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Coronavirus (COVID-19) Update

WFP Income Fund & WFP Opportunity Fund Investor Updates

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Newport Beach, California – March 18, 2020

The quick spread of COVID-19 (the coronavirus) across the globe is a rapidly changing situation impacting health and safety, as well as causing uncertainty around economic and business impacts.

Although we have only had a couple of investors reach out to us at this point, we are here to support our investors and are available to you should you have any questions about your investments with Wilshire Finance Partners.

The purpose of this communication is to provide initial thoughts and observations about the potential impacts to the real estate market. The content of this communication is based on the facts and circumstances as we believe them to be true today.  However, we are in an extremely dynamic and fast-paced environment and, although certain immediate impacts have surfaced, the ultimate impact of the virus on the broader economy and real estate market specifically still remains unknown.

Some of the observations gathered over the last several weeks include:

  • Pandemic. The COVID-19 outbreak has been declared a pandemic by the World Health Organization (WHO) and is clearly causing economic disruptions throughout the globe; including, the economic impact resulting from travel restrictions, shelter in place orders, lock down orders, and the effective closing of national borders to non-citizens.
  • Stock Market.  Global stock markets have been hit with historical declines as investors weigh the risk and uncertainty impacting business and the financial markets.
  • Recession. Several global economists have warned that a global recession is no longer a looming threat – it’s here.  The questions now focus on the severity, duration and recovery.
  • Central Bank Action.  Central banks across the globe have reacted aggressively by reducing rates and attempting to bolster the market through fixed income investments.  Following a 0.5% rate cut two weeks prior, the Board of Governors of the United States Federal Reserve voted on March 15,2020 to reduce the federal funds rate from 1% to a range of 0 to 0.25%.
  • Government Action.  The United States and state and local governments have announced policies and protective orders to help stem the spread of the virus.  Further, the United States has announced large stimulus packages to help reduce the impact of the virus and protect the economy.
  • Faster Recovery.  Certain investment banks have warned clients that the stock market could bottom by midyear, but they expect stocks to rapidly recover before the end of the year.

With respect to the United States real estate market, we believe there are a number of factors that should be considered when assessing the real estate market in today’s environment, including:

  • Premature Conclusions.  While certain real estate asset classes were immediately impacted and others may experience an impact in various degrees, we believe it is wise to continue to review and assess the impacts of the virus, the protective measures, and the stimulus packages to the economy and the real estate market to avoid reaching premature conclusions or taking what in hindsight may be overly aggressive action.
  • Duration.  It is clear there have been and will be impacts to the economy.  However, the shorter the duration of the virus’ impact the less of an impact it will have on the economy and commercial real estate.  If the duration of the COVID-19 follows the pattern of other outbreaks, such as SARS (Severe Acute Respiratory Syndrome)  in 2003, Swine Flu (H1N1) from 2009 to 2010, Camel Flu (MERS) in 2012, Ebola (EBOV) in 2013, Bird Flu (H5N1 and H7N9) in 2013 and 2016, and Seasonal Influenza which is reoccurring, the COVID-19 outbreak may last several months, which is still a relatively short duration.  Given that timing, certain economists and financial experts anticipate the short term will be very difficult, but a strong rebound in the markets may occur in the second half of the year.
  • Government Policies & Economic Stimulus.  While the initial reaction may have been delayed, several economists and financial experts believe that the government action and the central bank response which has taken place in the United States and abroad is strong and may have a powerful positive effect on the economy.  As of this writing, additional action is being considered by the United States government with respect to certain sectors of the economy, especially small businesses, which are exposed to higher risk.
  • Volatility.  The commercial real estate sector is not the stock market.  Real estate fundamentals and real estate valuations are not subject to the same market risk and volatility as the stock or bond markets.  That dynamic is very important, especially if a rapid recovery in other sectors of the economy may occur.
  • Investment Horizon.   Investor reaction is helping to fuel the volatility in the stock and bond markets.  With some exceptions, real estate is generally slower moving.  Therefore, like the recovery in real estate values we saw after the great recession, having a longer investment horizon may be one way to consider and address the near-term impacts to the market.  If various economists are correct, the duration of the downturn will be shorter lived and the recovery will be faster.
  • Flight to Quality.  The uncertainty surrounding the outbreak has caused a flight to quality.  Commercial real estate in the United States has historically been one of the top real estate asset classes viewed as a safe haven globally.
  • Property Types.  Not all property types and markets will experience the same amount of stress.  While various property types will be impacted, some have greater exposure than others.  Specifically, properties related to hospitality, travel, recreational, and retail (in particular, big box retail) have greater exposure in the near term.  That said, the longer the duration, and the greater of the severity of the virus and the actions required to be taken, the greater the impact may be against a broader array of real estate asset types.
  • Opportunity.  A couple of investment advisors contacted us about potential opportunities in the real estate market given the current conditions.  It is likely that there will be additional investment opportunities in the market as a result of the current environment.  Some of those may arise as a result of shifting capital availability or transaction driven needs of both buyers and sellers.  Notwithstanding all the turmoil in the marketplace, we are also continuing to receive financing requests across the United States.

With respect to your investments in and the performance of the WFP Income Fund and WFP Opportunity Fund, we are cautiously optimistic about the performance of the funds, but Wilshire cannot provide any guarantees about how the current situation will impact the underlying investments in the funds.  We do believe, however, that there are several factors that we have employed when originally making the loans and in our management of the funds that will help buffer the impacts to the funds, including:

  • Diversification.   The funds are diversified across borrowers, geographic locations and property types.  We are not overly concentrated in any signal asset class or geographic location.
  • Asset Types.  While the funds have some exposure to retail through loans secured by neighborhood centers and limited exposure to hospitality though a single residential property receiving Airbnb income, the funds have little to no exposure to the hospitality, travel, recreational and big box retail asset classes.  Further, the funds have not invested in loans made against land, development or ground up construction.
  • Additional Risk Mitigation.  Each of the funds is unleveraged and have maintained lower loan-to-values with more conservative underwriting relative to many of our peers.

Therefore, while there still could be problem assets in the portfolios of the funds, we believe that the conservative approach we have taken with the funds will help to provide down-side risk protection.  The key word at this point is “Duration.”  If the duration of the issues resulting from the COVID-19 virus are shorter lived, that will lower the impact to the overall economy, help speed a recovery, and be beneficial to the funds.

While this message does not cover all factors and nuances impacting the market and the funds, the primary goals of this message were to provide our thoughts on the current environment and keeping the lines of communication open with our investors.  If there are any questions, comments or concerns that you would like to discuss, please feel free to contact me at (866) 575-5070.

Otherwise, we hope you are well, and our thoughts remain with those who have been severely impacted by the fallout of COVID-19.

Sincerely,

WILSHIRE FINANCE PARTNERS

Donald H. Pelgrim, Jr.
Chief Executive Officer
TF. 866.575.5070 | P. 310.736.1370
A. 1400 Newport Center Drive, Suite 250
Newport Beach, CA 92660
W. WilshireFP.com

NOTICES: This communication is not an offer to buy or sell securities, nor a loan approval, agreement or commitment to lend. The circulation of any attached documents is for discussion purposes only and Wilshire Finance Partners, Inc. may make substantial and material revisions to the same. Rates and terms are subject to change without notice. Information provided by Wilshire Finance Partners, Inc., its affiliates and their respective directors, managers, officers, employees and agents is not to be interpreted as legal, tax or accounting advice.  Wilshire Finance Partners, Inc. is a debt collector and is required by law to inform you that this communication may be an attempt to collect a debt and any information obtained will be used for that purpose.  Investments in fund shares and/or trust deeds secured by one or more interests in real property are subject to risk of loss. Investments may only be sold to Accredited Investors who receive the applicable Private Placement Memorandum, Subscription Agreement and related documents and disclosures for the respective investment.  Loans made by Wilshire Finance Partners, Inc. Department of Real Estate Broker License number 01523207 and California Department of Business Oversight, Finance Lenders License number 603K729. WFP Income Fund, LLC, California Department of Business Oversight, Finance Lenders License number 603K726.  WFP Opportunity Fund, LLC California Department of Business Oversight, Finance Lenders License number 603K725.  WFP Income Fund REIT, LLC California Department of Business Oversight, Finance Lenders License number 60DBO-99184 •Equal Opportunity Housing Lender•

Read More 

WFP Income Fund, LLC 
• Monthly Cash Flow
• Short Term Fixed Income
• Stable Nav
• No Loads or commissions
• Not correlated to the stock or bond markets
• Not interest-rate sensitive

WFP Opportunity Fund, LLC 
Higher Risk-Adjusted Returns
• Monthly Cash Flow
• Short Term Fixed Income
• No Loads or commissions
• Not correlated to the stock or bond markets
• Not interest-rate sensitive

About Wilshire Finance Partners and our investment alternatives. 

Wilshire Finance Partners, Inc. (“Wilshire”) specializes in real estate finance and investments and is the manager of the WFP Income Fund, LLC (“WFP Income Fund”) and the WFP Opportunity Fund, LLC (“WFP Opportunity Fund” and collectively with the WFP Income Fund, the “Funds”). The WFP Income Fund invests in a diversified pool of residential, multifamily, and commercial real estate related short-term bridge loans secured by first trust deeds and mortgages. The WFP Opportunity Fund invests in a diversified pool of residential, multifamily, and commercial real estate related short-term bridge loans, participating loans, real estate joint ventures, and direct real estate investments. Wilshire commenced operations in January 2008 and launched the WFP Income Fund and the WFP Opportunity Fund in September 2013.

 

The WFP Income Fund is approved for both retirement and non-retirement accounts on the following alternative investment platforms:

  • Charles Schwab; (SSID Number available through an Advisor)
  • Fidelity Investments (National Financial Services or NFS); CUSIP Number 94699K534
  • Pershing as WFP INCOME FUND LLC; CUSIP Number 929LP9220
  • TD Ameritrade as WFP INCOME FUND LLC NSA; CUSIP Number 93099B102
  • Wells Fargo Advisors; No CUSIP number required

 

The WFP Opportunity Fund is approved for both retirement and non-retirement accounts on the following alternative investment platform:

  • Charles Schwab; (SSID Number available through an Advisor)
  • Fidelity Investments (National Financial Services or NFS); CUSIP Number 94699B948
  • TD Ameritrade as WFP OPPORTUNITY FUND NSA; CUSIP Number 93099C100

 

In addition, each of the WFP Income Fund and WFP Opportunity Fund are approved for self-directed retirement accounts and various other platforms without the need for the CUSIP number, including, Community National Bank, Equity Trust Company (Sterling Trust), Millennium Trust Company, Pensco Trust Company, Provident Trust Company, Strata Trust Company and Shareholder Services Group.

Each of the WFP Income Fund and WFP Opportunity Fund is open to investors, wealth managers and individual investment advisors under the above referenced platforms using standard subscription and transfer procedures.

Investors and advisors may also invest directly through Wilshire.  Individual investors not using a third-party advisor may be required to meet additional requirements of the platform providers.

Safe Harbor Statement

This communication is not an offer to sell or the solicitation of offers to purchase the securities of either of the Funds, individual loan or trust deed investments, or otherwise (individually and collectively, the “Securities”). The purpose of this communication is to provide an overview of the respective Securities and their private placement. Persons interested in learning about the Securities and their private placement will be provided with the respective Private Placement Memorandum (inclusive of exhibits thereto and any supplements, the “Memorandum”), which provides a description of the Securities, the terms of their private placement, a discussion of risk factors, a copy of the limited liability company operating agreement for the fund (as applicable), a subscription agreement and other information related to the Securities.

This communication contains certain forward-looking statements regarding the Securities and the investment objectives and strategies of each of the Funds. The forward-looking statements are based on current expectations that involve numerous risks and uncertainties which are difficult or impossible to predict accurately and many of which are beyond the control of Wilshire, as the manager of the Funds. Although Wilshire believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements, the inclusion of such information should not be regarded as a representation by Wilshire, any placement agent, or any other person, that the objectives and strategies of the respective Securities or the Funds will be achieved.

Investments in the Securities may only be made solely by accredited investors (which for natural persons, are investors who meet certain minimum annual income or net worth threshold), who are provided with the Memorandum and who complete, execute and deliver the subscription documents included therein. Each of the Securities is being offered in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the Securities Act) and are not required to comply with specific disclosure requirements that apply to registration under the Securities Act. The Securities Exchange Commission has not passed upon the merits of or given its approval to the Securities, the terms of the offering, or the accuracy or completeness of any offering materials. Each of the Securities is subject to legal restrictions on transfer and resale and investors should not assume they will be able to resell the Securities. Past performance is not indicative of future results. Investing in any of the Securities, including the Funds, involves substantial risk, including loss of investment, and is not suitable for all investors.

Contact:

Wilshire Finance Partners, Inc.

Donald H. Pelgrim, Jr.

(866) 575-5070

dpelgrim@wilshirefp.com

Source: Wilshire Finance Partners, Inc. 

 

 

DISCLOSURES

Wilshire Finance Partners, Inc. specializes in real estate finance and investments and is the manager of the WFP Income Fund, LLC (the “Income Fund”) and the WFP Opportunity Fund, LLC (the “Opportunity Fund” and collectively with the Income Fund, the “Funds”).  This communication is not an offer to sell or the solicitation of offers to purchase the securities of either of the Funds or otherwise. The purpose of this communication is to provide an overview of the respective Funds and their private placement.  Persons interested in learning about either of the Funds and their private placement will be provided with a Private Placement Memorandum (inclusive of exhibits thereto and any supplements, the “Memorandum”), which provides a description of the respective Fund, the terms of its private placement, a discussion of risk factors, a copy of such Fund’s limited liability company operating agreement, a subscription agreement and other information related to the respective Fund.  This communication contains certain forward-looking statements regarding each of the Funds’ investment objectives and strategies. The forward-looking statements are based on current expectations that involve numerous risks and uncertainties which are difficult or impossible to predict accurately and many of which are beyond the control of Wilshire Finance Partners, as the manager of the Funds.  Although Wilshire Finance Partners believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements, the inclusion of such information should not be regarded as a representation by Wilshire Finance Partners, any placement agent, or any other person, that the objectives and strategies of the respective Funds will be achieved.  An investment in either of the Funds may be made solely by accredited investors (which for natural persons, are investors who meet certain minimum annual income or net worth threshold), who are provided with the Memorandum and who complete, execute and deliver the subscription documents included therein.  Each of the Funds securities are being offered in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) and are not required to comply with specific disclosure requirements that apply to registration under the Securities Act.  Neither the Securities Exchange Commission nor any state agency has passed upon the merits of or given its approval to the securities, the terms of the offering, or the accuracy or completeness of any offering materials.  The securities are subject to legal restrictions on transfer and resale and investors should not assume they will be able to resell the securities.  Past performance is not indicative of future results. Investing in the Funds involves substantial risk, including loss of investment, and is not suitable for all investors.

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