Lower Risk, Higher Yield Investing

Transcription

1 Lower Risk, Higher Yield Investing Real Estate Based Investments Providing Stable Income & Principal Protection

2 For most investors, the nirvana of investing would be finding an investment that provides high current returns, high capital appreciation, and zero principal risk. Alas, such an investment only exists in fiction. The reality is that all investing involves some degree of risk. However, many savvy investors have learned that lower risk, higher yield investing involves locating investments that share the following attributes: Simplicity Consistency Stability Simplicity Often investments that are very complex or unique result from a tremendous amount of financial engineering or structuring in an attempt to mitigate risk. For example, in a mortgage backed securitization (MBS) or commercial mortgage backed securitization (CMBS) cash flows and risk of loss may be allocated to different tranches based on characteristics of the underlying loans and the investment attributes sought by the respective bond buyers. The use of excess collateral, collateral support, waterfalls and other provisions are some of the tools used by the investment banker to create the attributes of the respective tranche based, in part, on the performance expectations of the underlying loans. Loans with lower down payments and higher loan-to-values, for example, may require greater collateral support by lower rated and non-rated tranches in order to achieve the AAA rating of the most senior bonds. What if, however, the use of a simple, straight forward investment structure drove the lending parameters versus the other way around? In other words, as opposed to creating a sophisticated investment structure to address what may be the risks of investing in aggressively underwritten loans, what if a simple structure was used to invest in loans that were not as highly leveraged and required borrowers to have far more equity or skin in the game? What if risk mitigation started at the loan level versus having to rely on a sophisticated structure to address the loan level risk? Wouldn t that result in an investment that is based on common sense, and is simple and easier to understand? Consistency From consistency flow the concepts of repeatability and sustainability. Specifically, if the results of the underlying investment can be repeated over a prolonged period of time, it will result in consistency. Factors which may have a negative impact on consistency are the reliance on the realization of certain future events or the occurrence of contingent factors for returns to be realized. For example, a real estate investment trust (REIT) investing in commercial real estate may need to experience the positive repositioning of the real estate investment, a landlord friendly leasing environment, favorable interest rates and favorable capitalization rates at the time the property is sold for investors in the REIT to fully realize anticipated gains from the underlying investments. Conversely, an underlying investment that has certain simple, scheduled, repeatable events may result in greater consistency and more predictable returns for investors. 1

3 Stability Certain investments are subject to a number of external factors that need to be actively monitored, managed and potentially hedged (either by the investor or others) because of the sensitivity of the investment to changes in those factors. Such factors may include stock or bond market fluctuations, changing interest rates, changes in the national or global economy, geopolitical conditions and other factors. Conversely, investments with little to no correlation, less sensitivity or lagging impact to such factors may provide greater stability for the investor s principal investment. Many investors and their advisors have used real estate as means to diversify a portfolio or eliminate correlation among investments in an investment portfolio. Albeit recent years have tested many real estate models, over longer periods real estate investments have provided many of those anticipated benefits to investors. However, as most real estate investors know, real estate is cyclical, and each type of real property is sensitive on various degrees to different factors. Therefore, for the direct real estate investor who cannot wait years or even decades for the benefits of a real estate investment to be realized, even a slight change in value may result in a loss. PRIVATE REAL ESTATE LOANS A little known, but nevertheless proven, investment strategy is an investment in private real estate loans versus direct real estate investment. An investment in private real estate loans differs from an investment in publicly traded mortgage-backed securities which lose the simplicity of the investment and carry similar market risks of other exchange-traded securities. Further, an investment in private real estate loans differs from direct real estate investment because it does not carry the inherent risks and hassles of direct ownership, including, being at risk for the first loss in a declining real estate environment and getting calls at midnight to unclog a toilet. If done properly and without the financial engineering of a MBS or CMBS security, an investment in real estate loans provides the investor with stable income in the form of monthly mortgage payments while providing principal protection. The investment may also have a lower (or no) correlation to the stock or bond market, little sensitivity to changing interest rates, and provides down-side risk protection for the principal investment in a changing economic environment. Property Type: Office Property Type: Light Industrial Property Type: Office / Retail 2

4 Stable Income and Principal Protection TM Since 2008, Wilshire Finance Partners has arranged and invested in short-term, lower loan-to-value, private money, bridge loans secured by real estate in first lien position. As described below, a short term bridge loan covers the gap in timing or financing borrowers often experience when making real estate investments. As a result, these loans typically command a much higher rate of interest as compared to institutional loans and loans being securitized in a CMBS. Wilshire is considered a private money lender because it is not a bank and does not securitize its loans. Rather, Wilshire uses its own capital and the capital of the investors in our real estate mortgage funds to make the loans. From its inception, Wilshire has focused on providing investors with a simple, straight-forward investment approach that strives to provide Stable Income and Principal Protection. As a foundational matter, Wilshire s philosophy is that while diversification will help to mitigate overall portfolio risk, each loan is a building block in our fund and the strength and consistency of the investment portfolio of the fund derives from making higher quality loans. By ensuring that the underlying loan adheres to a set of conservative underwriting principles, the quality of each loan adds to the Wilshire portfolio structure versus the MBS and CMBS model of potentially using financial engineering and structure to compensate for more aggressive lending which may provide simplicity, consistency and stability. HOW TO INVEST IN REAL ESTATE LOANS While investing in real estate loans or a real estate loan fund is a lot easier to understand than more complicated investments, like other investments prior to investing in individual real estate loans or through a fund an investor should have an understanding of the nature of the investment and its risks and rewards. What follows next is a compilation of the most frequently asked questions Wilshire has received from potential investors regarding investments in individual real estate loans and real estate debt funds offered though Wilshire. The following Q & A should be viewed as a basic guide to understanding this investment class. We encourage readers to contact us with their questions. Please send your questions to investments@wilshirefp.com or call us at (866) What Is A Trust Deed? A trust deed is similar in effect to a mortgage because it is a legal document used to create a security interest in the real property used as collateral for a loan. In California, trust deeds are used almost exclusively to create and perfect a security interest in a real property for the repayment of a loan. Property Trust Deed Terms of Loan 3

5 Specifically, a person who would like to borrow money is required to pledge title to their real property in trust to secure the repayment of the loan. Like other trust documents, a trust deed has three parties; the trustor (borrower), the trustee (which is typically a title company or servicing agent), and the beneficiary (the lender). The trustee takes instructions from and acts on the lender s behalf while the loan is outstanding. Further, like other deeds which transfer title, a trust deed is recorded against the borrower s real property to provide notice that the borrower has pledged the real property as collateral and to create a security interest in the real property for the repayment of the loan. One of the primary benefits of a trust deed over a mortgage is the ability to use an accelerated process to foreclose against the property if the borrower defaults. In such an event, the beneficiary (the lender) instructs the trustee to conduct a trustee sale. As compared to suing on a mortgage, which may take years, the trustee sale process may take as little as 120 days. Thus, the name trust deed. It is a deed placing real property in trust to secure the repayment of a loan. What is a Bridge Loan? It is because Wilshire s loan bridges the financing or timing gap borrowers often experience. That gap may occur because traditional or other alternative financing is too time consuming or expensive to complete, contains terms which limit the borrowers investment strategy or simply not available. REGARDING POTENTIAL RISKS Is there a chance I can lose my entire investment? Chances are remote that you could lose your entire investment. If you invest in loans through Wilshire Finance Partners your investment will likely be in a loan secured by a first trust deed which generally has a maximum loan-to-value ratio ( LTV ) of 65%. For someone to lose their entire investment, many things would have to go wrong simultaneously. For example, the loan would have to go into default and the property value would have to fall by substantially more than the protective equity plus the foreclosure costs by the time you sold the property. Even in such an event, it is highly likely that the property would sell for an amount greater than zero. $1,000,000 Original Loan Value 20% Drop in Property Values Borrower Equity Loan to Value $200,000 Loss in Property Values $350,000 $150,000 $650,000 Loan Amount Loss of Equity Remaining Borrower Equity Loan to Value In this example, the property lost $200,000 in equity value, but the borrower has not lost any principal. $800,000 New Property Values Is there a possibility I might lose a portion of my investment? There is a possibility of losing a portion of your invested capital. If a loan defaults and a foreclosure occurs, there would be a chance that the foreclosed property might sell for less than the amount of the loan, causing a loss. 4

6 For example, assume you own a loan of $650,000 secured by a property worth $1,000,000 (or a 65% loan to value). If the property value drops 20% to $800,000, there would be a protective equity cushion of $150,000 (or 15%) remaining in the property. That protective equity cushion will help protect you against the loss of your principal investment. Conversely, if you have the same loan of $650,000 secured by the same property worth $1,000,000 (or a 65% loan to value) and property values drop 40% to $600,000, there would be a loss of approximately $50,000 plus the costs of the foreclosure. Although the probability of property values dropping 40% is small, during the Great Recession of 2007, which officially lasted from December 2007 through June 2009, some property values dropped over 40% in certain geographic areas. Further, some funds, partnerships and REITs that own real estate use third party debt in the form of mortgage loans to finance and leverage their portfolio holdings. While leverage can have a positive impact on investment returns, it has the opposite effect when problems arise. At Wilshire, the risk of loss through a decline in property values is mitigated in several ways, including, avoiding areas and property types which are more susceptible to large swings in value (e.g. lending on land in rural areas versus improved property in suburban areas), stress testing the property value at the time the loan is underwritten, and making shorter term loans so that loans may be repaid or adjusted based on then current market values. Another way Wilshire reduces and mitigates risk is through a diversified pool of real estate loans. For example, the loan portfolio of the WFP Income Fund is diversified across property types (such as office, warehouse, assisted living and other income property), borrowers, loan size, geographies, maturities, interest rates, and other factors. That type of diversification eliminates risk concentration in a single loan and provides investors with additional down-side risk protection in a changing environment. How does the risk of an investment in trust deeds compare to the risk of direct investment in real estate? Any money invested in real estate, whether directly or through a trust deed, fund, partnership or a REIT (real estate investment trust), usually has some investment risk. With respect to real estate investment, whether through direct ownership or an entity like a REIT, you would not have the same protective equity cushion as an investment in a trust deed or pool of trust deeds such as an investment in the WFP Income Fund. Specifically, if you (or a REIT in which you invested) purchased a property worth $1,000,000 and real estate values dropped 6%, there would be a loss of $60,000 upon the sale of that property. However, if you owned a trust deed with a 65% loan to value (or a loan amount of $650,000) against the same property originally worth $1,000,000 and real estate values drop by 6%, your principal would not be affected, and you would still have a 29% equity cushion to help protect your principal investment against loss. In that scenario, it is the property owner, not the lender, who absorbs the loss. 5

7 Further, some funds, partnerships and REITs that own real estate use third party debt in the form of mortgage loans to finance and leverage their portfolio holdings. While leverage can have a positive impact on investment returns, it has the opposite effect when problems arise. For example, if the partnership or REIT experiences a cash flow shortage, it may not be able to cover the debt service under the mortgages and pay the other costs of ownership, including, insurance, property taxes, maintenance and other costs. In such an event, the lender may foreclose against the real estate held by the fund, partnership or REIT, causing a loss to their respective investors. The individual loans and the WFP Income Fund managed and offered by Wilshire for investment have lower loan-to-values and do not employ the use of additional leverage. As a result, those investments do not have the same exposure to loss as a direct real estate investment, nor the additional credit and counterparty risk associated with a leveraged investment. Further, building off the success of our individual trust deed investments, the funds operated by Wilshire Finance Partners also provide our investors with additional investment choices and benefits. The WFP Income Fund consists of a professionally managed pool of loans secured by first trust deeds and mortgages with attributes similar to the individual trust deed investments offered by Wilshire, but with a number of additional benefits, including, diversification and the ability to obtain compound interest through dividend reinvestment. The WFP Opportunity Fund is a hybrid debt and equity fund designed to provide higher yields for investors while striving to preserve their principal investment. The WFP Opportunity Fund makes loans and direct equity investments in real estate across asset classes, borrowers and sponsorships, and seeks to mitigate down-side risk through prudent investment principles and diversification. How does the risk of an investment in trust deeds compare to the risks found in other alternative investments? Compared to complicated alternative investment vehicles relying on sophisticated financial modeling, financial engineering and securities trading to identify and react to shifting factors which may impact the invested principal, many of the risks associated with trust deed and mortgage investments are identifiable, quantifiable and may be mitigated. Further, many other alternative investments are also based on securities which are unsecured or have a lower ranking with respect to priority. Warrants and certain tranches of collateralized mortgage obligations (CMOs) are examples of securities whose value derive from other underlying investments and may be subordinate in their rank or class. As a result, part of the challenge of determining the absolute risk to your principal in such investments is that due to the numerous factors which may affect the investments, combined with the nature of the underlying securities and investments themselves, the theoretical value of such investments may at times be zero or very difficult to quantify. 6

8 A trust deed or a mortgage, however, is secured by real estate typically with a value greater than the principal amount of the loan. As a result, there is an equity cushion beyond the amount of the loan to absorb a certain amount of loss. Further, the value of a single-family home, apartment building or office building in a suburban area is quantifiable even in a changing economic environment. Its value can easily be obtained through an appraisal and other methods. Therefore, although real estate is certainly subject to market fluctuations, a trust deed investor may reduce the risk associated with potential declines in value by investing in short and medium-term loans with conservative loan-to-value ratios in areas where properties are not subject to wide swings in value over shorter periods of time. In addition, that risk may be further mitigated through investing in a fund with a diversified pool of loans. What happens if a loan goes into default? Depending on the nature, circumstances and timing of the default, answers to this question and the course of action taken by the investor will vary. Upon a default, investors will assess their various options to ensure the full repayment of their loan or to reduce the risk of loss. Those options may include, offering additional cure periods, appointing a receiver (i.e. a court official) to collect rents and manage the property, modifying the loan terms to alter the terms of repayment, or foreclosing to gain control of the real estate collateral. Each of these tools may be used individually or in combination to help protect the investor s principal investment. Some of the primary tools to reduce the risk of default include using a disciplined underwriting approach before the loan is made and making loans with lower loan-to-values so that a borrower who may potentially default still has equity (or skin in the game ) that they will want to protect. Although defaults on Wilshire loans have been very rare, one of Wilshire s services is to help our investors assess their options to respond to the default, including proceeding with the foreclosure process in the event it becomes necessary. Further, as the manager of the WFP Income Fund and WFP Opportunity Fund, Wilshire manages that process on behalf of the investors in those funds. 1 Are there risks in making loans when real estate values are declining? There are risks associated with all investments, including real estate based investments, however, Wilshire s lending approach helps to reduce many of those risks. Specifically, Wilshire obtains current valuations on all properties when making new loans or extending existing loans. This helps ensure that in a declining market the loan-to-value ratio is not based on old data. Also, Wilshire generally makes loans with a shorter term and a conservative loan-to-value ratio to help protect the invested principal in the event of a declining market. 1. While past performance is not indicative of future results, from the fund s inception in September 2013 through September 30, 2017 there were no non-performing loans or loan defaults in either of the portfolios of the WFP Income Fund or WFP Opportunity Fund. 7

9 ABOUT REWARDS What kind of returns can I expect? Wilshire s investors have been earning between 6.5% and 8% net annualized returns on their trust deed investments, paid monthly. Investors in either the WFP Income Fund or the WFP Opportunity Fund have enjoyed similar returns and other benefits. 3 Those investing through retirement accounts may receive added tax benefits on the interest or dividends received. That income may be tax deferred to the extent permitted by applicable federal and state tax rules and regulations % 11.00% 9.00% 7.00% 5.00% 3.00% 1.00% Sept WFP Income Fund Net Annualized Non-Compounded Return Since Inception 2 Dec March 2015 June 2015 Sept Dec March 2016 June 2016 Sept Dec March 2017 June 2017 Sept What is the chance that yields on Wilshire s trust deeds and fund investments will be less than that earned from a bank? It is unlikely that the rate of return earned from Wilshire originated trust deeds or through our WFP Income Fund will be inferior to the rates offered by banks or financial institutions on their deposit products (e.g. checking, savings, NOW, money market, certificates of deposit and other accounts). The reason for this is relatively straight forward: Wilshire s loans are targeted toward real estate investors and situational lending requiring short-term loans which command a premium to the rates charged by banks. Further, banks have a cost structure which requires them to retain a greater portion of the interest 2. From fund inception on September 23, 2013 through September 30, 2017 the WFP Income Fund has generated consistent annualized returns. Past performance is not indicative of future results. 3. Based on audited results for full year 2016, investors in the WFP Income Fund enjoyed an 7.13% net annualized non-compounded return with dividends paid monthly, and investors in the WFP Opportunity Fund enjoyed a 13.77% net annualized non-compounded return with dividends paid quarterly. Past performance is not indicative of future results. 8

10 charged on their loans. The result is that Wilshire s investors receive a higher risk-adjusted return on their money (e.g. 6.5% to 8%). However, unlike certain bank deposits which may be FDIC insured, direct ownership of a trust deed secured loan or an investment in one of Wilshire s funds does not carry FDIC insurance. Further, past performance of Wilshire s investments may not be indicative of future results. It is important to note that while cash and cash equivalents will always have a place in an investor s portfolio, a portfolio too heavily weighted in those investments will result in a drag on investment returns. Worse yet, if that is all the investor holds, they will effectively go broke slowly if the bank pays a sub-1% return on their deposits and the rate of inflation is higher than 1%. Obviously, Wilshire is not advocating that investors go in the other direction and have too much weight in other investments. However, a diversified portfolio that includes a non-correlated investment which pays a higher comparative return - like investments in conservatively underwritten loans and real estate debt funds may provide both diversification and a lift in returns for an investor s portfolio. REGARDING LIQUIDITY How liquid is my investment? Investors in individual trust deeds should generally anticipate that they will hold their investment through the maturity of the loan, i.e. 1 to 3 years. Conversely, sometimes loans are extended (with the investor s approval) for a longer period of time and sometimes loans payoff early. Wilshire typically makes loans ranging in maturity from 12 to 36 months. Investors in the WFP Income Fund will be subject to an initial 12 month lock-in period and investors in the WFP Opportunity Fund will be subject to an initial 24 month lock-in period. Further, the investments in either fund are not registered and may not be transferred except as set forth in the operating agreement applicable to each fund. After the lock-in period applicable to the fund has expired, the investor s funds become liquid subsequent to certain limitations on the ability of an investor to withdraw capital investments from a fund. Therefore, while an investment in individual loans or either of the Wilshire funds will be illiquid for a period of time, that holding period is similar to an intermediate term CD and shorter than most REIT and hedge fund investments. Please review the Private Placement Memorandum of the respective fund for more information about the fund s liquidity and redemption policies. What Are the Advantages of Making Short and Medium Term Loans? Shorter-term loans allow an investor (whether through Wilshire s funds or individual loans) to reinvest funds that are repaid in newer loans based on current market conditions, which, in turn, can reduce both collateral and interest rate risk. Specifically, as compared to the stock and bond markets which may fluctuate greatly in a short period of time, the real estate market has historically experienced gradual changes, either upward or downward, over a series of years. 9

11 Nevertheless, by making loans with shorter terms, Wilshire and its investors have the ability to ensure that the maximum loan-to-value ratios for loans being made against the subject properties (e.g. generally 65%) are based on current market values. As a result, there is less valuation risk. Further, in a changing interest rate environment, Wilshire and its investors have the ability to adjust the interest rates on new loans and modifications of existing loans to address any changes in market conditions. Lastly, shorter term loans provide investors with greater liquidity as the loans mature as compared to loans with much longer terms. Will Wilshire help me find a buyer if I wish to sell my trust deed? Although we can t guarantee that we can sell your trust deed, in the event you want to liquidate your individual trust deed investment early, Wilshire has many existing and new investors who may be willing to purchase your trust deed and we will work with you to arrange for a potential sale. Subject to the limitations described above and in the respective Private Placement Memorandum, investors in the WFPIncome Fund or WFP Opportunity Fund have greater liquidity and may redeem their investment by providing written notice to Wilshire. BORROWERS Why would a strong borrower seek your loans rather than less expensive loans from a bank? Many of Wilshire s borrowers are professional real estate investors who have special situations requiring short-term (bridge) financing. For example, a number of these borrowers may require Wilshire s speed and flexibility to capitalize on a market opportunity (e.g. a 1031 exchange); while another group of borrowers prefers the terms and conditions of a bridge loan because of the short term nature of their investment in the subject property. Simply stated, the quick turnaround time and underwriting process, combined with the ability to pay off the loan with little or no prepayment penalty, are all aspects which are attractive to a variety of borrowers. Therefore, the additional cost and expense incurred under these loans are generally regarded as worthwhile and a cost of doing business by these borrowers. As a collateral-based lender, several of the primary factors Wilshire will consider when making a loan include the value of the real property collateral, the sufficiency of its cash flow to service the loan, the loan-to-value (or advance rate) against the property, conditions which may affect the value of the property or its cash flow, the viability of the borrower s strategy for the repayment of the loan (e.g. the sale or refinance of the property), and the ability of Wilshire and its investors to obtain full repayment of the loan being made. As secondary considerations, Wilshire may also evaluate non-collateral factors, including, the general creditworthiness of the borrower, borrower capacity and other secondary sources of repayment, the use of additional collateral and other factors. 10

12 Wilshire s underwriting approach culminates in the making of a short term, bridge loan with a higher return for our investors and a lower loan-to-value with a borrower who has more skin in the game to help protect Wilshire s investors from down-side risk. Are there current advantages to making short and medium term loans? Shorter-term loans allow an investor (whether through Wilshire s funds or individual loans) to reinvest funds that are repaid in newer loans based on current market conditions, which, in turn, can reduce both collateral and interest rate risk. Specifically, as compared to the stock and bond markets which may fluctuate greatly in a short period of time, the real estate market has historically experienced gradual changes, either upward or downward, over a series of years. Nevertheless, by making loans with shorter terms, Wilshire and its investors have the ability to ensure that the maximum loan-to-value ratios for loans being made against the subject properties (e.g. generally 65%) are based on current market values. As a result, there is less valuation risk. Further, in a changing interest rate environment, Wilshire and its investors have the ability to adjust the interest rates on new loans and modifications of existing loans to address any changes in market conditions. Lastly, shorter term loans provide investors with greater liquidity as the loans mature as compared to loans with much longer terms. Can I invest my IRA or other retirement accounts in trust deeds? Yes, unless precluded by the terms of some company retirement plans, you may invest in trust deeds or either of Wilshire s funds through an IRA or other retirement account. Investing in trust deeds or the WFP Income Fund through an IRA or other retirement account can have the added benefit of tax deferral on the interest or dividends earned. What are some important points for potential trust deed and fund investors to consider? Because each investor s circumstances differ, we recommend that you talk with your Wilshire representative about your particular circumstances and needs. That said, several of the top points to consider include: LTV Ratio Term Diversification Experience and Expertise An appropriate loan-to-value ratio translates loan-to-value ratio translates into a protective equity cushion for an investor to help protect against declines in property values, create a buffer from potential defaults and ensure repayment of the loan. The short term or duration of a loan will help manage changes in property values, interest rates and liquidity needs. Like diversifying your stock and bond portfolio, you should seek diversity in your trust deed investments across geographic regions, property types, terms/maturities and other factors. That type of diversification may be accomplished by investing in the WFP Income Fund and/or WFP Opportunity Fund. The Wilshire team brings a combined set of skills, knowledge, experience and expertise which is unmatched by many other investment companies. 11

13 How can I invest in the WFP Income Fund, the WFP Opportunity Fund or Trust Deeds? Investments in trust deeds, the WFP Income Fund or the WFP Opportunity Fund may be made: Directly through Wilshire Finance Partners Through your Registered Investment Advisor, Wealth Manager or similar professional Further, the WFP Income Fund has been approved for both non-retirement and retirement accounts on the following alternative investment platforms: Fidelity Investments Alternative Investment Platform: 94699K534 Pershing Alternative Investment Platform: 929LP9220 TD Ameritrade Alternative Investment Platform: 93099B102 Millennium Trust Company (with affiliate access to the Charles Schwab platform) Investments through TD Ameritrade may be made with the assistance of a local branch manager. Investments through the Fidelity Investments platform require the investor to have $1 million invested through Fidelity, a requirement which is waived if you invest through your independent investment advisor. Investments in Wilshire trust deeds or either of our funds may only be made by Accredited Investors who receive the respective Private Placement Memorandum and accompanying materials. Questions? We invite your questions! Please your questions to investments@wilshirefp.com or call us at (866)

14 ABOUT WILSHIRE FINANCE PARTNERS Since 2008, Wilshire Finance Partners, Inc. has specialized in providing Stable Income and Principal Protection TM for its investors through real estate loan and fund investments. You are encouraged to visit our website at or call us at (866) to obtain additional information about real state based investments. Wilshire Finance Partners Toll-Free: (866) P: (310) Newport Center Drive, Suite 250, Newport Beach, CA 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 Trust Deed investments or the securities of either of the Funds or otherwise. The purpose of this communication is to provide an overview of Trust Deed investments, the respective Funds and their private placement. Persons interested in learning about Trust Deed investments, either of the Funds 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 respective investment, the terms of its private placement, a discussion of risk factors, a subscription agreement and other information related to the respective investment. This communication contains certain forward-looking statements regarding Trust Deed investments and 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 and the seller of the Trust Deeds. 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 Trust Deed investments or the respective Funds will be achieved. An investment in Trust Deeds or 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 and the Trust Deed investments 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. 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. 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. Wilshire Finance Partners, Inc. is licensed by the California Bureau of Real Estate Broker License number and California Department of Business Oversight, Finance Lenders License number 603K729. The WFP Income Fund, LLC is licensed by the California Department of Business Oversight, Finance Lenders License number 603K726, and the WFP Opportunity Fund, LLC is licensed by the California Department of Business Oversight, Finance Lenders License number 603K725. Equal Opportunity Housing Lender 13