office

Value-Add

11/2013 05/2017 14.6 55.0% 15.0% 3.2% 22.1% 1.44x

Peachtree Pointe

Atlanta, GA

Office

Stabilized

10/2013 10/2016 7.5 66.9% 12.0% 1.0% 13.2% 1.38x

Hilton Garden Inn

Ft. Washington, PA

Hotel

Stabilized

10/2013 05/2017 3.7 84.7% 13.0% 4.0% 14.9% 1.51x

Portland Hotel Portfolio

Portland, OR

Hotel

Stabilized

09/2013 08/2018 5.0 78.4% 13.0% 2.5% 14.8% 1.68x

24 Hour Fitness

Ft. Worth, TX

Retail

Stabilized

09/2013 12/2013 2.2 86.2% 15.0% 4.0% 234.7% 1.20x

Bridgeview Apartments

Tampa, FL

Multifamily

Stabilized

09/2013 12/2013 6.0 87.3% 14.0% 2.0% 45.7% 1.06x

Ball State Student Housing

Muncie, IN

Student Housing

Stabilized

08/2013 04/2018 2.7 84.8% 13.0% 2.0% 23.2% 2.21x

Matrix MHC Portfolio (6)

Various

Man. Housing

Stabilized

08/2013 08/2016 15.0 78.3% 12.5% -% 21.3% 1.64x

Sheraton Hotel & Spa

Ft. Worth, TX

Hotel

Stabilized

07/2013 10/2016 8.7 74.4% 14.5% 2.0% 16.8% 1.50x

Le Saint Drive Center

Cincinnati, OH

Industrial

Value-Add

05/2013 07/2015 7.2 78.1% 13.5% 2.0% 15.7% 1.31x

DoubleTree by Hilton

Greensboro, NC

Hotel

Stabilized

03/2013 02/2018 3.5 77.9% 14.0% 2.0% 15.6% 1.73x

Seven Penn Center

Philadelphia, PA

Office

Value-Add

03/2013 12/2014 4.3 74.2% 12.5% 1.0% 18.5% 1.32x

iStorage Portfolio

Various

Industrial

Stabilized

01/2013 10/2014 5.5 76.6% 13.5% 2.0% 22.9% 1.37x

Encino Courtyard

Encino, CA

Retail

Stabilized

12/2012 02/2017 2.5 76.8% 13.5% 2.0% 15.5% 1.61x

Brass Professional Center

San Antonio, TX

Office

Value-Add

12/2012 06/2016 15.4 71.1% 16.5% 5.0% 20.4% 1.69x

Park Central/East (5)

Greenville, SC

Office

Value-Add

11/2012 03/2015 4.8 68.4% 14.0% 1.0% 15.7% 1.27x

Z Hotel NYC

Long Island City, NY

Hotel

Stabilized

11/2012 10/2016 4.5 80.4% 13.0% 2.0% 14.7% 1.54x

Carolinas Self-Storage

Portfolio

Industrial

Stabilized

11/2012 09/2015 3.3 84.9% 14.0% 2.0% 15.7% 1.42x

Cleveland Tech Center

Cleveland, OH

Industrial

Stabilized

08/2012 05/2013 8.0 70.3% 13.0% 2.0% 24.7% 1.18x

AHF Portfolio

Various

Multifamily

Stabilized

07/2012 07/2018 6.1 69.9% 14.0% 2.0% 16.9% 1.72x

Boston Mayo Portfolio

Boston, MA

Multifamily

Stabilized

07/2012 03/2017 4.0 88.9% 12.0% 2.0% 14.1% 1.63x

Ramada Beach Resort

Ft. Walton Beach, FL

Hotel

Stabilized

07/2012 07/2017 4.5 68.8% 13.0% 1.4% 14.5% 1.69x

L Street Lofts

Sacramento, CA

Multifamily

Stabilized

07/2012 02/2014 4.4 77.6% 15.0% 3.0% 22.2% 1.37x

Ramada Hotel Atlanta

Atlanta, GA

Hotel

Value-Add

06/2012 09/2016 2.3 68.7% 13.9% 4.0% 16.4% 1.65x

La Jolla on Park

Plano, TX

Multifamily

Value-Add

03/2012 08/2015 2.0 73.1% 14.0% 3.0% 15.5% 1.50x

Crestmont at Thornblade

Greenville, SC

Multifamily

Stabilized

02/2012 11/2013 2.0 80.6% 13.0% 3.0% 25.2% 1.43x

54



Name Property Type

Strategy


Coupon (2)

Fees IRR MO IC

Crestmont at Thornblade

Greenville, SC

Multifamily

Stabilized

02/2012 11/2013 2.0 80.6% 13.0% 3.0% 25.2% 1.43x

Thornblade Park Apts

Greenville, SC

Multifamily

Stabilized

11/2011 11/2013 2.2 81.7% 13.0% 2.0% 21.5% 1.42x

Applebee's Portfolio

Atlanta, GA

Retail

Stabilized

10/2011 06/2012 3.5 77.7% 14.0% 2.7% 46.4% 1.24x

Windover Villas

Fredericksburg, Various

Multifamily

Stabilized

06/2011 12/2013 1.3 79.7% 13.5% 2.0% 15.5% 1.36x

Cortland Portfolio

Atlanta, GA

Multifamily

Stabilized

06/2011 08/2013 6.5 79.3% 15.0% 4.6% 22.0% 1.36x

Townsend Square Apts

Atlanta, GA

Multifamily

Stabilized

05/2011 05/2014 2.2 85.0% 13.5% 2.0% 15.4% 1.43x

Clifton Glen

Atlanta, GA

Multifamily

Stabilized

03/2011 08/2013 3.2 80.0% 18.0% 3.0% 20.6% 1.49x

Hamilton

Horn Lake, MS

Multifamily

Stabilized

03/2011 07/2012 2.6 80.3% 13.5% 2.0% 22.4% 1.29x

Clifton Ridge

Atlanta, GA

Multifamily

Stabilized

02/2011 09/2012 0.9 71.0% 18.0% 3.0% 26.4% 1.40x

Parke Lane Villas East

Santa Rosa, CA

Multifamily

Stabilized

11/2010 09/2012 2.8 70.2% 15.0% 5.3% 20.6% 1.33x

OCC/Penton

Cleveland, OH

Office

Stabilized

08/2010 07/2015 8.1 66.8% 13.0% 1.0% 14.4% 1.54x

Rialto-Capitol

Jersey City, NJ

Condo

Value-Add

06/2010 03/2011 3.5 74.3% 15.0% 3.0% 38.8% 1.18x

840 First Street

Washington, DC

Office

Stabilized

10/2009 03/2011 6.5 71.6% 15.0% 3.0% 40.7% 1.57x

TO TAL (8)

590.5 66.0% 13.2% 2.3% 18.9% 1.34x

(2) Stated interest rate for investment; for floating-rate loans, greater of contractual LIBOR floor or LIBOR rate of 249 basis points is applied

(3) Loan amount reflects $9.4m repaid; gross returns are expected and exclude $4.6m outstanding, which is reflected as separate investment

(6) Interest rate was fixed for first year at 12.6%, then declined through loan term to 12.3% by Month 60, for an avg effective yield of 12.5%

Note: Represents all investments recommended by TCP to its clients from 2009 to the date of this report; investments recommended by TCP

prior to 2009 are excluded because in 2008 TCP sold its managerial interest in any loans then outstanding, and the ultimate financial returns

from these investments are not readily available, and the results of such investments may be significantly less than the returns shown here

(4) Loan amount reflects only TCP's original mezzanine loan originated in Dec 2015; in Feb 2017, TCP exercised its option to purchase the first

mortgage as a protective advance on its position in the mezzanine loan; TCP purchased the first mortgage for par with an outstanding balance of

$50.6m; returns includes cash activity for both TCP's original mezzanine loan and purchase of first mortgage(5)

TCP's original B-Note was repaid when TCP took title to the property in Mar 2015; returns during the equity holding period are reflected as a

separate investment

(1) Include all interest payments and fees that are embedded into investment, calculated on fully-funded balance; totals averages weighted by loan

amounts

55

CONFLICTS OF INTEREST

Various conflicts of interest will arise out of the relationship between us and the Adviser and its affiliates,

including the General Partner. Subject to the overall control and oversight of the General Partner, the Adviser will

have control over our everyday operations and will resolve conflicts of interest through the exercise of its judgment.

There is a possibility that not all conflicts will be resolved in a manner favorable to us. Potential conflicts include

those set forth below.

Voting Agreement involving Terra Property Trust

On February 8, 2018, Terra Fund 5, Terra Property Trust and the REIT Manager entered into the Voting

Agreement, pursuant to which the board of directors of Terra Property Trust was increased to eight members. Simon

J. Mildé resigned from the board of directors of Terra Property Trust, leaving four existing directors (the “Existing

Directors”), including the existing three independent directors on Terra Property Trust board. The remaining members

of the board then appointed the following four individuals as additional members of Terra Property Trust board

(the “Additional Directors”): Andrew M. Axelrod (Chairman of the Board), Vikram S. Uppal, Roger H. Beless and

Spencer E. Goldenberg. The board of Terra Property Trust determined that Messrs. Beless and Goldenberg qualify as

independent directors pursuant to the rules and standards of the New York Stock Exchange and Terra Property Trust’s

corporate governance standards.

Pursuant to the terms of the Voting Agreement, until the earlier of (1) the date that is 18 months after the date of

the Voting Agreement or (2) the date that nominations for the board of Terra Property Trust are due for the 2019 annual

meeting of stockholders of Terra Property Trust (the “Initial Period”): (a) the board of Terra Property Trust will

continue to consist of eight directors, including at least five independent directors, (b) the REIT Manager will have

the right to nominate the Additional Directors to stand for reelection to Terra Property Trust board (or their

replacements) as well as to nominate one further independent director for election to Terra Property Trust board should

one of the independent Existing Directors voluntarily resign or not stand for reelection to Terra Property Trust board

during the Initial Period, and (c) Terra Fund 5 will have the right to nominate any of the Existing Directors to stand

for reelection to Terra Property Trust (or their replacements, except as provided in clause (b) above); provided that if

any departing director is an independent director, the individual nominated as a replacement director must also qualify

as an independent director.

In addition, for the period beginning on the day following the Initial Period and continuing for the period that the

REIT Manager remains the external manager of Terra Property Trust, the REIT Manager will have the right to

nominate two individuals to serve as directors of Terra Property Trust (which nominees need not be independent

directors) and for the period beginning on the day following the end of the Initial Period and ending on the date that

Terra Fund 5 no longer holds at least 10% of the outstanding shares of common stock of Terra Property Trust, Terra

Fund 5 will have the right to nominate one individual to serve as a director of Terra Property Trust (who need not be

an independent director).

Except as otherwise required by law or the provisions of other agreements to which the parties are or may in the

future become bound, the parties have agreed to vote all shares of common stock of Terra Property Trust directly or

indirectly owned in favor (or against removal) of the directors properly nominated in accordance with the Voting

Agreement. Other than with respect to the election of directors, the Voting Agreement requires that Terra Fund 5 vote

all shares of common stock of Terra Property Trust directly or indirectly owned by it in accordance with the

recommendations made by the board of Terra Property Trust.

Management Agreement

Terra Income Advisors assigned all of its rights, title and interest in and to its current external management

agreement with Terra Property Trust to the REIT Manager and immediately thereafter, the REIT Manager and Terra

Property Trust amended and restated such management agreement. Such amended and restated management

agreement has the same economic terms and is in all material respects otherwise on the same terms as the management

agreement between Terra Income Advisors and Terra Property Trust in effect immediately prior to the Axar

Transaction, except for the identity of the applicable manager.

56

Receipt of Fees and Other Compensation by the Adviser and its Affiliates

Terra Property Trust pays substantial fees to the REIT Manager and its affiliates. Further, Terra Property Trust,

must reimburse the REIT Manager and its affiliates for costs incurred by them in managing Terra Property Trust and

its portfolio of real estate-related loans.

Terra Property Trust has entered into a management agreement with the REIT Manager pursuant to which the

REIT Manager provides certain management services to Terra Property Trust, subject to oversight by its board of

directors. The REIT Manager’s responsibilities to Terra Property Trust include, among others, investing in, and

disposing of, assets, borrowing money, entering into contracts and agreements in connection with Terra Property

Trust’s business and purpose, providing administrative support and performing such other services as are delegated to

the REIT Manager by Terra Property Trust’s board of directors. In performing its duties, the REIT Manager is subject

to a fiduciary responsibility for the safekeeping and use of all funds and assets of Terra Property Trust. In consideration

of its providing such services, the REIT Manager is entitled to certain fees from Terra Property Trust as described

below. The original management agreement between Terra Capital Advisors and Terra Property Trust was entered into

on January 1, 2016. On September 1, 2016, Terra Property Trust terminated the original management agreement and

entered a management agreement with Terra Income Advisors. As described above, as part of the Axar Transaction,

Terra Income Advisors assigned all of its rights, title and interest in and to its current external management agreement

with Terra Property Trust to the REIT Manager and immediately thereafter, the REIT Manager and Terra Property

Trust amended and restated such management agreement. The current management agreement runs co-terminus Terra

Fund 5’s operating agreement, which terminates on December 31, 2023.

During the years ended December 31, 2017 and 2016, Terra Property Trust paid the predecessor to the REIT

Manager the following fees under the management agreement: $3.2 million and $3.3 million in asset management fee,

respectively, $0.7 million and $0.8 million in asset servicing fees, respectively, $3.6 million and $2.9 million in

origination fees, respectively; $1.1 million and $1.1 million in disposition fees, respectively, and $3.3 million and $3.3

million of operating expense reimbursements, respectively.

Subject to its fiduciary responsibilities and the terms of our Limited Partnership Agreement and the Management

Agreement, the Adviser has sole discretion with respect to the terms and timing of our investments, although it is

anticipated that those investments will be consistent with our investment objectives and strategy. It is further

anticipated that the REIT Manager will exercise its sole discretion through the management agreement with Terra

Property Trust. The agreements and arrangements, including those relating to compensation, between Terra Property

Trust and the REIT Manager and its affiliates are not the result of arm’s-length negotiations and may create conflicts

between the interests of the Adviser, the REIT Manager and their affiliates, on the one hand, and us, our Limited

Partners and Terra Property Trust on the other.

The Adviser and its Affiliates May Compete With Us

The Adviser and its affiliates may engage in real estate-related transactions on their own behalf or on behalf of

other entities.

The Adviser and its affiliates have, and in the future will have, legal and financial obligations with respect to its

other programs that are similar to the Adviser’s obligations to us. For example, the Adviser and its affiliates are the

external managers to Fund 5 International, Terra Fund 6, Terra International and Terra Fund 7, all of which follow

investment strategies that are similar to our strategy. Competition for investments among the real estate-related

investment programs sponsored by the Adviser and its affiliates will create a conflict of interest. In determining which

program should receive an investment opportunity, the Adviser or its affiliates will first evaluate the investment

objectives of each program to determine if the opportunity is suitable for each program. If the proposed investment is

appropriate for more than one program, the Adviser will then evaluate the portfolio of each program, in terms of

diversity of geography, underlying property type, tenant concentration and borrower, to determine if the investment is

most suitable for one program in order to create portfolio diversification. If such analysis is not determinative, the

Adviser will allocate the investment to the program with uncommitted funds available for the longest period of time

or, to the extent feasible, prorate the investment between the programs in accordance with uninvested funds.

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Related Party Transactions

Related party transactions are those where we or the Adviser on our behalf, transact with affiliated companies.

The Adviser and its affiliates are permitted to enter into certain transactions and perform certain services for us.

Although those transactions will be subject to the limitations set forth in our Limited Partnership Agreement, those

transactions, or the potential for those transactions, could cause conflicts for the Adviser with respect to performing

its duties. Related party transactions will not be the result of an arm’s-length negotiation.

Allocation of the General Partner’s and the Adviser’s Time

We rely on the General Partner to manage our day-to-day activities and on the Adviser to implement our

investment strategy. The Adviser and certain of its affiliates are presently, and plan in the future to continue to be,

involved with activities that are unrelated to us. As a result of these activities, the Adviser, its employees and certain

of its affiliates will have conflicts of interest in allocating their time between us and the other activities in which they

are or may become involved, including the management of Fund 5 International, Terra Fund 6, Terra International and

Terra Fund 7. The employees of each of the General Partner and the Adviser, or their affiliates, will devote only as

much of its or their time to our business as it and its employees, in their judgment, determine is reasonably required,

which may be substantially less than their full time. Therefore, the General Partner, the Adviser, their personnel and

certain affiliates may experience conflicts of interest in allocating management time, services and functions among us

and any other business ventures in which they or any of their key personnel, as applicable, are or may become involved.

This could result in actions that are more favorable to other affiliated entities than to us.

However, we believe that the members of the Adviser’s senior management and the other key debt finance

professionals performing services for us on behalf of the Adviser have sufficient time to fully discharge their

responsibilities to us and to the other businesses in which they are involved. We believe that the Adviser’s executive

officers will devote the time required to manage our business and expect that the amount of time a particular executive

officer or affiliate devotes to us will vary during the course of the year and depend on business activities at the given

time. We expect that these executive officers and affiliates will generally devote more time to programs raising and

investing capital than to programs that have completed their offering stages, though from time to time each program

will have its unique demands. Because many of the operational aspects of Terra Capital Partners-sponsored programs

are very similar, there are significant efficiencies created by the same team of individuals at the Adviser providing

services to multiple programs. For example, the Adviser has streamlined the structure for financial reporting, internal

controls and investment approval processes for the programs.

Competition and Allocation of Investment Opportunities

Employees of the Adviser or its affiliates are simultaneously providing investment advisory or management

services to other affiliated entities, including Fund 5 International, Terra Fund 6, Terra International and Terra Fund 7.

The Adviser may determine it appropriate for us and one or more other investment programs managed by the

Adviser or any of its affiliates to participate in an investment opportunity. To the extent we are able to make co-

investments with investment programs managed by the Adviser or its affiliates, these co-investment opportunities may

give rise to conflicts of interest or perceived conflicts of interest among us and the other participating programs. In

addition, conflicts of interest or perceived conflicts of interest may also arise in determining which investment

opportunities should be presented to us and other participating programs.

To mitigate these conflicts, the Adviser will seek to execute such transactions on a fair and equitable basis and in

accordance with its allocation policies, taking into account various factors, which may include: the source of

origination of the investment opportunity; investment objectives and strategies; tax considerations; risk, diversification

or investment concentration parameters; characteristics of the security; size of available investment; available liquidity

and liquidity requirements; regulatory restrictions; and/or such other factors as may be relevant to a particular

transaction.

Receipt of Compensation by Affiliates

The payments to the Adviser, REIT Manager, the General Partner, and certain of their affiliates have not been

determined through arm’s-length negotiations, and are payable regardless of profitability. The Adviser and the REIT

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Manager and their affiliates receive fees for their services, including an origination fee, asset management fee, asset

servicing fee, disposition fee and transaction break-up fee. In addition, the General Partner is entitled to receive

incentive distributions.

To the extent the terms of the Management Agreement with the Adviser are amended in the future, or if Terra

Property Trust enters into a new management agreement with the REIT Manager or its affiliates, the terms of any such

arrangement will not have been determined through arm’s-length negotiations and may be payable, in whole or in

part, regardless of profitability.

Certain fees that we will pay to the Adviser, the General Partner, and indirectly pay to the REIT Manager and its

affiliates as a result of our investment in Terra Property Trust, are based in part on the level of business activity, it is

not possible to predict the amounts of compensation that we or Terra Property Trust will be required to pay these

entities. In addition, because key employees of the Adviser, the General Partner, and the REIT Manager and their

affiliates are given broad discretion to determine when to consummate a transaction, we will rely on these key persons

to dictate the level of our business activity. Fees paid by us to the Adviser, the General Partner, and each of their

affiliates and, with respect to Terra Property Trust, to the REIT Manager and its affiliates, reduce funds available for

payment of distributions. Because we cannot predict the amount of fees due to these parties, we cannot predict how

precisely such fees will impact such payments.

Terra Property Trust pays the REIT Manager a base management fee regardless of the performance of its portfolio,

which we will be indirectly responsible for paying as a result of our investment in Terra Property Trust. The General

Partner’s entitlement to non-performance-based compensation might reduce its incentive to devote its time and effort

to seeking assets that provide attractive risk-adjusted returns for our Limited Partners. This in turn could hurt both our

ability to make distributions and the value of our Interests.

Loans Involving Affiliates

We do not make any loans to the General Partner, the Adviser or to any of their affiliates. In addition, we do not

make any loans to its dealer manager, Terra Capital Markets or any entities or individuals affiliated with its dealer

manager.

Under our Limited Partnership Agreement, the General Partner, the Adviser or their affiliates may, but will have

no obligation to, make loans to us to acquire assets or to pay our operating expenses. Any such loan will bear interest

at the actual cost of funds to the General Partner and the Adviser and provide for the payment of principal and any

accrued but unpaid interest in accordance with the terms of the promissory note evidencing such loan, but in no event

later than our dissolution. Any such loans would not be the result of arm’s-length negotiations and could create

conflicts between the interests of the General Partner, the Adviser, and their affiliates on the one hand, and us and our

Limited Partners, on the other.

The Resolution of Conflicts Will Be Undertaken by Employees of the General Partner, the Adviser and their

Affiliates

In the event of a conflict between us and the Adviser or the Adviser’s affiliates, including the General Partner, the

conflict will be resolved by the General Partner to the extent permissible under applicable law. Although the Adviser

has certain fiduciary responsibilities to the Partnership and to the Limited Partners, a conflict of interest policy

specifically relating to the resolution of conflicts between the Partnership or the REIT Subsidiary, Terra Property Trust,

the REIT Manager and the Adviser and its affiliates does not exist.

The Adviser may effect client cross-transactions where the Adviser causes a transaction to be effected between

the Partnership and another account managed or advised by it or any of its affiliates when they believe such

transactions are appropriate and in accordance with applicable regulatory requirements. To the extent that a cross

transaction may be viewed as a principal transaction due to the ownership interest in the Partnership or such other

client by the Adviser or its affiliates, the Partnership will comply with the requirements of Section 206(3) of the

Advisers Act, including obtaining the requisite consent.

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No Independent Counsel

Our counsel and the Adviser’s and General Partner’s counsel in connection with this offering is the same, and it

is anticipated that such multiple representation will continue in the future. As a result, conflicts may arise in the future

and if those conflicts cannot be resolved or the consent of the respective parties obtained to the continuation to the

multiple representations after full disclosure of any such conflict, said counsel will withdraw from representing one

or more of the conflicting interests with respect to the specific matter involved. Each subscriber acknowledges and

agrees that counsel representing us, the Adviser, the General Partner, and their affiliates does not represent and shall

not be deemed under the applicable codes of professional responsibility to have represented or to be representing any

or all of our Limited Partners in any respect. Additionally, each Limited Partner consents to us hiring counsel that is

also counsel for the Adviser, the General Partner, and their other affiliates. Subscribers seeking legal advice should

retain their own counsel and conduct any due diligence they deem appropriate to verify the accuracy of the

representations or information set forth in this memorandum.

Representation in Tax Audit Proceedings

The General Partner will be designated as our “partnership representative” and is authorized and directed by our

Limited Partnership Agreement to represent us and our Limited Partners, at our expense, in connection with all

examinations of our affairs by federal tax authorities, including any resulting administrative or judicial proceedings.

Those proceedings may involve or affect other programs for which the General Partner or its affiliates act as manager.

In those situations, the positions taken by the General Partner with respect to us may have differing effects on us and

the other programs. Any decisions made by the General Partner with respect to those matters will be made in a manner

consistent with its duties to us and to our Limited Partners.

Other Conflicts of Interest

We will be subject to conflicts of interest arising out of our relationship with the Adviser and its affiliates,

including the General Partner. In the future, we may enter into additional transactions with Terra Capital Partners or

its affiliates. In particular, we may invest in, or acquire, certain of our investments through joint ventures with Terra

Capital Partners or its affiliates or purchase assets from, sell assets to or arrange financing from or provide financing

to its other vehicles. Any such transactions will require approval of the General Partner.

There can be no assurance that any procedural protections will be sufficient to assure that these transactions will

be made on terms that will be at least as favorable to us as those that would have been obtained in an arm’s-length

transaction.

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PLAN OF DISTRIBUTION

General

Subject to the terms and conditions set forth in this memorandum, we are offering aggregate subscriptions of

U.S. $50,000,000 (subject to increase at the sole discretion of the General Partner) to persons are not “United States

persons” as defined in Section 7701(a)(30) of the Code. Each investor must comply with the suitability requirements

of his or her country.

The Partnership has engaged IDB to serve as placement agent for the offering. Each Investor must commit to

subscribe for at least U.S. $100,000, unless waived in the General Partner’s sole discretion, all of which will be due

and payable upon acceptance of such investor’s commitment, unless such minimum purchase requirement is

specifically waived by our General Partner. The Interests may not be withdrawn by the investors. We intend to continue

to the offering until the earlier of (i) December 31, 2019, (ii) the date that all of the offered Interests have been sold,

and (iii) such earlier date as the General Partner shall determine, If the offering is not terminated by December 31,

2019, the General Partner may extend the offering period for up to two six month periods in its sole discretion.

Following the termination offering termination date, the General Partner may, from time to time in its sole discretion,

cause the Partnership to accept additional subscriptions, in cash or in-kind, from the General Partner, its affiliates or

entities that are sponsored by the foregoing.

Qualifications of Purchasers

An investment in the Partnership involves a high degree of risk and is suitable only for investors that have no

need for liquidity in their investments. Accordingly, we intend to limit this offering only to persons who are not “United

States persons” as defined in Section 7701(a)(30) of the Code. Each investor will need to comply with the suitability

requirements of his or her country. The Interests may not be withdrawn by the investors. Each subscriber must

represent that they meet the investor suitability requirements described under the section entitled “Who May Invest.”

A full description of the representations to be made by prospective investors can be found in our subscription

agreement. Each subscriber also may be required to provide current financial and other information to us to enable us

to determine whether such subscriber is qualified to invest in the Partnership.

Sale of the Interests

Each Limited Partner must commit to subscribe for at least U.S. $100,000, unless waived in the General Partner’s

sole discretion, all of which will be due and payable upon acceptance of such investor’s subscription commitment.

The Interests may not be withdrawn by investors. There is no assurance that the Partnership will be fully subscribed.

The General Partner reserves the right to refuse to reject subscriptions of any person and may terminate this offering

and stop accepting subscriptions at any time and for any reason.

Escrow Deposit

Subscription proceeds will be held in the Partnership escrow account with the Escrow Agent until the earlier of

(i) the sale of the minimum offering of U.S. $1,000,000 in Interests, (ii) August 31, 2019 and (iii) such earlier date as

the General Partner shall determine. The Escrow Agent will release the funds to us only after we have sold

U.S. $1,000,000 in this offering. If we have not sold the minimum offering of U.S. $1,000,000 on or before August

31, 2019, all escrow funds will be returned to subscribers, without interest. We will not receive any fees or expenses

out of any funds returned to investors, and neither IDB nor any other placement agents we may engage will receive

any fees related to such returned funds.

Marketing of Interests

We will pay aggregate selling commissions to IDB and any other placement agents we may engage of up to 5.0%

of the gross proceeds from sale of Interests, payable as follows: (i) up to 2.0% of the gross proceeds payable at the

time of such sale, plus (ii) up to 1.0% of the gross proceeds payable for each of the three years thereafter on the

anniversary of the offering termination date; provided, however, that aggregate selling commissions payable shall not

exceed 5.0% of the gross proceeds of subscriptions. The selling commissions may be waived or reduced for certain

categories of purchasers. However, to the extent required by applicable law, no selling commission or any other

61

compensation will be paid in connection with Interests purchased in the offering by an investor who has engaged the

services of an individual compensated on a fee-for-service basis and prohibited from receiving such selling

commission or other compensation under applicable securities laws.

Sales Materials

In addition to this memorandum, we may make use of brochures, pamphlets and other sales literature describing

certain aspects of our business and this offering. The General Partner and its affiliates may also respond to specific

questions from IDB and any other placement agents we may engage, as well as prospective investors. Information

relating to this offering may be made available to IDB and any other placement agents we may engage for internal

use. However, this offering is made only by means of this memorandum and the documents provided herewith. The

information in the supplemental sales material does not purport to be complete and should not be considered a part of

this memorandum, or as incorporated in this memorandum by reference or as forming the basis of this offering.

Neither IDB nor any other placement agent we may engage, nor any salesman or other person has been authorized

to give any information or to make any representations other than those contained in this memorandum or in any sales

literature issued by us and referred to in this memorandum, and, if given or made, such information or representations

must not be relied upon.

Acceptance of Subscriptions

We will generally inform the subscriber within 30 days of receipt of a completed subscription agreement whether

its subscription has been accepted or rejected. If we reject a subscription, we will promptly return the investor’s funds,

without interest. We will not receive any fees or expenses out of any funds returned to investors, and neither IDB nor

any other placement agents we may engage will receive any fees related to such returned funds.

Limitation of Offering

The offer and sale of the Interests are made in reliance upon exemptions from the applicable securities laws of

each of Argentina, Bahamas, Belize, Brazil, British Virgin Islands, Canada, Chile, Colombia, Costa Rica, Israel,

Mexico, New Zealand, Panama, Peru, Portugal, St Kitts and Nevis, Thailand, United Kingdom, Uruguay, and

Venezuela, and any other jurisdictions as determined by the General Partner in its sole discretion. Accordingly,

distribution of this memorandum has been strictly limited to persons satisfying the suitability requirements described

herein, and this memorandum does not constitute an offer to sell or a solicitation of an offer to buy with respect to any

person not satisfying those requirements.

Offering Terms Subject to Modification

We reserve the unconditional right to cancel or modify the offering, to reject subscriptions in whole or in part, to

accept subscriptions for less than the minimum amount, and to waive conditions to the purchase of Interests.

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DESCRIPTION OF OUR INTERESTS

The Interests represent equity interests in the Partnership. Persons whose subscription for Interests is accepted by

the General Partner shall become Limited Partners of the Partnership and are entitled to vote on certain matters. We

will generally not issue certificates for the Interests.

The Interests may not be freely assigned and are subject to restrictions on transfer by law or by regulation in the

jurisdiction where they are sold, and may be subject to restrictions on transfer imposed by lenders. It is not anticipated

that a public trading market in the Interests will develop.

There are substantial restrictions on the transferability of the Interests imposed by applicable securities laws.

Lenders may also impose additional restrictions on the transferability of Interests. Before selling or transferring of

Interests, a Limited Partner must obtain the written consent of the General Partner, which will not be unreasonably

withheld, and comply with applicable requirements of applicable securities laws and regulations, including the

financial suitability requirements of such laws or regulations and any applicable anti-money laundering standards. See

“Anti-Money Laundering” below. It is highly unlikely that any market for the Interests will ever develop. You should

view an investment in the Interests solely as a long-term investment.

The governing documents of the Partnership will contain Ownership Restrictions that generally restrict the

beneficial and constructive ownership of the Interests in the Partnership by any person to 9.8% of such Interests. The

purpose of the Ownership Restrictions is to assist in protecting the REIT Subsidiary’s status as a REIT.

The Interests offered by this memorandum have not been registered under the applicable securities laws of each

of Argentina, Bahamas, Belize, Brazil, British Virgin Islands, Canada, Chile, Colombia, Costa Rica, Israel, Mexico,

New Zealand, Panama, Peru, Portugal, St Kitts and Nevis, Thailand, United Kingdom, Uruguay, and Venezuela, or

any applicable securities laws. The Interests may not be transferred or resold unless they are registered under the

applicable securities laws of each of Argentina, Bahamas, Belize, Brazil, British Virgin Islands, Canada, Chile,

Colombia, Costa Rica, Israel, Mexico, New Zealand, Panama, Peru, Portugal, St Kitts and Nevis, Thailand, United

Kingdom, Uruguay, and Venezuela, and any other jurisdictions as determined by the General Partner in its sole

discretion or unless exemptions from such registration and qualification are available.

Appropriate legends setting forth the restrictions on transfer of the Interests are set out in the subscription

agreement.

Conduent Securities Services, Inc., our Administrator, will act as our transfer agent and registrar and will perform

various Limited Partner services for us, including processing of subscription forms for us. The Administrator will

receive a fee from us in accordance with its customary fee schedule, and we will also reimburse the Administrator for

all reasonable out-of-pocket expenses, subject to the terms of a written agreement with the Administrator.

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VALUATION OF PARTNERSHIP ASSETS

Valuation of the Partnership’s assets will be carried out annually or more frequently as determined in the sole

discretion of the General Partner. The net asset value of the Partnership shall be equivalent to all the assets less all the

liabilities of the Partnership as at the relevant date of valuation.

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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a general summary of certain U.S. federal income tax consequences to non-U.S. Limited Partners

(as defined below) of an investment in the Partnership. It is not intended as a complete analysis of all possible tax

considerations in acquiring, holding and disposing of an Interest in the Partnership and, therefore, is not a substitute

for careful tax planning by each investor. No ruling from the Internal Revenue Service (the “IRS”), and no opinion

of legal counsel, has been or will be sought as to any matter discussed below.

This discussion of the federal income tax consequences of an investment in the Partnership is based upon existing

law, contained in the Code, the Treasury regulations promulgated under the Code (“Regulations”), administrative

rulings and other pronouncements, and court decisions as of the date hereof. The existing law, as currently interpreted,

is subject to change by either new legislation, or by differing interpretations of existing law in regulations,

administrative pronouncements or court decisions, any of which could, by retroactive application or otherwise,

adversely affect a Limited Partner’s investment in the Partnership.

For purposes of this discussion, a “U.S. Person” is (i) an individual who is a citizen of the United States or is

treated as a resident of the United States for U.S. federal income tax purposes, (ii) a corporation or other entity treated

as a corporation for U.S. federal income tax purposes that is created or organized in or under the laws of the United

States, any State thereof or the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal

income taxation regardless of its source, or (iv) a trust that (a) is subject to the supervision of a court within the United

States and the control of one or more U.S. Persons or (b) has a valid election in effect under applicable Treasury

Regulations to be treated as a U.S. Person. A “U.S. Limited Partner” is a Limited Partner that is a U.S. Person. A “Non-

U.S. Person” is an individual, corporation, estate or trust for U.S. federal income tax purposes and is not a U.S. Person,

and a “Non-U.S. Limited Partner” is a Limited Partner that is a Non-U.S. Person. If an interest is held by an entity

treated as a partnership for U.S. federal income tax purposes, the tax treatment of a partner thereof will generally

depend on the status of the partner and the activities of the partnership. Accordingly, if a prospective investor is treated

as a partnership for U.S. federal income tax purposes, the partnership and its partners should consult their tax advisers

regarding the U.S. tax consequences of an investment in the Partnership.

PROSPECTIVE INVESTORS MUST CONSULT WITH AND RELY SOLELY ON THE ADVICE OF AN

INDEPENDENT TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES (INCLUDING NON-

U.S. TAX CONSEQUENCES) OF AN INVESTMENT IN THE PARTNERSHIP BASED ON THEIR

PARTICULAR CIRCUMSTANCES.

Treatment as a Partnership.

The Partnership expects to be treated as a partnership for federal income tax purposes. The Partnership does not

expect to be treated as a publicly traded partnership (which, under certain circumstances, is taxable as a corporation).

Accordingly, subject to the discussion below, the Partnership does not expect to pay any federal income tax. Treatment

of the Partnership as a corporation for federal income tax purposes would materially reduce the anticipated benefits

of an investment in the Partnership. The balance of this discussion assumes that the Partnership will be treated as a

partnership for tax purposes and will not be taxed as a corporation.

Possible IRS Challenges; Tax Audits

Under the U.S. rules for audits of partnerships, the Partnership (rather than the Partners) will generally be required

to pay any imputed underpayments, including interest and penalties, resulting from an adjustment to the Partnership’s

items of income, gain, loss, deduction or credit, or an adjustment to the allocation of such items among the Partners.

Such imputed underpayments will be based on the highest individual or corporate income tax rate in effect for the

year being audited, unless the Partnership is able to establish that the underpayment is allocable to a Partner that would

have otherwise been taxed at a lower rate. In some cases, the Partnership may be required to pay an imputed

underpayment with respect to items of taxable income on which a Partner has previously paid tax. The Partnership

may treat any imputed underpayments as a deemed distribution to the Partner to which such imputed underpayment

is allocable As an alternative to paying the imputed underpayment, the Partnership may elect to cause each Partner to

take into account its share of any adjustment. However, in that case, the Partners would be subject to a higher rate of

interest with respect to any underpayment than would have applied if the Partnership were subject to the

underpayment.

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Under the new audit rules, the General Partner will be appointed the Partnership’s “partnership representative”

with the authority to determine the Partnership’s response to an audit and to make all related decisions and elections.

Any actions taken by the General Partner as the Partnership’s partnership representative would be binding on both the

Partnership and the Partners. The IRS will not be required to provide notice of any audit or proceeding to any other

Partner.

Treatment of REIT Subsidiary

The General Partner expects to cause the REIT Subsidiary to elect to be classified as corporations and to elect to

be taxed as a REIT. If the REIT Subsidiary elects to be taxed as a REIT but fails to qualify as a REIT or loses its

qualification as a REIT at any time, it will face materially adverse tax consequences that would substantially reduce

the Partnerships available for distribution to the Partnership, which would reduce the funds available for distribution

by the Partnership to the Limited Partners, for each of the years involved. Qualification as a REIT involves the

application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial

and administrative interpretations. The determination of various factual matters and circumstances not entirely within

the Partnership’s control may affect the REIT Subsidiary’s ability to qualify as a REIT.

Taxation of Limited Partners on Income or Losses of the Partnership Generally

No federal income tax is payable by an entity that is treated as a partnership for federal income tax purposes.

Instead, the income of the Partnership is treated as the income of the Partners, whether or not cash is distributed to the

Partners during the taxable year.

Taxation of Non-U.S. Limited Partners

In general, the tax treatment of a Non-U.S. Limited Partner will depend on whether the Partnership is deemed to

be engaged in a U.S. trade or business and whether the Partnership earns income that is effectively connected with

such trade or business (“ECI”). The Partnership generally expects to conduct its business in a manner that would not

cause Non-U.S. Limited Partners to be treated as engaged in a U.S. trade or business.

To the extent the Partnership is not engaged in a U.S. trade or business, U.S.-source dividends (including

dividends from the REIT Subsidiary) paid to the Partnership that are allocable to a Non-U.S. Limited Partner generally

will be subject to a 30% withholding tax unless a lower rate or exemption applies pursuant to an applicable income

tax treaty. U.S.-source interest paid to the Partnership that is allocable to a Non-U.S. Limited Partner will also be

subject to a 30% withholding tax unless such interest qualifies as “portfolio interest,” another statutory exception

applies, or a lower rate or exemption applies pursuant to an applicable income tax treaty. Portfolio interest generally

includes (with certain exceptions) interest paid on registered obligations with respect to which the beneficial owner

provides a statement that it is not a U.S. Person. The portfolio interest exemption is not available with respect to

interest paid by the REIT Subsidiary to a person that owns 10% or more of the voting stock of the REIT Subsidiary

and is subject to certain other limitations. The General Partner expects that interest paid by the REIT Subsidiary to the

Partnership will qualify as portfolio interest. A Non-U.S. Limited Partner who is resident for tax purposes in a country

with respect to which the United States has an income tax treaty may be eligible for a reduced rate of withholding on

such Limited Partner’s distributive share of U.S.-source interest and dividends. Limited Partners claiming the benefits

of a tax treaty or the portfolio interest exemption are required to provide certain documentation to the Partnership.

FIRPTA. Under certain provisions of the Code commonly referred to as FIRPTA, Non-U.S. Limited Partners

generally will be taxed on their allocable share of gain derived from the disposition of “United States real property

interests” (“USRPIs”) by the Partnership, as well as gain realized on the disposition of their interest in the Partnership

to the extent attributable to the Partnership’s USRPIs. Under FIRPTA, Non-U.S. Limited Partners treat gain or loss

from dispositions of USRPIs as ECI and, therefore, are required to report such income on U.S. federal income tax

returns and pay U.S. federal income taxes at regular U.S. rates on such gain or loss. Also, such gain may be subject to

a 30% branch profits tax in the case of non-U.S. corporations and special withholding rules.

Gain realized by a Non-U.S. Limited partner upon a disposition of its Interest in the Partnership will be treated as

ECI subject to U.S. federal income tax to the extent attributable to USRPIs held by the Partnership at the time of

disposition. In addition, if (i) 50% or more of the Partnership’s gross assets consist of USRPIs and (ii) 90% or more

of the Partnership’s gross assets consist of USRPIs and cash or cash equivalents, a purchaser will be required to

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withhold from the purchase price an amount equal to 15% of the amount realized by the Non-U.S. Limited Partner,

which will include the Non-U.S. Limited Partner’s share of the Partnership’s liabilities.

The Partnership does not expect that its investments, including stock of the REIT Subsidiary, will be USRPIs.

REIT Investments. Assuming that the REIT Subsidiary elects to be taxed as a REIT, dividends from the REIT

Subsidiary that are allocable to a Non-U.S. Limited Partner and that are not attributable to gains from the sale of

USRPIs by the REIT Subsidiary (or Terra Property Trust) will be subject to U.S. federal withholding tax at a 30% rate,

unless reduced by an applicable tax treaty. To the extent REIT dividends are attributable to excess inclusion income

with respect to REMIC residual interests or taxable mortgage pools held by the REIT Subsidiary, no reduced treaty

withholding rates would apply. Dividends that are attributable to gains from the sale of USRPIs by the REIT Subsidiary

(or Terra Property Trust) will be treated as ECI. The REIT Subsidiary is not expected to hold USRPIs.

In general, gains on sale of stock of a REIT may be taxable under FIRPTA if the REIT is a U.S. real property

holding corporation. The REIT Subsidiary should not be a U.S. real property holding corporation.

Dispositions of Interests. Gain realized on the disposition (including by redemption) by a Non-U.S. Limited

Partner of its interest in the Partnership will be treated as ECI to the extent such gain is attributable to assets of the

Partnership that generate ECI or USRPIs, including for this purpose gain that is attributable to stock of a U.S. real

property holding corporation, and may be subject to U.S. withholding tax under certain circumstances. As noted above,

the stock of the REIT Subsidiary is not expected to be a USRPI. Gain that is not attributable to assets that generate

ECI or USRPIs generally would not be subject to U.S. federal income tax, except in the case of a Non-U.S. Limited

Partner that is an individual and is present in the United States for 183 days or more in the taxable year of the sale and

has a tax home for U.S. federal income tax purposes in the United States.

FATCA

Under sections of the Code, commonly referred to as “FATCA,” withholding at a rate of 30% will be required on

payments of U.S.-source dividends, interest and certain other types of income to certain foreign financial institutions

(including investment funds), unless such institution enters into an agreement with the Secretary of the Treasury

(unless alternative procedures apply pursuant to an applicable intergovernmental agreement between the United States

and the relevant foreign government) to report, on an annual basis, information with respect to shares in, and accounts

maintained by, the institution to the extent such shares or accounts are held by certain U.S. persons or by certain non-

U.S. entities that are wholly or partially owned by U.S. persons. Similarly, U.S.-source dividends, interest and certain

other types of income paid to an investor that is a passive non-financial non-U.S. entity will be subject to withholding

at a rate of 30%, unless such entity either (i) certifies to us that such entity does not have any “substantial U.S. owners”

or (ii) provides certain information regarding the entity’s “substantial U.S. owners,” which we will in turn provide to

the Secretary of the Treasury. While withholding under FATCA also would have applied to payments of gross proceeds

from the sale or other disposition of stock or debt instruments of U.S. obligors after December 31, 2018, recently

proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers

generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

The Partnership may be required to withhold 30% of distributions to Limited Partners that are non-U.S.

partnerships or corporations unless those Limited Partners provide the Partnership with information regarding their

U.S. partners or shareholders, which information will be required to be disclosed to the United States Treasury.

PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISERS REGARDING FATCA

WITHHOLDING.

REIT Qualification and Taxation

As described above, the Partnership expects invest substantially all of its offering proceeds in the REIT Subsidiary,

and the REIT Subsidiary expects to elect to be taxed as a REIT. The sections of the Code and the corresponding

Treasury Regulations that relate to qualification and taxation as a REIT are highly technical and complex. The

following sets forth certain aspects of the sections of the Code that govern the U.S. federal income tax qualification

and taxation of a REIT. The rules described below apply to both the REIT Subsidiary and Terra Property Trust.

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If the REIT Subsidiary elects to be taxed as a REIT and qualifies for taxation as a REIT, it generally will not be

required to pay federal corporate income taxes on its net income that is currently distributed to its shareholders. This

treatment substantially eliminates the “double taxation” that ordinarily results from investment in a taxable C

corporation. Double taxation means taxation once at the corporate-level when income is earned and once again at the

shareholder level when the income is distributed. Entities that qualify for taxation as a REIT will, however, be required

to pay federal income tax as follows:

• A REIT will be required to pay tax at regular corporate rates on any undistributed REIT taxable income,

including undistributed net capital gains.

• If the REIT has (1) net income from the sale or other disposition of “foreclosure property” held primarily

for sale to customers in the ordinary course of business or (2) other non-qualifying income from

foreclosure property, it will be required to pay tax at the highest corporate rate on such income.

Foreclosure property generally is defined as property a REIT acquires through foreclosure or after a

default on a loan secured by the property or a lease of the property and for which an election is in effect.

• A REIT will be required to pay a 100% tax on any net income from prohibited transactions. Prohibited

transactions are, in general, sales or other taxable dispositions of property, other than foreclosure

property, held primarily for sale to customers in the ordinary course of business.

• If a REIT fails to satisfy the 75% gross income test or the 95% gross income test, as described below,

but has otherwise maintained its qualification as a REIT because certain other requirements are met, it

will be required to pay a tax equal to (1) the greater of (a) the amount by which 75% of its gross income

exceeds the amount qualifying under the 75% gross income test, and (b) the amount by which 95% of

its gross income exceeds the amount qualifying under the 95% gross income test, multiplied by (2) a

fraction intended to reflect the REIT’s profitability.

• If the REIT fails to satisfy any of the REIT asset tests (other than a de minimis failure of the 5% or 10%

asset tests), as described below, due to reasonable cause and not due to willful neglect, and it nonetheless

maintains its REIT qualification because of specified cure provisions, the REIT will be required to pay

a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income

generated by the non-qualifying assets that caused it to fail such test.

• If the REIT fails to satisfy any provision of the Code that would result in its failure to qualify as a REIT

(other than a violation of the REIT gross income tests or certain violations of the asset tests described

below) and the violation is due to reasonable cause and not due to willful neglect, the REIT may retain

its REIT qualification but will be required to pay a penalty of $50,000 for each such failure.

• The REIT will be required to pay a 4% excise tax to the extent it fails to distribute during each calendar

year at least the sum of (1) 85% of its REIT ordinary income for the year, (2) 95% of its REIT capital

gain net income for the year, and (3) any undistributed taxable income from prior periods.

• If the REIT acquires any asset from a corporation which is or has been a C corporation in a transaction

in which the basis of the asset in the REIT’s hands is less than the fair market value of the asset on the

date the asset is acquired, and the REIT subsequently recognizes gain on the disposition of the asset

during the five-year period beginning on the date on which it acquired the asset, then the REIT will be

required to pay tax at the highest regular corporate tax rate on this gain to the extent of the excess of (1)

the fair market value of the asset over (2) its adjusted basis in the asset, in each case determined as of

the date on which the REIT acquired the asset. The results described in this paragraph with respect to

the recognition of gain assume that the C corporation will refrain from making an election to receive

different treatment under existing Treasury Regulations on its tax return for the year in which the REIT

acquires an asset from the C corporation.

• The REIT will be required to pay a 100% tax on any “redetermined rents,” “redetermined deductions,”

“redetermined services income” or “excess interest,” generally as a result of transactions between the

REIT and a taxable REIT subsidiary that are not compensated at arm’s-length rates.

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Share Ownership Test. After the first taxable year of the REIT, shares of a REIT must be held by a minimum of

100 persons for at least 335 days in each taxable year or a proportional number of days in any short taxable year. In

addition, at all times during the second half of each taxable year after the first taxable year of the REIT, no more than

50% in value of the shares may be owned, directly or indirectly and by applying constructive ownership rules, by five

or fewer individuals, which for this purpose includes some tax-exempt entities. The Partnership will hold all of the

outstanding non-voting common share of the REIT Subsidiary. The General Partner will own the only voting interests

of the REIT Subsidiary. The REIT Subsidiary will issue non-voting preferred interests to investors in at least an

amount necessary to satisfy the 100 investor requirement.

The governing documents of the Partnership will contain provisions (the “Ownership Restrictions”) that generally

restrict the beneficial and constructive ownership of the Interests in the Partnership to protect the REIT Subsidiary’s

status as a REIT. If any person’s ownership of interests in the Partnership would cause the REIT to fail to qualify as

a REIT, Interests will be deemed to have been transferred to an unaffiliated trustee and held in trust for the benefit of

a charitable beneficiary. A transfer of an Interest or of any direct or indirect ownership interest in a Limited Partner

may cause such person’s Interests in the Partnership to be transferred to a charitable trust.

Each Limited Partner will be required to provide to the Partnership such information as the General Partner may

reasonably request to determine the effect of such person’s ownership of interests in the Partnership on the REIT

Subsidiary’s status as a REIT for U.S. federal income tax purposes.

Ownership of Interests in a Qualified REIT Subsidiary. A REIT may own certain wholly owned subsidiaries that

are intended to be treated as “qualified REIT subsidiaries” under the Code. A corporation will qualify as a qualified

REIT subsidiary if the REIT owns 100% of the corporation’s outstanding stock (directly and/or through disregarded

subsidiaries) and it does not elect with the corporation to treat it as a “taxable REIT subsidiary,” as described below.

A qualified REIT subsidiary is not treated as a separate corporation for federal income tax purposes, and all assets,

liabilities and items of income, gain, loss, deduction and credit of a qualified REIT subsidiary are treated as assets,

liabilities and items of income, gain, loss, deduction and credit (as the case may be) of the parent REIT for all purposes

under the Code, including the REIT qualification tests. Thus, in applying the federal income tax requirements

described in this summary, any corporation in which a REIT owns a 100% interest (other than a taxable REIT

subsidiary) is ignored, and all assets, liabilities, and items of income, gain, loss, deduction and credit of such

corporation are treated as the assets, liabilities and items of income, gain, loss, deduction, and credit of the REIT. A

qualified REIT subsidiary is not required to pay federal income tax, and a REIT’s ownership of the stock of a qualified

REIT subsidiary will not violate the restrictions on ownership of securities described below under “Asset Tests.”

Ownership of Interests in Taxable REIT Subsidiaries. A taxable REIT subsidiary is a corporation other than a

REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with the REIT to be treated

as a taxable REIT subsidiary. A taxable REIT subsidiary also includes any corporation, other than a REIT, with respect

to which a taxable REIT subsidiary owns securities possessing more than 35% of the total voting power or value.

Other than some activities relating to lodging and health care facilities, a taxable REIT subsidiary may generally

engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT.

A taxable REIT subsidiary is subject to federal income tax as a regular C corporation. In addition, a taxable REIT

subsidiary may be prevented from deducting interest on debt funded directly or indirectly by its parent REIT if certain

tests regarding the taxable REIT subsidiary’s debt to equity ratio and interest expense are not satisfied. A REIT’s

ownership of securities of its taxable REIT subsidiaries will not be subject to the 10% or 5% asset tests described

below.

Ownership of Interests in Partnerships. Where a REIT invests in a partnership, the REIT will be deemed to own

a proportionate share of the partnership’s assets based on its interest in partnership capital, subject to special rules

relating to the 10% asset test described below. This treatment also applies with respect to the ownership of interests in

limited liability companies that are treated as partnerships for tax purposes.

Asset Tests. At the close of each calendar quarter of its taxable year, a REIT must satisfy various tests relating to

the nature of its assets. First, at least 75% of the value of the REIT’s total assets must be represented by real estate

assets, cash, cash items and government securities. For purposes of this test, the term “real estate assets” generally

means real property (including interests in real property and interests in mortgages on real property), certain MBS,

shares (or transferable certificates of beneficial interest) in other REITs, debt instruments issued by “publicly offered

REITs,” and any stock or debt instrument attributable to the investment of the proceeds of a stock offering or a public

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offering of debt with a term of at least five years, but only for the one-year period beginning on the date the REIT

receives such proceeds.

Second, not more than 25% of the value of the REIT’s total assets may be represented by securities, other than

those securities includable in the 75% asset test.

Third, except for securities that are treated as real estate assets and securities of any “qualified REIT subsidiaries”

and “taxable REIT subsidiaries,” the value of any one issuer’s securities may not exceed 5% of the value of the REIT’s

total assets, and the REIT may not own more than 10% of the total vote or value of the outstanding securities of any

one issuer. Solely for purposes of the 10% value test, however, certain securities including, but not limited to “straight

debt” securities having specified characteristics, loans to an individual or an estate, obligations to pay rents from real

property and securities issued by a REIT, are disregarded as securities. In addition, solely for purposes of the 10%

value test, the determination of the REIT’s interest in the assets of a partnership or limited liability company in which

it owns an interest will be based on the REIT’s proportionate interest in any securities issued by the partnership or

limited liability company, excluding for this purpose certain securities described in the Code.

Fourth, not more than 20% of the value of the REIT’s total assets may be represented by the securities of one or

more taxable REIT subsidiaries.

Fifth, not more than 25% of the value of the REIT’s total assets may be represented by debt instruments issued

by “publicly offered REITs” that would not otherwise qualify as real estate assets.

The asset tests described above must be satisfied at the close of each calendar quarter of the REIT’s taxable year.

After initially meeting the asset tests at the close of any quarter, a REIT will not lose its status as a REIT for failure to

satisfy the asset tests at the end of a later quarter solely by reason of changes in asset values unless the REIT acquires

securities in the applicable issuer, increases its ownership of securities of such issuer (including as a result of increasing

its interest in other partnerships and limited liability companies which own such securities), or acquires other assets.

If the REIT fails to satisfy an asset test because it acquires securities or other property during a quarter, including as a

result of an increase in its interest in a subsidiary partnership, the REIT may cure this failure by disposing of sufficient

non-qualifying assets within 30 days after the close of that quarter.

Certain relief provisions may be available if the REIT discovers a failure to satisfy the asset tests described above

after the 30-day cure period. Under these provisions, the REIT will be deemed to have met the 5% and 10% asset tests

if the value of its non-qualifying assets (1) does not exceed the lesser of (a) 1% of the total value of its assets at the

end of the applicable quarter or (b) $10,000,000, and (2) the REIT disposes of the non-qualifying assets or otherwise

satisfy such asset tests within (a) six months after the last day of the quarter in which the failure to satisfy the asset

tests is discovered or (b) the period of time prescribed by Treasury Regulations to be issued. For violations of any of

the asset tests due to reasonable cause and not due to willful neglect and that are, in the case of the 5% and 10% asset

tests, in excess of the de minimis exception described above, the REIT may avoid disqualification as a REIT after the

30-day cure period by taking steps including (1) the disposition of sufficient non-qualifying assets, or the taking of

other actions, which allow the REIT to meet the asset tests within (a) six months after the last day of the quarter in

which the failure to satisfy the asset tests is discovered or (b) the period of time prescribed by Treasury Regulations

to be issued and (2) disclosing certain information to the IRS. In such case, the REIT will be required to pay a tax

equal to the greater of (a) $50,000 or (b) the highest corporate tax rate multiplied by the net income generated by the

non-qualifying assets.

Gross Income Tests. A REIT must satisfy two gross income requirements annually to maintain its qualification as

a REIT. First, in each taxable year, the REIT must derive directly or indirectly at least 75% of its gross income,

excluding gross income from prohibited transactions, certain hedging transactions, and certain foreign currency gains,

from (a) investments relating to real property or mortgages on real property, including “rents from real property” and,

in certain circumstances, interest, including interest with respect to certain MBS, or (b) some types of temporary

investments. Second, in each taxable year, the REIT must derive at least 95% of its gross income, excluding gross

income from prohibited transactions, certain hedging transactions, and certain foreign currency gains, from the real

property investments described above, dividends, interest and gain from the sale or disposition of stock or securities,

or from any combination of the foregoing.

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The term “interest,” as defined for purposes of both gross income tests, generally excludes any amount that is

based in whole or in part on the income or profits of any person; however, it generally includes the following: (i) an

amount that is received or accrued based on a fixed percentage or percentages of receipts or sales, and (ii) an amount

that is based on the income or profits of a debtor, as long as the debtor derives substantially all of its income from the

real property securing the debt by leasing substantially all of its interest in the property, and only to the extent that the

amounts received by the debtor would be qualifying “rents from real property” if received directly by a REIT.

Interest on debt secured by mortgages on real property or on interests in real property (including, for this purpose,

prepayment penalties, loan assumption fees and late payment charges that are not compensation for services) generally

is qualifying income for purposes of the 75% gross income test. However, if the highest principal amount of a loan

outstanding during a taxable year exceeds the fair market value of the real property securing the loan as of the date

the REIT agreed to originate or acquire the loan and the value of personal property securing the loan exceeds 15% of

the value of all property securing the loan, a portion of the interest income from such loan will not be qualifying

income for purposes of the 75% gross income test but will be qualifying income for purposes of the 95% gross income

test. The portion of the interest income that will not be qualifying income for purposes of the 75% gross income test

will be equal to the portion of the principal amount of the loan that is not secured by real property—that is, the amount

by which the loan exceeds the value of the real estate that is security for the loan.

A REIT may make or acquire mezzanine loans that are secured by equity interests in a pass-through entity that

directly or indirectly owns real property, rather than a direct mortgage on the real property. Revenue Procedure 2003-

65 provides a safe harbor pursuant to which a mezzanine loan, if it meets each of the requirements contained in the

Revenue Procedure, will be treated by the IRS as a real estate asset for purposes of the REIT asset tests (described

below), and interest derived from it will be treated as qualifying mortgage interest for purposes of the 75% gross

income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe

rules of substantive tax law. Any mezzanine loans that Terra Property Trust makes or acquires may not meet all of the

requirements for reliance on this safe harbor. Hence, there can be no assurance that the IRS will not challenge the

qualification of such assets as real estate assets for purposes of the REIT asset tests (described below) or the interest

generated by these loans as qualifying income under the 75% gross income test.

Income from a “hedging transaction” entered into in the normal course of a REIT’s business primarily to manage

risk of (1) interest rate changes or fluctuations with respect to borrowings made or to be made by the REIT to acquire

or carry real estate assets, or (2) currency fluctuations with respect to an item of qualifying income under the 75% or

95% gross income test or to hedge an existing hedging position after a portion of the hedged indebtedness or property

has been disposed of, if clearly identified as a hedging transaction as specified in the Code, will not constitute gross

income and thus will be exempt from the 95% gross income test and from the 75% gross income test. To the extent

that a REIT does not properly identify such transactions as hedges, it hedges other risks or it hedges with other types

of financial instruments, the income from those transactions is not likely to be treated as qualifying income for

purposes of either gross income test.

If a REIT fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, the REIT may

nevertheless qualify as a REIT for the year if it is entitled to relief under certain provisions of the Code. A REIT

generally may make use of the relief provisions if following its identification of the failure to meet the 75% or 95%

gross income tests for any taxable year, the REIT files a schedule with the IRS setting forth each item of its gross

income for purposes of the 75% or 95% gross income tests for such taxable year in accordance with Treasury

Regulations to be issued, and the failure to meet these tests was due to reasonable cause and not due to willful neglect.

It is not possible, however, to state whether in all circumstances the REIT Subsidiary or Terra Property Trust

would be entitled to the benefit of these relief provisions. For example, if it fails to satisfy the gross income tests

because non-qualifying income that it intentionally accrues or receives exceeds the limits on non-qualifying income,

the IRS could conclude that its failure to satisfy the tests was not due to reasonable cause. If these relief provisions do

not apply to a particular set of circumstances, the REIT will not qualify as a REIT. Even if these relief provisions

apply, and it retains its status as a REIT, a tax would be imposed with respect to the REIT’s non-qualifying income.

Annual Distribution Requirements. To maintain its qualification as a REIT, a REIT is required to distribute

dividends, other than capital gain dividends, to its shareholders in an amount at least equal to the sum of:

• 90% of its “REIT taxable income,” and

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• 90% of its after-tax net income, if any, from foreclosure property, minus

• the excess of the sum of certain items of non-cash income over 5% of its “REIT taxable income.”

For these purposes, “REIT taxable income” is computed without regard to the dividends-paid deduction and net

capital gain. In addition, for purposes of this test, non-cash income means income attributable to leveled stepped rents,

original issue discount on purchase money debt, cancellation of indebtedness or a like-kind exchange that is later

determined to be taxable.

It is possible that the REIT Subsidiary, from time to time, may not have sufficient cash to meet the distribution

requirements due to timing differences between (1) the actual receipt of cash, including receipt of distributions from

its subsidiaries and (2) the inclusion of items in income by us for U.S. federal income tax purposes. For example, we

may acquire assets, including debt instruments requiring us to accrue OID or recognize market discount income that

generate taxable income in excess of economic income or in advance of the receipt of corresponding cash flow. In

addition, we may be required under the terms of certain indebtedness to use cash received from interest payments to

make principal payments on such indebtedness. Under the Tax Cuts and Jobs Act, a REIT may be required to take

certain amounts in income no later than the time such amounts are reflected on certain financial statements. The

application of this rule may require the accrual of income with respect to debt instruments or mortgage-backed

securities, such as original issue discount, earlier than would be the case under the general tax rules, although the

precise application of this rule is unclear at this time.

A REIT generally must pay, or be treated as paying, the distributions described above in the taxable year to which

they relate. At its election, a distribution will be treated as paid in a taxable year if it is declared before the REIT timely

files its tax return for such year and paid on or before the first regular dividend payment after such declaration, provided

such payment is made during the twelve-month period following the close of such year. These distributions generally

are taxable to the REIT’s shareholders, other than tax-exempt entities, in the year in which paid. This is so even though

these distributions relate to the prior year for purposes of the 90% distribution requirement. The amount distributed

must not be preferential — i.e., every shareholder of the class of stock to which a distribution is made must be treated

the same as every other shareholder of that class, and no class of stock may be treated other than according to its

dividend rights as a class. To the extent that a REIT does not distribute all of its net capital gain, or distribute at least

90%, but less than 100%, of its “REIT taxable income,” as adjusted, the REIT will be required to pay tax on the

undistributed amount at regular corporate tax rates.

Under some circumstances, a REIT may be able to rectify an inadvertent failure to meet the 90% distribution

requirements for a year by paying “deficiency dividends” to its shareholders in a later year, which may be included in

the REIT’s deduction for dividends paid for the earlier year. Thus, the REIT may be able to avoid being taxed on

amounts distributed as deficiency dividends, subject to the 4% excise tax described below. However, the REIT will be

required to pay interest to the IRS based upon the amount of any deduction claimed for deficiency dividends.

Furthermore, the REIT will be required to pay a 4% excise tax to the extent it fails to distribute during each

calendar year at least the sum of 85% of its REIT ordinary income for such year, 95% of its REIT capital gain net

income for the year and any undistributed taxable income from prior periods. Any ordinary income and net capital

gain on which this excise tax is imposed for any year is treated as an amount distributed during that year for purposes

of calculating such tax.

For purposes of the 90% distribution requirements and 4% excise tax described above, distributions declared

during the last three months of the taxable year, payable to shareholders of record on a specified date during such

period and paid during January of the following year, will be treated as paid by the REIT and received by its

shareholders on December 31 of the year in which they are declared.

Failure to Qualify. If a REIT fails to qualify for taxation as a REIT in any taxable year and relief provisions did

not apply, it would be subject to tax on its taxable income at regular corporate rates. Distributions by the REIT in any

year in which the REIT fails to qualify as a REIT would not be deductible by the REIT, nor generally would

distributions be required to be made by the REIT under the Code. Unless entitled to relief under specific statutory

provisions, a REIT also would be disqualified from reelecting taxation as a REIT for the four taxable years following

the year during which REIT qualification was lost.

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Possible Legislative or Other Actions Affecting Tax Aspects

The present U.S. federal income tax treatment of an investment in the Partnership may be modified by legislative,

judicial or administrative action at any time, and any such action may affect the treatment of such investment. The

U.S. federal income tax rules are constantly under review by persons involved in the legislative process and by the

IRS and U.S. Treasury Department, resulting from time to time in the adoption of new Treasury Regulations or changes

to existing regulations, revised interpretations of established concepts, as well as statutory changes. Any changes in

the U.S. federal tax laws or interpretations thereof could adversely affect the tax treatment of an investment in the

Partnership.

* * *

LIMITED PARTNERS MUST CONSULT THEIR OWN ADVISERS REGARDING THE POSSIBLE

APPLICABILITY OF NON-US TAXES IN THE JURISDICTIONS IN WHICH SUCH LIMITED PARTNER

IS TAX RESIDENT OR OTHERWISE MAINTAINS A TAXABLE PRESENCE TO AN INVESTMENT IN

THE PARTNERSHIP. THE FOREGOING SUMMARY IS NOT INTENDED AS A SUBSTITUTE FOR

PROFESSIONAL TAX ADVICE, NOR DOES IT PURPORT TO BE A COMPLETE DISCUSSION OF ALL

TAX CONSEQUENCES THAT COULD APPLY TO THIS INVESTMENT.

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CAYMAN ISLANDS TAX CONSIDERATIONS

The following is a summary of certain Cayman Islands tax consequences to persons who purchase partnership

interests in the partnership. The discussion is based upon applicable law of the Cayman Islands and on the advice of

Walkers, Cayman Islands counsel. The discussion does not address all of the tax consequences that may be relevant

to a particular partner. Prospective investors must consult their own tax advisers as to the Cayman Islands tax

consequences of acquiring, holding and disposing of partnership interests, as well as the effects of tax laws of the

jurisdictions of which they are citizens, residents or domiciliaries or in which they conduct business.

Taxation of the Partnership

There is, at present, no direct taxation in the Cayman Islands and interest, distributions and gains payable to the

Partnership will be received free of all Cayman Islands taxes. The Partnership is registered as an "exempted limited

partnership" pursuant to the Exempted Limited Partnership Law (as amended) (the "ELP Law"). The Partnership has

applied for, and expects to receive an undertaking from the Government of the Cayman Islands to the effect that, for

a period of 50 years from the date of the undertaking, no law that thereafter is enacted in the Cayman Islands imposing

any tax to be levied on profits or income or gains or appreciations, shall apply to the Partnership, or to any partner

thereof, in respect of the operations or assets of the Partnership or the partnership interest of a partner therein.

AEOI means one or more of the following, as the context requires:

1. sections 1471 to 1474 of the US Internal Revenue Code of 1986 and any associated legislation, regulations

or guidance, commonly referred to as the US Foreign Account Tax Compliance Act ("FATCA"), the

Common Reporting Standard ("CRS") issued by the Organisation for Economic Cooperation and

Development, or similar legislation, regulations or guidance enacted in any other jurisdiction which seeks

to implement equivalent tax reporting and/or withholding tax regimes;

2. any intergovernmental agreement, treaty or any other arrangement between the Cayman Islands and the US

or any other jurisdiction (including between any government bodies in each relevant jurisdiction), entered

into to facilitate, implement, comply with or supplement the legislation, regulations or guidance described

in paragraph (1); and

3. any legislation, regulations or guidance implemented in the Cayman Islands to give effect to the matters

outlined in the preceding paragraphs.

On November 29, 2013, the Cayman Islands government entered into an inter-governmental agreement with

the US (the "US IGA") in connection with the implementation of FATCA. The US IGA is intended to result in

the automatic exchange of tax information under FATCA. The two governments have also signed a Tax

Information Exchange Agreement which outlines the legal channels through which tax information will

automatically be exchanged.

On July 4, 2014, the Cayman Islands government issued the Tax Information Authority (International Tax

Compliance) (United States of America) Regulations (as amended) (the "US FATCA Regulations") to accompany the

Tax Information Authority Law (as amended) (the "TIA Law"). The US FATCA Regulations implement the provisions

of the US IGA. The US FATCA Regulations provide for the identification of and reporting on certain direct and

indirect US investors who are US citizens, and impact the Partnership and its investors.

Investors in the Partnership will be required to provide identifying information to the Partnership in order for the

Partnership to correctly classify the investor for the purposes of US FATCA, and should note that in the event an

investor does not supply such information on request, such investor may be classified as a 'US Reportable Account'

and information pertaining to such investor (and its holding in the Partnership) may be passed to the Cayman Islands

Tax Information Authority or its delegate (the "TIA"), who may then provide it to the United States Internal Revenue

Service (the "IRS"). Each investor should also note that any information provided to the Partnership which identifies

its direct or indirect ownership of an interest in the Partnership may be reported to the TIA and/or the IRS.

On 29 October 2014, the Cayman Islands along with 50 other jurisdictions signed a Multilateral Competent

Authority Agreement to demonstrate its commitment to implement the CRS. Local regulations, which require due

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diligence to be undertaken on new and pre-existing accounts, were enacted on 16 October 2015 and 19 December

2016 with reporting on such accounts commencing during 2017. More than 100 countries have since agreed to

implement the CRS, which imposes similar reporting and other obligations as the US IGA with respect to investors

who are tax resident in other signatory jurisdictions. The Partnership will be required to report to the TIA on an annual

basis, with account information being disseminated by the TIA to tax authorities around the globe. The Cayman

Islands government may also enter into additional agreements with other countries in the future, and additional

countries may adopt CRS, which will likely further increase the reporting and/or withholding obligations of the

Partnership.

Each investor acknowledges that the Partnership may take such action as it considers necessary in relation

to such investor's holding or redemption proceeds to ensure that any withholding tax payable by the Partnership,

and any related costs, interest, penalties and other losses and liabilities suffered by the Partnership or any other

investor, or any agent, delegate, employee, director, officer, manager, member or affiliate of any of the foregoing

persons pursuant to AEOI, arising from such investor's failure to provide the requested information to the

Partnership, is economically borne by such investor.

Consequences for Investors as a result of AEOI

The Partnership may take such action as it considers necessary in relation to an investor's holding or redemption

proceeds, as a result of relevant legislation and regulations, including but not limited to, AEOI. Such actions may

include, but are not limited to the following:

1. The disclosure by the Partnership or such other service provider or delegate of the Partnership, of certain

information relating to an investor to the TIA or equivalent authority and any other foreign government

body as required by AEOI. Such information may include, without limitation, confidential information

such as financial information concerning an investor's investment in the Partnership, and any information

relating to any shareholders, principals, partners, beneficial owners (direct or indirect) or controlling

persons (direct or indirect) of such investor.

The Partnership may compulsorily redeem any partnership interests held by an investor in accordance with the

terms of this memorandum and may deduct relevant amounts from a recalcitrant investor so that any withholding tax

payable by the Partnership or any related costs, debts, expenses, obligations or liabilities (whether internal or external

to the Partnership) are recovered from such investor(s) whose action or inaction (directly or indirectly) gave rise or

contributed to such taxes, costs or liabilities. Failure by an investor to assist the Partnership in meeting its obligations

pursuant to AEOI may therefore result in pecuniary loss to such investor.

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RESTRICTIONS ON TRANSFERABILITY

Applicable securities laws may impose substantial restrictions on the transferability of Interests. Before selling or

transferring any Interests, a Limited Partner must obtain the written consent of our General Partner, which will not be

unreasonably withheld, and comply with applicable requirements of applicable securities laws and regulations,

including the financial suitability requirements of such laws or regulations and any applicable anti-money laundering

standards. See “Anti-Money Laundering” below. It is highly unlikely that any market for Interests will develop and

prospective investors should view the Interests solely as a long-term investment.

An assignee of Interests may not become a substitute Limited Partner without meeting certain conditions and

without consent to such substitution by the General Partner, which will not be unreasonably withheld. If an assignee

is not admitted to our Partnership as a substitute Limited Partner, such assignee will have no right to vote on

Partnership matters, will have no right to information relating to our business and will have no right to participate in

the management of our business and affairs. Such assignee is only entitled to receive the share of profits and

distributions, and return of contributions, to which a Limited Partner would otherwise be entitled.

The Interests offered by this memorandum have not been registered under the applicable securities laws of each

of Argentina, Bahamas, Belize, Brazil, British Virgin Islands, Canada, Chile, Colombia, Costa Rica, Israel, Mexico,

New Zealand, Panama, Peru, Portugal, St Kitts and Nevis, Thailand, United Kingdom, Uruguay, and Venezuela, nor

any other jurisdictions. The Interests may not be resold unless they are registered under of the applicable securities

laws of each of Argentina, Bahamas, Belize, Brazil, British Virgin Islands, Canada, Chile, Colombia, Costa Rica,

Israel, Mexico, New Zealand, Panama, Peru, Portugal, St Kitts and Nevis, Thailand, United Kingdom, Uruguay, and

Venezuela, and any other jurisdictions as approved by the General Partner in its sole discretion or unless exemptions

from such registration and qualification are available.

MUTUAL FUNDS LAW

The Partnership “is not required to register or be regulated as a mutual fund” under the Mutual Funds Law (as

amended) of the Cayman Islands. Neither the Cayman Islands Monetary Authority nor any other governmental

authority in the Cayman Islands has passed judgment upon or approved the terms or merits of this document. There

is no investment compensation scheme available to investors in the Cayman Islands.

CAYMAN ISLANDS EXEMPTED LIMITED PARTNERSHIPS

The Partnership is to be constituted as a Cayman Islands exempted limited partnership under the ELP Law. A

Cayman Islands exempted limited partnership is constituted by the signing of the relevant partnership agreement and

its registration with the Registrar of Exempted Limited Partnerships in the Cayman Islands.

Notwithstanding registration, an exempted limited partnership is not a separate legal person distinct from its

partners. Under Cayman Islands law, any rights or property of every description of the exempted limited partnership,

including all choses in action and any right to make capital calls and receive the proceeds thereof that is conveyed to

or vested in or held on behalf of any one or more of the general partners or which is conveyed into or vested in the

name of the exempted limited partnership shall be held or deemed to be held by the general partner and if more than

one then by the general partners jointly, upon trust as an asset of the exempted limited partnership in accordance with

the terms of the partnership agreement. Similarly, any debt or obligation incurred by a general partner in the conduct

of the business of an exempted limited partnership shall be a debt or obligation of the exempted limited partnership.

Registration under the ELP Law entails that the partnership becomes subject to, and the limited partners therein are

afforded the limited liability and other benefits of, the ELP Law.

The business of an exempted limited partnership will be conducted by its general partner(s) who will be liable for

all debts and obligations of the exempted limited partnership to the extent the partnership’s assets are inadequate. As

a general matter, a limited partner of an exempted limited partnership will not be liable for the debts and obligations

of the exempted limited partnership save (i) as expressed in the partnership agreement or as otherwise agreed, (ii) if

such limited partner becomes involved in the conduct of the partnership’s business and holds himself out as a general

partner to third parties or (iii) if such limited partner is obliged pursuant to section 34 of the ELP Law to return a

distribution made to it where the exempted limited partnership is insolvent and the limited partner has actual

knowledge of the insolvency.

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ANTI-MONEY LAUNDERING

Cayman Islands

As part of the Partnership’s responsibility for the prevention of money laundering, the Partnership (including its

affiliates, subsidiaries or associates) will require a detailed verification of the applicant’s identity and the source of

payment. Depending on the circumstances of each application, a detailed verification might not be required where:

1. the applicant is a relevant financial business required to comply with the Anti-Money Laundering

Regulations, (as amended ; or is a majority-owned subsidiary of such a business; or

2. the applicant is acting in the course of a business in relation to which a regulatory authority exercises

regulatory functions and which is in a country listed by the Cayman Islands Anti-Money Laundering

Steering Committee (“Equivalent Jurisdiction”) or is a majority-owned subsidiary of such an applicant; or

3. the applicant is a central or local government organization, statutory body or agency of government in the

Cayman Islands or an Equivalent Jurisdiction; or

4. the applicant is a company that is listed on a recognized stock exchange and subject to disclosure

requirements which impose requirements to ensure adequate transparency of beneficial ownership, or is a

majority-owned subsidiary of such a company; or

5. the applicant is a pension fund for a professional association, trade union or is acting on behalf of

employees of an entity referred to in sub-paragraphs (1) to (4); or

6. the application is made through an intermediary which falls within one of sub-paragraphs (1) to (5). In this

situation the Partnership may rely on a written assurance from the intermediary which confirms (i) that the

requisite identification and verification procedures on the applicant for business and its beneficial owners

have been carried out; (ii) the nature and intended purpose of the business relationship; (iii) that the

intermediary has identified the source of funds of the applicant for business; and (iv) that the intermediary

shall make available copies of any identification and verification data or information and relevant

documents.

Alternatively, if the subscription payment is remitted from an account (or joint account) held in the applicant’s

name at a bank in the Cayman Islands or a bank regulated in an Equivalent Jurisdiction, a detailed verification might

not be required at the time of subscription. In this situation the Partnership may require evidence identifying the branch

or office of the bank from which the monies have been transferred, verify that the account is in the name of the

applicant and retain a written record of such details. However, a detailed verification will need to be carried out prior

to any redemption.

The Partnership reserves the right to request such information as is necessary to verify the identity of an applicant.

In the event of delay or failure by the applicant to produce any information required for verification purposes, will

refuse to accept the application and the subscription monies relating thereto.

If any person who is resident in the Cayman Islands has a suspicion that a payment to the Partnership (by way of

subscription or otherwise) contains the proceeds of criminal conduct that person is required to report such suspicion

pursuant to the Proceeds of Crime Law (as amended).

By subscribing, applicants consent to the disclosure by the Partnership of any information about them to

regulators and others upon request in connection with money laundering and similar matters both in the Cayman

Islands and in other jurisdictions.

Other Jurisdictions

The Partnership will comply with applicable U.S. anti-money laundering regulations. In addition, many

jurisdictions are in the process of changing or creating anti-money laundering, embargo and trade sanctions, or similar

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laws, regulations, requirements (whether or not with force of law) or regulatory policies and many financial

intermediaries are in the process of changing or creating responsive disclosure and compliance policies (collectively

“Requirements”) and the Partnership could be requested or required to obtain certain assurances from applicants

subscribing for partnership interests, disclose information pertaining to them to governmental, regulatory or other

authorities or to financial intermediaries or engage in due diligence or take other related actions in the future. It is the

Partnership’s policy to comply with Requirements to which it is or may become subject to and to interpret them

broadly in favor of disclosure. Each applicant will be required to agree in the Subscription Agreement, and will be

deemed to have agreed by reason of owning any Partnership interests, that it will provide additional information or

take such other actions as may be necessary or advisable for the Partnership (in the sole judgment of the Partnership)

to comply with any Requirements, related legal process or appropriate requests (whether formal or informal) or

otherwise. Each applicant by executing the Subscription Agreement consents, and by owning partnership interests is

deemed to have consented, to disclosure by the Partnership and its agents to relevant third parties of information

pertaining to it in respect of Requirements or information requests related thereto. Failure to honor any such request

may result in redemption by the Partnership or a forced sale to another investor of such applicant’s partnership

interests.

LITIGATION

None of we, the General Partner, the Adviser, or any of their affiliates is currently party to any material litigation,

nor to our knowledge is any litigation threatened against any of us, any of its management or any affiliate, which may

materially affect our operations or projected goals.

Subscribers seeking legal advice should retain their own counsel and conduct any due diligence they deem

appropriate to verify the accuracy of the representations or information set forth in this memorandum.

COUNSEL

Alston & Bird LLP serves as counsel to the Partnership and the General Partner. Alston & Bird LLP will not be

representing investors in the Partnership. Walkers serves as counsel to the Partnership and the General Partner as to

matters of Cayman Islands law. Walkers will not be representing investors in the Partnership.

REPORTS TO LIMITED PARTNERS

Limited Partners will be entitled to receive from us:

• an audited year-end balance sheet, income statement and a statement of changes in financial position

(all prepared in accordance with U.S. generally accepted accounting principles (“GAAP”)), as soon

as such statements become available, which is expected to be 90 days after the end of each fiscal

year;

• unaudited quarterly statements regarding our performance, cash distribution information and other

material information (also prepared in accordance with GAAP) as soon as such statements become

available, which is expected to be 45 days after the close of each of our fiscal quarters; and

• such other information as the General Partner may elect to distribute from time to time.

ADDITIONAL INFORMATION

Investors and their advisors are invited to review, at the General Partner’s offices, or at a mutually agreed upon

location at any reasonable hour and after reasonable prior notice, any materials reasonably available to the General

Partner and its management relating to our business, this offering, any information set forth in this memorandum or

any other matter deemed by the investor to be material to a decision to invest in the Partnership.

The General Partner will answer all inquiries from investors and their advisors concerning these matters and will

afford investors and their advisors the opportunities to obtain any additional information (to the extent the General

Partner possesses such information or can acquire it without unreasonable effort or expense) necessary to verify the

accuracy of the information set forth in this memorandum.

Documents

TERRA INTERNATIONAL FUND 3, L.P. LIMITED PARTNERSHIP ... · CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM Dated May 30, 2019 This confidential private placement memorandum (the “memorandum”)