Terra Income Fund 6, Inc.

Transcription

1 Terra Income Fund 6, Inc. Maximum Offering of 80,000,000 Shares of Common Stock We are a specialty finance company that invests primarily in commercial real estate loans, preferred equity real estate investments and select commercial real estate-related debt securities of private companies. Our investment objectives are to pay attractive and stable cash distributions and to preserve, protect and return capital contributions to stockholders. We may also seek to realize growth in the value of our investments by timing their sale to maximize value. We are a non-diversified, closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, and intends to elect to be taxed as a regulated investment company under the Internal Revenue Code of 1986, as amended. We are externally managed by Terra Income Advisors, LLC, or Terra Income Advisors, a private investment firm that is registered as an investment adviser with the Securities and Exchange Commission, or SEC. Terra Income Advisors is responsible for making investment decisions for our portfolio. Through our affiliate, Terra Capital Markets, LLC, our dealer manager, we are offering up to 80,000,000 shares of our common stock in this offering at an initial offering price of $12.50 per share. The dealer manager is not required to sell any specific number or dollar amount of shares but will use its best efforts to sell the shares offered. The minimum permitted purchase is $5,000 of our common stock. Because this is our initial public offering, there has been no public market for, or historical valuation of, our common stock. Pursuant to an initial capitalization and subsequent private placement, Terra Capital Partners, LLC, or Terra Capital Partners, has purchased an aggregate of $175,000 of shares of our common stock at $9.00 per share, which price represented the previous initial public offering price of $10.00 per share, net of selling commissions and dealer manager fees as well as any broker-dealer fees. On February 25, 2015, our board of directors determined to change the initial offering price from $10.00 per share to $12.50 per share. As a result, on February 26, 2015, we effected a reverse stock split to account for the change in our offering price since the initial investment by Terra Capital Partners. On May 1, 2015, Terra Capital Partners purchased an additional $275,000 of shares of our common stock at $11.25 per share, representing the current offering price of $12.50 per share less selling commissions, broker-dealer fees and dealer manager fees. As a result, gross offering proceeds of $450,000 were immediately available to us as of May 1, We are offering our shares on a continuous basis at a current offering price of $12.50 per share; however, to the extent that our net asset value, or NAV, increases, we will sell at a price necessary to ensure shares are not sold at a price per share, after deducting selling commissions, broker-dealer fees, and dealer manager fees, that is below our NAV per share. Once we have raised gross offering proceeds in excess of $125 million, or sooner in the sole discretion of our board of directors, in the event of a material decline in our NAV per share, which we consider to be a 2.5% decrease below our then-current net offering price, we will reduce our offering price to establish a new net offering price not more than 2.5% above our NAV per share. Persons who tender subscriptions for shares of our common stock in this offering must submit subscriptions for a certain dollar amount, rather than a specified number of shares of common stock and, as a result, may receive fractional shares of our common stock. We intend to file post-effective amendments to the registration statement, of which this prospectus is a part, that are subject to SEC review, to allow us to continue this offering for at least two years from the date of this prospectus. You should not expect to be able to sell your shares regardless of how we perform. If you are able to sell your shares, you will likely receive less than your purchase price. We do not intend to list our shares on any national securities exchange during or for a significant time after the end of the offering, and we do not expect a secondary market in the shares to develop. We have implemented a share repurchase program, but only a limited number of shares are eligible for repurchase by us. In addition, any such repurchases will be at a 10% discount to the current offering price in effect on the date of repurchase. You should consider that you may not have access to the money you invest for an indefinite period of time. An investment in our shares is not suitable for you if you need access to the money you invest. See Share Repurchase Program, Suitability Standards and Liquidity Strategy. Our distributions may be funded from unlimited amounts of offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of capital available to us for investment. Distributions funded from a return of capital are not funded from our net profit. Any profits returned to stockholders through distributions will be distributed after payment of fees and expenses. Our distributions may be funded in significant part from the reimbursement of our expenses, including through the temporary waiver of investment advisory fees, which will be subject to repayment to Terra Income Advisors, LLC, our advisor. Significant portions of our distributions may not be based on our investment performance, and such waivers and reimbursements by our advisor may not continue in the future. The repayment of any amounts owed to our advisor will reduce the future distributions to which you would otherwise be entitled. We invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as junk, have predominantly speculative characteristics with respect to the issuer s capacity to pay interest and repay principal. They may also be difficult to value and illiquid. We are an emerging growth company under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our common stock involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. See Risk Factors beginning on page 35 to read about the risks you should consider before buying shares of our common stock, including the risk of leverage. An investment in our shares is not suitable for all investors. See Suitability Standards for information on the suitability standards that investors must meet in order to purchase shares of our common stock in this offering. We will continue to issue shares of our common stock on a continuous basis in this offering. As a result, your ownership in us is subject to dilution. See Risk Factors Risks Related to an Investment in Our Common Stock. This prospectus contains important information about us that a prospective investor should know before investing in our common stock. Please read this prospectus before investing and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the SEC. This information is available free of charge by contacting us at 805 Third Avenue, 8 th Floor, New York, New York, or by calling us collect at (855) or by visiting our website at In addition, the contact information provided above may be used by you to make stockholder inquiries. The SEC also maintains a website at that contains such information. Neither the SEC, the Attorney General of the State of New York nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. We have not been in the business described in this prospectus for at least three years; however, our affiliate, Terra Capital Partners, has been 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. Except as specifically required by the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder, the use of forecasts is prohibited and any representation to the contrary and any predictions, written or oral, as to the amount or certainty of any present or future cash benefit or tax consequence which may flow from an investment in our common stock is not permitted. Maximum Offering Per Share Amount Price to Public (1)... $12.50 $1,000,000,000 Sales Load (2)... $0.69 $ 55,000,000 Net Proceeds (Before Expenses) (3)... $11.81 $ 945,000,000 (1) Assumes all shares are sold at the current offering price of $12.50 per share, which is subject to adjustment based upon, among other things, our NAV per share. (2) Sales Load includes selling commissions of 3.0%, a dealer manager fee of 1.5% and a broker-dealer fee for marketing and expenses equal to up to 1.0% of the gross offering proceeds. Under certain circumstances as described in this prospectus, selling commissions, broker-dealer fees and the dealer manager fee may be reduced or waived. In addition to the sales load, our dealer manager will receive a distribution fee at an annual rate of 1.125% of gross offering proceeds, payable on the first, second, third and fourth anniversaries of the month of purchase. See Prospectus Summary Distribution Fee, Fees and Expenses and Plan of Distribution. (3) We estimate that we will incur approximately $15,000,000 of offering-related expenses if the maximum number of shares is sold. Because you will pay a sales load of up to 5.5% and offering expenses of up to 1.5%, for each $100 you invest in our shares and pay the full sales load, at least $93.00 but less than $94.50 of your investment will actually be used by us for investments. The amount available for investment by us will also be reduced by the distribution fee payable to the dealer manager. See Plan of Distribution Compensation of Dealer Manager and Selected Broker- Dealers. Based on the current public offering price of $12.50, you would have to experience a total return on your investment of approximately 7.53% in order to recover these expenses. See Estimated Use of Proceeds on page 61. The date of this prospectus is April 27, Terra Capital Markets, LLC

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3 ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the SEC using a continuous offering process. Periodically, as we make material investments or have other material developments, we will provide a prospectus supplement that may add, update or change information contained in this prospectus. We will endeavor to avoid interruptions in the continuous offering of up to $1,000,000,000 in shares of our common stock, including, to the extent permitted under the rules and regulations of the SEC, by filing an amendment to the registration statement with the SEC if our NAV declines more than 10% from our NAV as of the effective date of the registration statement. There can be no assurance, however, that our continuous offering will not be suspended while the SEC reviews such amendment, until the registration statement, as amended, is declared effective. Any statement that we make in this prospectus will be modified or superseded by any inconsistent or contradictory statement made by us in a subsequent prospectus supplement. The registration statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with the SEC and any prospectus supplement, together with additional information described below under Available Information. In this prospectus, we use the term day to refer to a calendar day, and we use the term business day to refer to any day other than Saturday, Sunday, a legal holiday or a day on which banks in New York City are authorized or required to close. You should rely only on the information contained in this prospectus. Neither we nor the dealer manager has authorized any other person to provide you with different information from that contained in this prospectus. The information contained in this prospectus is complete and accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or sale of our common stock. i

4 SUITABILITY STANDARDS Pursuant to applicable state securities laws, shares of common stock offered through this prospectus are suitable only as a long-term investment for persons of adequate financial means who have no need for liquidity in this investment. For the foreseeable future, there is not expected to be any public market for our shares, which means that it may be difficult for stockholders to sell shares. As a result, we have established suitability standards which require investors to have either (i) a net worth (not including home, furnishings, and personal automobiles) of at least $70,000 and an annual gross income of at least $70,000, or (ii) a net worth (not including home, furnishings and personal automobiles) of at least $250,000. Our suitability standards also require that a potential investor: (1) can reasonably benefit from an investment in us based on such investor s overall investment objectives and portfolio structuring; (2) is able to bear the economic risk of the investment based on the prospective stockholder s overall financial situation; and (3) has apparent understanding of (a) the fundamental risks of the investment, (b) the risk that such investor may lose his or her entire investment, (c) the lack of liquidity of the shares, (d) the background and qualifications of Terra Income Advisors and (e) the tax consequences of the investment. We will not sell shares to investors residing in the states listed below unless they meet the special suitability standards: Alabama In addition to the suitability standards above, this investment will only be sold to Alabama residents that represent they have a liquid net worth of at least ten times their investment in this program and its affiliates. California In addition to the suitability standards noted above, a California investor s total investment in us shall not exceed 10% of his or her net worth. Idaho Each investor who resides in the state of Idaho must have either (i) an annual income of $85,000 and a net worth of $85,000 or (ii) a liquid net worth of $300,000. Additionally, an Idaho investor s investment in us and any affiliated non-traded business development companies shall not exceed 10% of his or her liquid net worth. For these purposes, liquid net worth is the portion of an investor s net worth that is cash, cash equivalents and readily marketable securities. Iowa In addition to the suitability standards above, Iowa requires that each Iowa investor limit his or her investment in non-traded business development companies, including his or her investment in our common shares and in our affiliates, to a maximum of 10% of his or her liquid net worth. For these purposes, liquid net worth shall be defined as that portion of total net worth (total assets minus liabilities) that is comprised of cash, cash equivalents and readily marketable securities, as determined in conformity with generally acceptable accounting principles applicable in the United States. Kansas In addition to the suitability standards above, it is recommended by the Office of the Securities Commissioner that Kansas investors limit their aggregate investment in the securities of the issuer and other non-traded business development companies to not more than 10% of their liquid net worth. For these purposes, liquid net worth shall be defined as that portion of total net worth (total assets minus liabilities) that is comprised of cash, cash equivalents and readily marketable securities, as determined in conformity with generally acceptable accounting principles applicable in the United States. Kentucky In addition to the suitability standards above, no Kentucky investor shall invest, in the aggregate, more than 10% of his or her liquid net worth in our shares or in the shares of our non-publicly traded business development company affiliates. Maine In addition to the suitability standards above, the Maine Office of Securities recommends that an investor s aggregate investment in this offering and similar non-traded business development companies not exceed 10% of the investor s liquid net worth. For this purpose, liquid net worth is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities. Massachusetts In addition to the suitability standards above, Massachusetts investors may not invest over 10% of their liquid net worth in this offering and in other illiquid direct participation programs. New Jersey New Jersey investors must have either (a) a minimum liquid net worth of at least $100,000 and a minimum annual gross income of not less than $85,000 or (b) a minimum liquid net worth of $350,000. For these purposes, liquid net worth is defined as that portion of net worth (total assets exclusive ii

5 of home, home furnishings and automobiles, minus total liabilities) that consists of cash, cash equivalents and readily marketable securities. In addition, a New Jersey investor s investment in us, our affiliates and other non-publicly traded direct investment programs (including real estate investment trusts, business development programs, oil and gas programs, equipment leasing programs and commodity pools, but excluding unregistered, federally and state exempt private offerings) may not exceed ten percent (10%) of his or her liquid net worth. New Mexico In addition to the general suitability standards listed above, a New Mexico investor may not invest more than 10% of his or her liquid net worth in our common shares, in our affiliates and in other non-traded business development companies. Liquid net worth is defined as that portion of net worth which consists of cash, cash equivalents and readily marketable securities. North Dakota In addition to the suitability standards relating to net income and net worth, North Dakota investors must represent that they have a net worth of at least ten times their investment in us. Ohio In addition to the suitability standards above, the state of Ohio requires that each Ohio investor limit his or her investment in our shares of common stock, in our affiliates and in other non-traded business development companies to not more than 10% of his or her liquid net worth. Liquid net worth is that portion of an investor s net worth (total assets exclusive of primary residence, home furnishings and automobiles minus total liabilities) that is comprised of cash, cash equivalents and readily marketable securities. Oklahoma In addition to the suitability standards above, purchases of our common shares by Oklahoma investors should not exceed 10% of their net worth (not including home, home furnishings and automobiles). Oregon In addition to the suitability standards above, the state of Oregon requires that each Oregon investor limit his or her investment in us and our affiliates to a maximum of 10% of his or her net worth. Tennessee In addition to meeting the general suitability standards stated above, Tennessee investors may not invest more than ten percent (10%) of their liquid net worth (exclusive of home, home furnishings and automobiles) in this offering or any follow-on offering of this offering. In addition, it is recommended that a Tennessee investor s aggregate investment in this offering and in similar direct participation program investments not exceed 10% of his or her net worth (exclusive of home, home furnishings and automobiles). For additional information on the suitability standards that investors must meet in order to purchase shares of our common stock in this offering, see Suitability Standards. iii

6 TABLE OF CONTENTS ABOUT THIS PROSPECTUS... i SUITABILITY STANDARDS... ii PROSPECTUS SUMMARY FEES AND EXPENSES COMPENSATION OF THE DEALER MANAGER AND THE ADVISOR QUESTIONS AND ANSWERS ABOUT THIS OFFERING SELECTED FINANCIAL DATA RISK FACTORS SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ESTIMATED USE OF PROCEEDS DISTRIBUTIONS INVESTMENT OBJECTIVES AND STRATEGY DETERMINATION OF NET ASSET VALUE MANAGEMENT PORTFOLIO MANAGEMENT INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENT ADMINISTRATIVE SERVICES CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS DISTRIBUTION REINVESTMENT PLAN MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DESCRIPTION OF OUR SECURITIES CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS REGULATION PLAN OF DISTRIBUTION SUITABILITY STANDARDS LIQUIDITY STRATEGY SHARE REPURCHASE PROGRAM CUSTODIAN, TRANSFER AND DISTRIBUTION PAYING AGENT AND REGISTRAR BROKERAGE ALLOCATION AND OTHER PRACTICES LEGAL MATTERS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AVAILABLE INFORMATION PRIVACY NOTICE INDEX TO FINANCIAL STATEMENTS... F-1 APPENDIX A: FORM OF SUBSCRIPTION AGREEMENT... A-1 iv

7 PROSPECTUS SUMMARY This summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may want to consider. To understand this offering fully, you should read the entire prospectus carefully, including the section entitled Risk Factors, before making a decision to invest in our common stock. Unless otherwise noted, the terms we, us, our, and the Company refer to Terra Income Fund 6, Inc. In addition, the terms Terra Income Advisors and our advisor refer to Terra Income Advisors, LLC, Terra Capital Markets refers to Terra Capital Markets, LLC, and the term Terra Income Funds refers to Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, Terra Secured Income Fund 5, LLC and Terra Secured Income Fund 5 International. Terra Income Fund 6, Inc. We were formed on May 15, 2013 and commenced operations on June 24, 2015, the date on which we satisfied the minimum offering requirement in this offering. We are a non-diversified, closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. As such, we are required to comply with certain regulatory requirements. See Regulation. We are externally managed by Terra Income Advisors, LLC, or Terra Income Advisors, a private investment firm that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act. Terra Income Advisors is responsible for identifying, evaluating and negotiating the structure of our investments and making investment decisions on our behalf, according to asset allocation and other guidelines set by our board of directors. In addition, we intend to elect to be taxed for federal income tax purposes for our taxable year in which we commenced operations, and intend to qualify annually thereafter, as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. Investment Objectives and Strategy Our primary investment objectives are: to pay attractive and stable cash distributions; and to preserve, protect and return capital contributions to stockholders. We may also seek to realize growth in the value of our investments by timing their sale to maximize value. Our investment strategy is to use substantially all of the proceeds of this offering to originate and manage a diversified portfolio consisting of (1) commercial real estate loans to U.S. companies qualifying as eligible portfolio companies under the 1940 Act and (2) preferred equity real estate investments in U.S. companies qualifying as eligible portfolio companies under the 1940 Act. We may also purchase other select commercial real estate-related debt securities, such as commercial mortgage-backed securities, or CMBS, or collateralized debt obligations, or CDOs; provided, however, that we will select all investments after considering our ability to qualify to be taxed as a RIC. We will seek to structure, acquire and maintain a portfolio of investments that generate a stable income stream to enable us to pay attractive and consistent cash distributions to our stockholders. We intend to directly structure, underwrite and originate most of our investments, as this provides us with the best opportunity to invest in loans that satisfy our standards, establish a direct relationship with the borrower and optimize the terms of our investments; however, we may acquire existing loans from the originating lender should our advisor determine such an investment is in our best interest. We may hold our investments until their scheduled maturity dates or we may sell them if we are able to command favorable terms for their disposition. We believe that our investment strategy will allow us to pay attractive and stable cash distributions to our stockholders and to preserve, protect and return our stockholders capital contributions, consistent with our investment objectives. 1

8 Our advisor s management team has extensive experience in originating, acquiring, structuring, managing and disposing of real estate-related loans similar to the types of loans in which we intend to invest. In order to meet our investment objectives, we will generally seek to follow the following investment criteria: focus primarily on the origination of new loans; focus on loans backed by properties in the United States; invest primarily in fixed rate rather than floating rate loans, but we reserve the right to make debt investments that will bear interest at a floating rate; invest in loans expected to be repaid within one to five years; maximize current income; lend to creditworthy borrowers; lend on properties that are expected to generate sustainable cash flow; maximize diversification by property type, geographic location, tenancy and borrower; source off-market transactions; and hold investments until maturity unless, in our advisor s judgment, market conditions warrant earlier disposition. While we expect that the size of each of our future investments will generally range between $3 million and $20 million, our investments will ultimately be at the discretion of our advisor, subject to oversight by our board of directors. Prior to raising substantial capital, we may make smaller investments and invest a larger portion of our capital base in cash and cash items (including receivables) and U.S. government securities to enable us to acquire assets that meet our desired investment profile and to meet certain RIC qualification requirements under the Code. To enhance our returns, we intend to employ leverage as market conditions permit and at the discretion of our advisor, but in no event will leverage employed exceed 50% of the value of our assets, as required by the 1940 Act. See Risk Factors Risks Related to Debt Financing for a discussion of the risks inherent in employing leverage. About Terra Income Advisors Our advisor is a subsidiary of our affiliate, Terra Capital Partners, a New York-based real estate capital management firm that has been 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. See About Terra Capital Partners. Our advisor is registered as an investment adviser with the SEC under the Advisers Act and is led by the same personnel that form the investment and operations team of Terra Capital Partners. See Management, Risk Factors Risks Related to Terra Income Advisors and Its Affiliates and Certain Relationships and Related Party Transactions. In accordance with the investment advisory and administrative services agreement between us and our advisor, or the advisory agreement, the management of our investment portfolio is the responsibility of our advisor and its executive officers. The investment committee of our advisor will approve each new investment that we make. Our board of directors, including a majority of independent directors, oversees and monitors our investment performance and, beginning with the second anniversary of the date of the advisory agreement, our board of directors will annually review the compensation we pay to our advisor and its performance during the preceding 12 months to determine whether the compensation paid to our advisor is reasonable in relation to the nature and quality of the services performed, and whether the provisions of the advisory agreement are carried out. See Investment Advisory and Administrative Services Agreement. About Terra Capital Partners Terra Capital Partners, the parent company of our advisor, 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 approximately 300 properties of all major property types throughout the United States since it 2

9 was formed in 2001 and commenced operations in These investments have been made in 34 states and have been secured by approximately 15.8 million square feet of office properties, 3.4 million square feet of retail properties, 4.2 million square feet of industrial properties, 3,731 hotel rooms and 20,648 apartment units. The value of the properties underlying these investments was approximately $6.3 billion based on appraised values as of the closing dates. Terra Capital Partners and its affiliates have originated all the loans on approximately 300 properties with an approximate value of $5 billion held by its previous affiliated funds, which are described below in Terra Private Funds, and have suffered no monetary defaults or foreclosures on these loans. As of the date of this prospectus, Terra Capital Partners and its affiliates employed 33 persons. Terra Capital Partners is led by the chairman of our board of directors, Simon J. Mildé, and our chief executive officer, Bruce D. Batkin, and employs a team of highly experienced real estate, finance and securities professionals with an average of over 25 years experience in global real estate transactions. 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 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 Management Directors and Executive Officers 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 advisor to successfully execute our investment strategy. Terra Private Funds Through its affiliates, Terra Capital Partners has managed the operations of multiple private real estate investment funds, which we refer to collectively as the Terra private funds and each, a Terra private fund, which were formed to originate, acquire and manage 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. Terra Capital Partners was formed in 2001 and commenced operations in 2002 and acted as investment manager for the first Terra private fund in As a result, Terra Capital Partners has extensive experience in originating, acquiring and managing investments of the type we intend to make, in all types of real estate financial markets and all phases of the economic cycle. We intend to capitalize on the expertise that Terra Capital Partners has developed during economic expansions, peaks, contractions, troughs and recoveries. We will rely on the experience that its management has in determining when to enter and exit certain real estaterelated investments based on market and economic conditions and future economic prospects. For further discussion of the Terra private funds, see Management Terra Private Funds. Risk Factors An investment in our common stock involves a high degree of risk and may be considered speculative. You should carefully consider the information found in Risk Factors before deciding to invest in shares of our common stock. The following are some of the risks associated with an investment in our shares: We are a new company with a limited operating history and are subject to the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objectives. We have not identified specific future investments that we will make with the proceeds of this offering and you will not have the opportunity to evaluate our future investments prior to purchasing shares of our common stock. As a result, our offering may be considered a blind pool offering. Prior to raising substantial capital, we may be required to keep a significant portion of our offering proceeds in cash and cash items (including receivables) and U.S. government securities to enable us 3

10 to acquire assets that meet our desired investment profile and to meet certain RIC qualification requirements. As a result, until we have raised substantial capital, your return may be lower due to the lower rates available on cash and cash items and U.S. government securities. Because there is no public trading market for shares of our common stock and we are not obligated to effectuate a liquidity event by a specified date, you may not be able to sell your shares. We invest in securities that are rated below investment grade by rating agencies or that would likely be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as junk, have predominantly speculative characteristics with respect to the issuer s capacity to pay interest and repay principal. They may also be difficult to value and illiquid. We intend to qualify as a RIC for federal income tax purposes but may fail to do so. Such failure would subject us to federal income tax on our taxable income (which would not be reduced by dividends we distribute), which would have a material adverse effect on our financial performance. We may pay distributions from offering proceeds, borrowings, the sales of assets or expense support payments or fee waivers from our advisor that are subject to reimbursement, to the extent our cash flow from operations, net investment income or earnings are not sufficient to fund declared distributions. We have not established limits on the amount of funds we may use from net offering proceeds or borrowings to make distributions. Economic activity in the United States was adversely impacted by the global financial crisis of 2008 and has yet to fully recover. These conditions may make it more difficult for us to achieve our investment objectives. The downgrade of the U.S. credit rating and the economic crisis in Europe could negatively impact our business, financial condition and results of operations. An investment strategy focused primarily on privately held real estate companies presents certain challenges, including the lack of available information about these companies. A lack of liquidity in certain of our investments may adversely affect our business. Our advisor has not previously managed a publicly registered company, a BDC or a RIC and may not be able to successfully operate our business or achieve our investment objectives. There is a risk that investors in our common stock may not receive distributions or that our distributions will not grow over time. We may suspend or terminate our share repurchase program at any time. Our distribution proceeds may exceed our earnings, particularly during the period before we have substantially invested the net proceeds from our continuous public offering. Therefore, it is possible that a portion of the distributions that we make will represent a return of capital to you for tax purposes. Distributions funded from a return of capital are not funded from our net profit. Because we must distribute at least 90% of our investment company taxable income (generally, net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses) in order to satisfy the annual distribution requirement to qualify to be taxed as a RIC, we will be unable to use those funds to make new investments. As a result, we will likely need to continually raise cash or borrow to fund new investments that we would otherwise acquire using the taxable income that we are required to distribute. At times, the sources and terms of funding may not be available to us on acceptable terms, if at all. We are subject to financial market risks, including changes in interest rates, which may have a substantial negative impact on our investments. A significant portion of our portfolio is recorded at fair value as determined in good faith by our board of directors and, as a result, there is uncertainty as to the value of our portfolio investments. 4

11 We invest primarily in commercial real estate loans and other loans related to or secured by commercial real estate in the United States. The collateral securing these investments may decrease in value or lose substantial value over time, which may lead to a loss in principal. The potential for our advisor to earn incentive fees under the advisory agreement may create an incentive for it to recommend investments that are riskier or more speculative than would otherwise be in our best interests, and, since the base management fee is based on gross assets, our advisor may have an incentive to increase portfolio leverage in order to earn higher base management fees. This is a best efforts offering and if we are unable to raise substantial funds then we will be more limited in the number and type of investments we may make. Our advisor and its affiliates face conflicts of interest as a result of compensation arrangements, time constraints and competition for investments, which they will attempt to resolve in a fair and equitable manner, but which may result in actions that are not in our stockholders best interests. The purchase price at which you purchase shares will be determined at each semi-monthly closing date. As a result, such purchase price may be higher than the prior semi-monthly closing price per share, and therefore you may receive a smaller number of shares than if you had subscribed at the prior semi-monthly closing price. We expect to borrow funds to make future investments. As a result, we would be exposed to the risks of borrowing, which may be considered a speculative investment technique. Leverage increases the volatility of investments by magnifying the potential for gain and loss on amounts invested, therefore increasing the risks associated with investing in our securities. A stockholders interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us. Our board of directors may change our operating policies, objectives or strategies without prior notice or stockholder approval, the effects of which may be adverse. See Risk Factors beginning on page 35 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock. Market Opportunity General 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 turmoil in the U.S. mortgage market that commenced in 2008 has diminished the availability of credit for commercial real estate from traditional providers of capital to commercial real estate borrowers. Although credit availability has increased over the past several years, we believe that a more risk-averse credit culture, tighter underwriting standards, changes in the regulatory environment and the high number of existing loans on overleveraged properties, many of which were acquired at premium prices prior to the 2008 downturn, will continue to constrain the lending capacity of large commercial banks and traditional providers of capital. Many of these pre-2008 loans have ten-year terms, creating an impending wall of maturities that must be refinanced or repaid in the coming years. In the face of this constrained lending capacity, a large volume of commercial real estate loans originated at the market peak will mature over the next several years. The confluence of these two conditions reduced lending by traditional lenders and an increased volume of maturing loans requiring refinancing proceeds has created opportunities for alternative lenders such as our company. Those financial institutions still willing to provide capital may not provide sufficient proceeds to meet borrowers needs, and many loans that previously would have been provided by a single lender often will require multiple lenders. This provides us, as an alternative lender, with an immediate opportunity to augment loans provided by traditional lenders with subordinated debt and preferred equity often at lower property valuations, lower loan-to-value ratios and higher returns than prior to the economic crisis. We believe this opportunity will continue for the foreseeable future. 5

12 Reductions in the supply of traditional commercial real estate loans, along with the failures or retrenchment of many banks and financial institutions that historically satisfied much of the demand for debt financing, as well as current lending practices that are more conservative than those prevailing prior to the economic crisis (despite the recovery in real estate fundamentals), have created a compelling opportunity to originate attractively structured and priced commercial real estate financing. Mezzanine loans and preferred equity investments today are financing portions of the real estate capital structure previously funded by lower cost senior mortgage financing. Mezzanine loans generally take the form of a subordinated loan secured by a pledge of the ownership interests of an entity that owns commercial real estate, and generally finance the acquisition, refinancing, rehabilitation or construction of commercial real estate. These loans are subordinate to both first and subordinated mortgage loans but provide the potential for superior risk-adjusted returns. Mezzanine loans may be either short- or long-term and may be fixed or floating. We believe the opportunity to generate attractive risk-adjusted returns through investment in mezzanine loans and preferred equity investments as well as certain first mortgage loans and bridge loans will continue for the foreseeable future, given the prospect of impending mortgage maturities and relatively limited sources of mortgage financing. One of our competitive advantages relative to many existing real estate investment vehicles is our management team s sale of 100% of its investment management interests in June 2007, prior to the credit crisis. Thus, neither Terra Capital Partners nor any of its affiliates is burdened by a pre-credit crisis legacy portfolio of lower-return or problem assets. In comparison, management teams with a pre-credit crisis legacy portfolio are often distracted by asset management, workouts, foreclosures and litigation. We believe this competitive advantage, along with our management team s experience, track record, judgment and capabilities, will facilitate our ability to execute our investment strategy and benefit from the current market opportunities. Targeted Investments Our investment strategy is to use substantially all of the proceeds of this offering to originate and manage a diversified portfolio consisting of (1) commercial real estate loans to U.S. companies qualifying as eligible portfolio companies under the 1940 Act, including mezzanine loans, first and second lien mortgage loans, subordinated mortgage loans, bridge loans and other commercial real estate-related loans related to or secured by high quality commercial real estate in the United States and (2) preferred equity real estate investments in U.S. companies qualifying as eligible portfolio companies under the 1940 Act. We may also purchase select commercial real estate-related debt securities, such as CMBS or CDOs; provided, however, that we will select all investments after considering our ability to qualify to be taxed as a RIC. Commercial Real Estate-Related Loans We intend to originate and manage mezzanine loans, first and second lien mortgage loans, subordinated mortgage loans, bridge loans and other commercial real estate-related loans, including loans related to or secured by high quality commercial real estate in the United States, such as office buildings, warehouses, shopping centers, apartment properties and hotels. We expect to directly structure, underwrite and originate most of our investments. By originating loans directly, we will be able to structure and underwrite loans that satisfy our standards, establish a direct relationship with the borrower and optimize the terms of our investments. We will use conservative underwriting criteria, and our underwriting process will involve comprehensive financial, structural, operational and legal due diligence to assess the risks of investments so that we can optimize pricing and structuring. We expect that most of our loans will have maturities of five years or less, and we will limit those loans with maturities longer than five years to those that we believe are relatively liquid. Unlike the residential loan market, the commercial real estate-related loan market is not supported by governmental or government-sponsored agencies, making borrowers heavily dependent on banks or alternative providers of capitals such as us. As a result, we believe there will be sufficient demand for the capital we can provide to produce favorable risk-adjusted returns for our stockholders. Mezzanine Loans. When commercial banks or other alternative commercial real estate lenders provide capital for a senior loan, they, or borrowers directly, may seek a lender to provide an additional layer of financing known as a mezzanine loan. This loan is junior to the senior mortgage loan in terms of priority but may have other liens subordinate to it. Terra Capital Partners specializes in providing this type of financing to creditworthy borrowers and as a means of augmenting the senior commercial real estate loan provided by a 6

13 traditional commercial real estate lender. Terra Capital Partners is a preferred mezzanine lender to many traditional commercial real estate lenders because of its extensive real estate experience in the event of problems in the borrower s operations or the underlying real estate. We intend to originate or acquire mezzanine loans backed by high quality properties in the United States that have loan-to-value ratios generally ranging from 60% to 85% and which otherwise meet our investment criteria. We may own such mezzanine loans directly or we may hold a participation in a mezzanine loan or sub-participation in a mezzanine loan. We expect to invest in both senior and junior positions in a mezzanine loan. Preferred Equity Investments These are investments in preferred membership interests in entities that own commercial real estate and generally finance the acquisition, refinancing, rehabilitation or construction of commercial real estate. We may also participate with other entities in these investments through joint ventures, partnerships and other types of common ownership or participations, subject to the limitations imposed by the 1940 Act. Other Commercial Real Estate-Related Debt Securities We may also invest in commercial real estate-related debt securities such as CMBS and CDOs, as well as any other debt security that we believe will provide us with a favorable risk-adjusted return. CMBS are securities issued by a trust that evidence interests in, or are secured by, a single commercial mortgage loan or a partial or entire pool of commercial mortgage loans. CDOs are multiple class debt securities, or bonds, secured by pools of assets, such as CMBS or mezzanine loans. CDOs are typically issued in multiple tranches with varying risk/reward attributes in which some classes are subordinate to others in priority of payment. Both CMBS and CDOs are subject to all of the same risks as the underlying real estate assets. Characteristics of and Risks Related to Investments in Private Companies We intend to invest primarily in the debt and preferred equity of privately held real estate companies within the United States. Investments in private companies generally pose significantly greater risks than investments in public companies. First, private companies have reduced access to the capital markets, resulting in diminished capital resources and ability to withstand financial distress. As a result, these companies, which may present greater credit risk than public companies, may be unable to meet their obligations under their credit agreements or instruments. Second, the investments themselves may often be illiquid. The securities of many of the companies in which we intend to invest are not publicly traded or actively traded on the secondary market and are, instead, traded on a privately negotiated over-the-counter secondary market for institutional investors. In addition, such securities may be subject to legal and other restrictions on resale. As such, we may have difficulty exiting an investment promptly or at a desired price prior to maturity. These investments also may be difficult to value because little public information generally exists about private companies. We must therefore rely on the ability of our advisor to obtain adequate information through its due diligence efforts to evaluate the creditworthiness of, and risks involved in, investing in these companies, and to determine the optimal time to exit an investment. These companies and their financial information will also generally not be subject to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and other rules and regulations that govern public companies that are designed to protect investors. Investment Limitations As a BDC, we are subject to certain regulatory restrictions in making our investments. For example, we generally are not permitted to co-invest with certain entities affiliated with our advisor in transactions originated by it or its affiliates unless we obtain an exemptive order from the SEC or co-invest alongside our advisor or its affiliates in accordance with existing regulatory guidance and the allocation policies of our advisor and its affiliates, as applicable. However, we are permitted to, and may, co-invest in syndicated deals and secondary loan market transactions where price is the only negotiated point. We are currently seeking exemptive relief from the SEC to engage in co-investment transactions with our advisor and its affiliates. Prior to obtaining exemptive relief, we also intend to co-invest alongside our advisor and its affiliates in accordance with existing regulatory guidance. While we desire to receive exemptive relief from the SEC, there can be no assurance that we will obtain such exemptive relief. In an application for exemptive relief from the provisions of Sections 17(d) and 57(a)(4) of the 1940 Act and Rule 17d-1 under the 1940 Act, as filed with the SEC on April 29, 2015, and as amended on November 7