Terra Income Fund 6, LLC Files 10-Q for Q2 2024

TL;DR

**Terra Income Fund 6, LLC filed its Q2 2024 10-Q. Check financials.**

AI Summary

Terra Income Fund 6, LLC filed its 10-Q for the period ending June 30, 2024. The company, previously known as Terra Income Fund 6, Inc., is incorporated in Maryland and operates in the Real Estate Investment Trusts sector. Its business and mailing address are located at 205 West 28th Street, 12th Floor, New York, NY 10001.

Why It Matters

This filing provides investors with a quarterly update on the financial performance and operational status of Terra Income Fund 6, LLC, a real estate investment trust.

Risk Assessment

Risk Level: low — This is a routine quarterly filing with no immediate red flags or significant negative news.

Key Numbers

• 20240630 — Period End Date (The 10-Q covers financial data up to this date.)
• 20240809 — Filing Date (The date the 10-Q was officially filed with the SEC.)

Key Players & Entities

• Terra Income Fund 6, LLC (company) — Filer of the 10-Q
• 205 West 28th Street, 12th Floor, New York, NY 10001 (location) — Business and mailing address
• 20240630 (date) — Period of report for the 10-Q
• Terra Income Fund 6, Inc. (company) — Former company name

FAQ

Filing Documents

• tfsa-20240630.htm (10-Q) — 1242KB
• tif663024exhibit311.htm (EX-31.1) — 11KB
• tif663024exhibit312.htm (EX-31.2) — 11KB
• tif663024exhibit32.htm (EX-32.1) — 8KB
• 0001577134-24-000022.txt ( ) — 7634KB
• tfsa-20240630.xsd (EX-101.SCH) — 43KB
• tfsa-20240630_cal.xml (EX-101.CAL) — 70KB
• tfsa-20240630_def.xml (EX-101.DEF) — 307KB
• tfsa-20240630_lab.xml (EX-101.LAB) — 484KB
• tfsa-20240630_pre.xml (EX-101.PRE) — 415KB
• tfsa-20240630_htm.xml (XML) — 1430KB

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Consolidated Financial Statements

Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of June 30 , 2024 (unaudited) and December 31, 2023 2 Consolidated Statements of Operations and Comprehensive Income (Loss) for the T hree and S ix M onths E nded June 30 , 2024 and 2023 (unaudited) 3 Consolidated Statements of Changes in Member's Capital for the T hree and Six M onths E nded June 30 , 2024 and 2023 (unaudited) 4 Consolidated Statements of Cash Flows for the Six M onths E nded June 30 , 2024 and 2023 (unaudited) 5

Notes to Consolidated Financial Statements as of June 30 , 2024 (unaudited)

Notes to Consolidated Financial Statements as of June 30 , 2024 (unaudited) 6

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 22

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 29

Controls and Procedures

Item 4. Controls and Procedures 30

OTHER INFORMATION

PART II OTHER INFORMATION 30

Legal Proceedings

Item 1. Legal Proceedings 30

Risk Factors

Item 1A. Risk Factors 30

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30

Defaults upon Senior Securities

Item 3. Defaults upon Senior Securities 30

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 30

Other Information

Item 5. Other Information 30

Exhibits

Item 6. Exhibits 31

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. Terra Income Fund 6, LLC Consolidated Balance Sheets June 30, 2024 December 31, 2023 (unaudited) Assets Cash and cash equivalents $ 7,708,062 $ 3,193,078 Restricted cash — 106,918 Loans held for investment, net of allowance for credit losses of $ 382,709 and $ 469,011 21,337,941 60,458,534 Loans held for investment acquired through participation, net of allowance for credit losses of $ 10,367,310 and $ 9,234,320 16,797,791 17,884,930 Equity investment in unconsolidated investments 38,175,572 40,431,710 Promissory note receivable ( Note 6 ) 34,335,983 — Marketable securities 498,703 507,266 Interest receivable 290,869 1,241,308 Prepaid expenses and other assets 537,214 515,407 Total assets $ 119,682,135 $ 124,339,151 Liabilities and Equity Liabilities: Unsecured notes payable, net of purchase discount 35,849,458 35,213,543 Term loan payable, net of deferred financing cost — 14,948,604 Obligation under participation agreement ( Note 7 ) 15,119,853 — Interest payable from obligation under participation agreement 220,174 — Interest reserve and other deposits held on investments — 106,918 Other liabilities 12,740 410,075 Accrued expenses 120,673 254,716 Total liabilities 51,322,898 50,933,856 Commitments and contingencies ( Note 8 ) Equity: Managing member 68,367,800 73,405,295 Accumulated other comprehensive loss ( 8,563 ) — Total equity 68,359,237 73,405,295 Total liabilities and equity $ 119,682,135 $ 124,339,151 See notes to unaudited consolidated financial statements. 2 Terra Income Fund 6, LLC Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues Interest income $ 1,766,342 $ 2,595,328 $ 3,930,618 $ 5,527,232 Dividend and other income 10,494 31,900 26,826 37,475 1,776,836 2,627,228 3,957,444 5,564,707 Operating expenses Asset management and asset servicing fees paid/ pay

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) Note 1. Principal Business and Organization Terra Income Fund 6, LLC ("Terra LLC", and together with its consolidated subsidiaries, the "Company") was formed as a Delaware limited liability company on April 29, 2022 as a wholly owned subsidiary of Terra Property Trust, Inc. ("Terra REIT"). On October 1, 2022, pursuant to an Agreement and Plan of Merger, dated as of May 2, 2022 (as amended, the "Merger Agreement"), Terra Income Fund 6, Inc. ("Terra BDC") merged with and into Terra LLC, with Terra LLC continuing as the surviving entity of the merger (the "Merger"). Subsequent to the Merger, Terra LLC became the successor of Terra BDC and assumed all of Terra BDC's rights and obligations. In February 2021, Terra BDC issued $ 38.4 million in aggregate principal amount of 7.00 % fixed-rate notes due 2026, for net proceeds of $ 37.2 million, after deducting underwriting commissions of $ 1.2 million, see " Unsecured Senior Notes " in Note 7 for more information. In connection with the Merger, Terra LLC assumed the obligations of Terra BDC under the indenture governing the 7.00 % fixed-rate notes due 2026. The Company is a wholly owned subsidiary of Terra REIT, and its investment objective is to provide attractive risk-adjusted returns to Terra REIT's stockholders, primarily through Terra REIT's regular distributions. Terra REIT's investments activities are externally managed by Terra REIT Advisors, LLC (the "REIT Manager"), an affiliate of the Company. The Company originates, invests in and manages a diverse portfolio of real estate-related investments that generate a stable income stream. The Company directly originates, structures and underwrites most, if not all, of its loans, as it believes that doing so will provide it with the best opportunity to invest in loans that satisfy its standards, establish a direct relationship with the borrower and optimize the terms of its investments; however, the Company may ac

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) corresponding liability of the same amount on the statements of assets and liabilities called "Interest reserve and other deposits held on investments." The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company's consolidated balance sheets to the total amount shown in its statements of cash flows: June 30, 2024 2023 Cash and cash equivalents $ 7,708,062 $ 8,761,896 Restricted cash — — Total cash, cash equivalents and restricted cash shown in the consolidated Loans Held for Investment The Company originates, acquires, and structures, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the "loans"). Loans held for investment are carried at the principal amount outstanding, adjusted for the accretion of discounts on investments and exit fees, and the amortization of premiums on investments and origination fees. The Company's preferred equity investments, which are economically similar to mezzanine loans and subordinate to any loans but senior to common equity, are accounted for as loans held for investment. Loans are carried at amortized cost less allowance for credit losses. Amortized cost is the amount at which a financing receivable or a loan is originated or acquired, adjusted for accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash and write-offs. Allowance for Credit Losses On January 1, 2023, the Company adopted the provisions of Accounting Standards Codification ("ASC") 326, Financial Instruments – Credit Losses . ASC 326 mandates the use of a current expected credit loss ("CECL") methodology for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the "incurred loss" methodology previously required under U.S. GAAP. The CECL methodology requir

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) judgment is applied in selecting inputs and analyzing results produced by the models to determine the allowance for credit losses on performing loans. Changes in such estimates can significantly affect the expected credit losses. Beyond the Company's reasonable and supportable forecast period, the Company reverts to historical loss information on a straight-line basis over the remaining contractual loan term, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. The determination of the performing loans credit loss estimate considers historical loss information and current economic conditions for each loan, reversion period and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company's assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed. The Company also performs a qualitative assessment and applies qualitative adjustments as necessary, usually due to limitations of the loan loss model. The Company's qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which all

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) Marketable Securities From time to time, the Company may invest in short-term debt. These securities are classified as available-for-sale securities and are carried at fair value. Changes in the fair value of debt securities are reported in other comprehensive income until a gain or loss on the securities is realized. Revenue Recognition Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Interest Income: Interest income is accrued based upon the outstanding principal amount and contractual terms of the loans and preferred equity investments that the Company expects to collect, and it is accrued and recorded on a daily basis. Discounts and premiums on investments purchased are accreted or amortized over the expected life of the respective loan using the effective yield method, and are included in interest income in the consolidated statements of operations. Loan origination fees and exit fees, net of portions attributable to obligations under participation agreements, if any, are capitalized and amortized or accreted to interest income over the life of the investment using the effective yield method. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the REIT Manager, recovery of interest and principal becomes not probable. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's judgment regarding collectability. The Company may hold loans in its portfolio t

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