FORM 1-K
ANNUAL REPORT PURSUANT TO REGULATION A
For the year ended December 31, 2019
BRIDGEWELL PREFERRED INCOME LP
Commission File No. 024-10687
Florida
(State or other jurisdiction of incorporation or organization)
BridgeWell Preferred Income LP
2400 E. Colonial Dr., Ste. 200
Orlando, FL 32803
Office: (407) 447-5000
Email: manager@bridgewellfunds.com
All correspondence:
Kevin Kim, Esq.
GERACI LLP
90 Discovery
Irvine, CA 92618
(949) 379-2600
EMAIL FOR CORRESPONDENCE: k.kim@geracillp.com
Limited Partnership Units and General Partnership Units
(Title of each class of securities issued pursuant to Regulation A)
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
We make statements in this Annual Report on Form 1-K (“Annual Report”) of BridgeWell Preferred Income LP (the “Company,” “BW PI,” “we,” “our” or “us”) that are forward-looking statements within the meaning of the federal securities laws. The words “believe,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “seek,” “may,” and similar expressions or statements regarding future periods are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this Annual Report or in the information incorporated by reference into this Annual Report.
The forward-looking statements included in this Annual Report are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market condition and future business decision, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements.
Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon our audited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:
| ● | our ability to effectively deploy the proceeds raised in the offering; | |
| ● | our ability to purchase suitable loans and real estate to be held by the Company; | |
| ● | changes in economic conditions generally and the real estate and securities markets specifically; | |
| ● | limited ability to dispose of assets because of the relative illiquidity of real estate investments; | |
| ● | increased interest rates and operating costs; | |
| ● | our failure to obtain necessary warehouse financing; |
2
BRIDGEWELL PREFERRED INCOME LP
ANNUAL REPORT ON FORM 1-K
For the Year ended December 31, 2018
TABLE OF CONTENTS
3
PART II
BridgeWell Preferred Income LP
The Company
BridgeWell Preferred Income LP is a Limited Partnership organized on January 25, 2016 in the state of Florida for the purpose of investing in (1) mortgages secured by real estate and (2) directly in real estate. It is managed by Preferred Income Manager LLC (“PIM” or the “Manager” or the “General Partner”).
The Company was formed to raise up to $50 million under Regulation A Plus from a wide range of individuals, focused equally on individual accredited and non-accredited investors, to acquire loans on non-owner occupied single-family residential properties, as well as real estate to hold for appreciation and/or income production. The fund-raising activity is done through the General Partner, Preferred Income Manager LLC (“PIM”), and is focused primarily on raising funds through investment seminars held in Central Florida.
We operate under the direction of John Parrett, who is the Manager of the General Partner, Preferred Income Manager LLC. Mr. Parrett is also the President and CEO of an affiliated company, BridgeWell Capital LLC, who is the originator and servicer of a large percentage of the loans that are purchased by the Company.
We are offering up to $50 million in Limited Partership Interests (“Units”) in this offering for $1,000 per unit (the “Offering”). The minimum initial permitted purchase is $10,000. See Item 2 – “Management’s Discussion and Analysis of Financial Conditions and Results of Operations-Overview” for more information concerning the current status of the Offering.
Investment Strategy
The Company invests primarily in Mortgage loans secured by mortgages issued to companies whose purpose is to buy, fix and sell, or hold and rent, non-owner occupied single-family residential homes. The Company also invests directly in real estate development projects with the goal of selling them for retail market value or holding them for appreciation and/or income production. The Company focuses on purchasing loans and real estate primarily in the states of Florida, Georgia, North Carolina, South Carolina, Tennessee and Indiana, although it purchases loans throughout the United States.
The loans that the Company purchases are held by companies (typically LLC’s or Land Trusts) and personally guaranteed by the borrower(s). The Company had the use of a $2 MM warehouse line of credit through Bridgewell Capital LLC, the loan servicer. In February 2019, the Company obtained a $5 MM dedicated warehouse line of credit with Silvergate Bank. The line went into productive use in mid-May 2019. This facilitated the purchase of loans and thereby served to maximize fund returns.
Competition
We face a high degree of competition in all areas of our business. These areas include attracting and retaining investors funds, purchasing loans, and purchasing real estate at a competitive price. Competition for investor funds comes from other uninsured products such as mutual funds provided by insurance companies and brokerage firms. Our competition for mortgage loans comes from commercial banks and other private lenders, including some rather large well-organized companies. Our competition for real estate purchases is varied, but includes professional investors, large real estate investment companies, financial institutions, REIT’s, life insurance companies and the like. Our ability to grow and manage our portfolio of loans and real estate depends on the ability of our Manager to navigate the competitive landscape of these industries. We believe our Manager has the extensive experience, knowledge and relationships to effectively compete in our areas of investment.
4
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations
Overview
BridgeWell Preferred Income LP (the “Company”) was formed on January 25, 2016 for the purposes of investing in a diversified portfolio of first and second mortgage loans that are secured by a deed of trust or mortgage. We focus on purchasing loans in the following states: Florida, Georgia, Tennessee, South Carolina, North Carolina, Indiana, however the Company holds loans throughout the United States. The Company also invests in real estate and real estate trusts in select locations with the goal of selling them for retail market value or holding them for appreciation and/or income generation.
As of December 31, 2019, the Company had sold 14,780 Limited Partnership Interests (Units) to Investors ($14.78 million).
As of December 31, 2019, the Company was invested in $14.53 million in secured mortgage loan notes, $1.95 million in real estate investments, $634,687 in Real Estate Owned (“REO”) and $1.41 million was being held in cash at a depository insured bank. Of the cash held at December 31, 2019, $500,530 was “restricted”. At December 31, 2019, there was $160,726 being held in cash at a depository insured bank.
During the year ended December 31, 2019, the Company generated $1,168,903 in investment income from mortgage loans receivable of $14.53 MM at year end. The Company generated interest income of $10,393 on bank balances held. The Company generated a $5,653 gain on the sale of $155,472 in real estate assets and $34,327 gain on REO retention. The Company had servicing fees of $27,348 to provide monthly servicing to the existing portfolio of mortgage loan receivable, as well as $123,409 in management fees to manage the Company assets throughout the year. For the year ended December 31, 2019, warehouse credit line fees and interest expense from the related party warehouse line of credit amounted to $27,360, and warehouse credit line fees and interest expense from the Silvergate warehouse line of credit amounted to $80,965. General and administrative expenses were $105,045 for the year ended December 31, 2019. These were primarily comprised of advertising costs ($51,009), Investor Seminars ($16,913) and Audit, Tax & Legal Fees ($33,575). Net income was $830,221 for the year ended December 31, 2019.
During the year ended December 31, 2018, the Company generated $285,984 in investment income from mortgage loans receivable that amounted to $7.515 MM at year end. The Company also generated a $1,166 gain on the sale of $230,251 in real estate assets. The Company had servicing fees of $57,148 to provide monthly servicing to the existing portfolio of mortgage loan receivable, as well as $12,400 in management fees to management the Company assets throughout the year. For the year ended December 31, 2018, fees and interest expense from the related party warehouse line of credit amounted to $9,065, and general and administrative expenses primarily comprised of advertising costs amounted to $14,253. Net investment income was $194,284 for the year ended December 31, 2018.
In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in China and has since spread to other countries, including the U.S. The extent of the impact of COVID-19 outbreak on operations of the Company will depend on future developments, including the duration and spread of the outbreak, related advisories and restrictions, government actions, the impact on financial markets and the overall economy, all of which are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s operations can be affected. Future potential impacts may include the borrowers’ ability to pay the required monthly loan payments or ability to solicit additional capital. New institutional buyers of long-term mortgage notes may need to be sourced. Operating functions that may be changed include site visits, borrower draws, and new loan applications and funding. Foreclosure actions on non-performing loans may be delayed. Permitting, zoning and other issues related to real estate held for development or rehabilitation may be delayed. Changes to the operating environment may increase operating costs. Depending on the severity and length of the outbreak, the novel coronavirus could present uncertainty and risk with respect to the Company, its performance, and its financial results.
Liquidity and Capital Resources
The Company is seeking to raise up to $50 million by selling Limited Partnership Interests (Units) to Investors. Most of the capital we raise is invested in secured mortgage notes and income-producing and/or appreciating real estate. In addition, the Company holds real estate that is retained from foreclosures on mortgage loans receivable.
During the year ended December 31, 2019, the Company raised an additional net $5.92 million in investor contributions to end the year at $14.78 million. The Company also had access to a $2MM related party line of credit for investment purposes, the balance of which ranged from $253,008 to $597,181, and ended the year at $0. The Company’s $5,000,000 line of credit with Silvergate Bank was utilized from May to December of 2019 with balances ranging from $798,647 to $3.70 million, ending the year at $3.70 million. The related party line of credit was subsequently closed due to non-use. At December 31, 2019, the Company is committed to providing an additional $1.95 million in credit line draws on existing rehabilitation loans.
During the year ended December 31, 2018, the Company raised $8.88 million in investor contributions to commence operations. The Company also had access to a $2MM related party line of credit for investment purposes, of which $392,513 was utilized during the year. At December 31, 2018, the Company is committed to providing an additional $2,636 MM in cash advances to existing rehabilitation loan borrowers to complete their projects.
The Company does not currently have any capital commitments. Should we need more liquid capital, we have established institutional buyers for the type of secured mortgage loans that we hold.
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Trend Information
We are closely monitoring the impact of changing interest rates and rates of return on the type of secured mortgage loan notes that the Company purchases. During the reporting period ending December 31, 2019, we have not noticed a material change substantial enough to prevent the Company from acquiring investment inventory at sufficient rates to provide Limited Partner preferred returns.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies
We have identified the policies outlined in the Offering Circular and attachments as critical to our business operations and an understanding of our results of operations. Those policies outlined are not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operation where such policies affect our reported and expected financial results. Note that our preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.
Additional Company Matters
The Company has not filed for bankruptcy protection nor has it ever been involved in receivership or similar proceedings. The Company is not presently involved in any legal proceedings material to the business or financial condition of the Company. The Company does not anticipate any material reclassification, merger, consolidation, or purchase or sale of a significant proportion of assets (not in the ordinary course of business) during the next 12 months.
PIM is pursuing the opportunity to diversify into real estate-related income, from 100% dependency on secured mortgage notes, to a percentage as yet to be determined of the income being derived from income-producing and/or appreciating properties owned by the Company.
Investment in the property at 501 Franklin (see below for description and history of the property) increased by $646,700 during fiscal year 2019. Of this, $500,000 was used to pay off an existing first mortgage. This will then allow for institutional financing of initial development costs, which is the go-forward plan. An additional $27,049 was used for interest, $16,268 for insurance and property tax, and the remaining $103,383 for development of the property (i.e. design, engineering, permitting, site work and surveying). These costs were capitalized and are included on the 2019 balance sheet presented below.
In early September 2018, when an undeveloped parcel of land known as 501 Franklin became available, the Company purchased 100% ownership in this property. Preliminary analysis determined that completion of development of this property would likely result in an ongoing 10%+ annual cash-on-cash return. The property has been in engineering and entitlement since late 2015. It is located in an extremely fast-growing area on the western edge of Ocoee, at the intersection of Highway 429 and 436. This particular property is in an exceptionally prime location and is considered a ‘Gateway’ property to the City of Ocoee. It has been approved by the City of Ocoee for an 88,000 square foot mixed-use retail and office center comprising four 2-story buildings on a total of 5.77 acres. The value of the property is increasing substantially due to large new development in the immediate area, the completion of Highway 417 (the western Orlando beltway) and from other rapid development in the surrounding cities of Winter Garden and Ocoee. Property value has also increased significantly subsequent to acquisition by the Company, as full entitlement for the development of 88,000 square feet was finalized post-acquisition. Entitlement is the legal process of obtaining approvals for a specific development plan. The property was acquired by the purchase of 100% of the beneficial interest in the titled owner of the property, 501 Franklin Land Trust LLC, in an affiliated party transaction.
According to the Fund Offering Circular section titled, Policies with Respect to Certain Transactions, affiliated party transactions are authorized. Therefore it is noted that an affiliated party transaction was conducted in 2018 in compliance with the Fund Offering Circular section titled, Policies with Respect to Certain Transactions, whereby a mortgage note was executed between the Fund, as the mortgagee, and an affiliated party, Cherry Gap LLC, the mortgagor.
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Item 3. Directors and Officers
| Name | Age | Title | ||
| John Parrett | 66 | Manager of Preferred Income Manager LLC |
Biographical information regarding the above individual can be found in our offering circular.
Item 4. Security Ownership of Certain Beneficial Owners and Management
| Name of Beneficial Owner | General | Percent Before Offering | Percent After Offering | |||||||||
| Preferred Income Manager LLC | 100 | % | 100 | % | 100 | % | ||||||
| TOTAL | 100 | % | 100 | % | 100 | % | ||||||
“Beneficial ownership” means the sole or shared power to vote or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e. the power to dispose of or to direct the disposition of a security), In addition, for the purpose of this table, a person is deemed, as of any date, to have “beneficial ownership” of any security that such person has the right to acquire within 60 days from the date of the Offering.
Item 5. Interest of Management and Others in Certain Transactions
See Additional Company Matters in Item 2 above.
None.
7
Bridgewell Preferred Income LP
December 31, 2019 and 2018
Audited Financial Statements
8
BridgeWell Preferred Income LP
Table of Contents
December 31, 2019 and 2018
F-1
F-2
F-3
BridgeWell Preferred Income LP
Balance Sheets
| ASSETS | ||||||||
| December 31, | ||||||||
| Assets: | 2019 | 2018 | ||||||
| Cash | $ | 910,837 | $ | 160,726 | ||||
| Restricted Cash | 500,530 | $ | - | |||||
| Mortgage Loans Receivable | 14,534,214 | 7,514,870 | ||||||
| Real Estate Investments (Cost $2,581,132) | 2,581,132 | 1,465,934 | ||||||
| Prepaid Expenses and Other Receivables | 122,174 | 80,633 | ||||||
| Total Assets | $ | 18,648,887 | $ | 9,222,163 | ||||
| LIABILITIES AND PARTNERS' CAPITAL | ||||||||
| Liabilities: | ||||||||
| Accounts Payable and Accrued Liabilities | $ | 148,836 | $ | - | ||||
| Line of Credit | 3,702,400 | 392,513 | ||||||
| Related Party Payable | 194,462 | 144,522 | ||||||
| Total Liabilities | $ | 4,045,698 | $ | 537,035 | ||||
| Partners’ Capital | 14,603,189 | 8,685,128 | ||||||
| Total Liabilities and Partners’ Capital | $ | 18,648,887 | $ | 9,222,163 | ||||
See Notes to Financial Statements
F-4
BridgeWell Preferred Income LP
Statements of Investments
| December 31, 2019 | December 31, 2018 | |||||||||||||||
| Cost | Fair Value | Cost | Fair Value | |||||||||||||
| Mortgage Loans | ||||||||||||||||
| Receivable | $ | 14,534,214 | $ | 14,534,214 | $ | 7,514,870 | $ | 7,514,870 | ||||||||
| Total Mortgage | ||||||||||||||||
| Loans Receivable | $ | 14,534,214 | $ | 14,534,214 | $ | 7,514,870 | $ | 7,514,870 | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||||||||||
| Cost | Fair Value | Cost | Fair Value | |||||||||||||
| Real Estate Investments: | ||||||||||||||||
| Real Estate Purchases: | ||||||||||||||||
| 501 Franklin | $ | 1,946,445 | $ | 1,946,445 | $ | 1,305,745 | $ | 1,305,745 | ||||||||
| 2509 Shannon | - | - | 160,189 | 160,189 | ||||||||||||
| Real Estate Owned: | ||||||||||||||||
| 411 Seffner Valrico | 109,837 | 109,837 | - | - | ||||||||||||
| 4611 Colonial Ave. | 265,500 | 265,500 | - | - | ||||||||||||
| 760 Southleaf Dr. | 259,350 | 259,350 | - | - | ||||||||||||
| Total Real Estate Investments | $ | 2,581,132 | $ | 2,581,132 | $ | 1,465,934 | $ | 1,465,934 | ||||||||
See Notes to Financial Statements
F-5
BridgeWell Preferred Income LP
Statements of Income
| Years Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Income: | ||||||||
| Interest Income | $ | 1,179,296 | $ | 285,984 | ||||
| Gain on Sale of Real Estate Investment | 5,653 | 1,166 | ||||||
| Gain on Real Estate Owned Retention | 34,327 | - | ||||||
| Total Revenue | 1,219,276 | 287,150 | ||||||
| Expenses: | ||||||||
| Servicing Fees | 27,348 | 57,148 | ||||||
| Management Fees | 123,409 | 12,400 | ||||||
| Warehouse Credit Line Fees and Interest | 108,325 | 9,065 | ||||||
| General & Administrative Expenses | 105,045 | 14,253 | ||||||
| Write-Off of Deferred Management Fees | 24,928 | - | ||||||
| Total Expenses | 389,055 | 92,866 | ||||||
| Net Income | $ | 830,221 | $ | 194,284 | ||||
See Notes to Financial Statements
F-6
BridgeWell Preferred Income LP
Statements of Changes in Partners' Capital
| Partners | Syndication | |||||||||||||||
| Limited | General | Fees | Total | |||||||||||||
| Balance at January 1, 2018 | $ | - | $ | 50,000 | $ | - | $ | 50,000 | ||||||||
| Contributions | 8,880,566 | 1,600 | - | 8,882,166 | ||||||||||||
| Distributions & Withdrawals | (192,684 | ) | (1,600 | ) | - | (194,284 | ) | |||||||||
| Syndication Fees | - | - | (247,038 | ) | (247,038 | ) | ||||||||||
| Net Income | 192,684 | 1,600 | - | 194,284 | ||||||||||||
| Balance at December 31, 2018 | 8,880,566 | 51,600 | (247,038 | ) | 8,685,128 | |||||||||||
| Contributions | 7,256,223 | 18,585 | - | 7,274,808 | ||||||||||||
| Distributions & Withdrawals | (2,186,968 | ) | - | - | (2,186,968 | ) | ||||||||||
| Net Income | 830,221 | - | - | 830,221 | ||||||||||||
| Balance at December 31, 2019 | $ | 14,780,042 | $ | 70,185 | $ | (247,038 | ) | $ | 14,603,189 | |||||||
See Notes to Financial Statements
F-7
BridgeWell Preferred Income LP
Statements of Cash Flows
| Years Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Income | $ | 830,221 | $ | 194,284 | ||||
| Adjustments to Reconcile Net Income to Net Cash from Operating Activities: | ||||||||
| Net Gain on Sale of Real Estate Investment | (5,653 | ) | (1,166 | ) | ||||
| Net Gain on Real Estate Owned Retention | (34,327 | ) | - | |||||
| Change in Operating Assets & Liabilities: | ||||||||
| Mortgage Loans Receivable | (7,619,704 | ) | (7,514,870 | ) | ||||
| Prepaid Expenses and Other Receivables | (41,541 | ) | (80,633 | ) | ||||
| Accounts Payable and Accrued Liabilities | 148,836 | (6,284 | ) | |||||
| Related Party Payable | 49,940 | - | ||||||
| Net Cash Used in Operating Activities | (6,672,228 | ) | (7,408,669 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of Real Estate Investments | (640,700 | ) | (1,695,019 | ) | ||||
| Proceeds from Sale of Real Estate Investment | 165,842 | 230,251 | ||||||
| Net Cash Used in Investing Activities | (474,858 | ) | (1,464,768 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Net Proceeds from Line of Credit | 3,309,887 | 392,513 | ||||||
| Related Party Payable | - | 55,930 | ||||||
| Syndication Fees | - | (102,205 | ) | |||||
| Contributions | 7,274,808 | 8,880,566 | ||||||
| Withdrawals & Distributions | (2,186,968 | ) | (192,684 | ) | ||||
| Net Cash Provided by Financing Activities | 8,397,727 | 9,034,120 | ||||||
| Net Increase in Cash | 1,250,641 | 160,683 | ||||||
| Cash and Restricted Cash - Beginning of Year | 160,726 | 43 | ||||||
| Cash and Restricted Cash - End of Year | $ | 1,411,367 | $ | 160,726 | ||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash Paid for Taxes | $ | - | $ | - | ||||
| Cash Paid for LOC Interest | $ | 95,630 | $ | 7,290 | ||||
| Non-Cash transactions: | ||||||||
| Transfer of Syndication Costs to Partners' Capital | $ | - | $ | 144,833 | ||||
| Conversion of Mortgage Loans Receivable to Real Estate Owned | $ | 600,360 | $ | - | ||||
See Notes to Financial Statements
F-8
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
BridgeWell Preferred Income LP (the “Company”) is a Florida limited partnership formed on January 25, 2016. The general partner is the Preferred Income Manager LLC (“PIM”, “General Partner” or the “Manager”). The Company invests primarily in mortgage loans secured by the first and/or second mortgages issued to home remodelers, landlords, builders, developers, private and commercial real estate investors who purchase or refinance residential real estate properties that they intend to hold as rental property or for resale. Operations are conducted throughout the United States, but primarily in Florida. Mortgage loans acquired by the Company are primarily originated by BridgeWell Capital LLC, an affiliated company to the Manager, pursuant to a set of underwriting guidelines approved by management. BridgeWell Capital LLC also services the loans pursuant to a Master Note Servicing Agreement. The Company focuses on purchasing loans in the following states: Florida, Georgia, Tennessee, South Carolina, North Carolina, and Indiana, however, the Company holds loans throughout the United States.
The Company also invests in commercial real estate or land that management intends to renovate and sell or hold for appreciation and/or income production.
The Company’s commercial investment operations commenced upon receiving authority to issue Limited Partnership Units as discussed below.
General Company Provisions
The Company is managed by PIM, the Company’s General Partner (“General Partner” or the “Manager”). The rights, duties and powers of the Manager are governed by the Company’s limited partnership agreement.
PIM acting alone has the power and authority to act for and bind the Company.
Terms and Offering of the Company
The Company will continue in perpetuity unless PIM chooses to dissolve it.
Limited Partnership Units
On January 31, 2018, the Company received qualification from the U.S. Securities and Exchange Commission to issue Limited Partnership Units under Regulation A, the Conditional Small Issues Exemption, for a period of 12 months. Under the terms of the Company’s offering, it can issue up to 50,000 Limited Partnership Units at a price of $1,000 per unit. The Limited Partnership Units bear a preferred return of 7.00%. Limited Partners holding more than 75% of the Limited Partnership Units may vote to dissolve the Company. As of December 31, 2019 and December 31, 2018, the number of outstanding Limited Partnership Units were 14,780 and 8,880.6, respectively.
F-9
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Limited Partnership Units (continued)
On January 7, 2020 the Company filed a Post-Qualification Amendment to continue to offer Limited Partnership Units beyond the initial 12 months. Rule 251(D)(3)(I)(F)(4) permits Regulation A Offerings to conduct ongoing, continuous offerings of securities for more than thirty (30) days after the qualification date, but only if not more than three (3) years have elapsed since the initial qualification date of the offering, unless a new offering circular is submitted. The Company is permitted to continue to offer and sell the securities until the earlier of the qualification date of the new offering circular or the one hundred eighty (180) calendar days after the third anniversary of the initial qualification date of the prior offering circular, i.e. July 30, 2021. The Company intends to offer the Limited Partnership Units on a continuous and ongoing basis pursuant to Rule 251(D)(3)(I)(F).
General Partnership Units
The Company issued General Partnership Units to PIM, the General Partner. General Partnership Units are voting units and give the General Partner the sole discretion to operate the Company. General Partnership Units are entitled to 100% of profits after the payment of Company expenses and the 7.00% preferred return to the limited partners. As of December 31, 2019 and 2018, the number of General Partnership Units were 70.185 and 51.6 respectively.
Liquidity and Withdrawals
There is no public market for units of the Company, and none is expected to develop in the foreseeable future. The Company does have a redemption program; however, no Limited Partnership unit holder may request a redemption until 90 days after the units were purchased. Any redemption is not subject to penalty. The Company will only redeem Limited Partnership units up to 10% of the value of the assets under management per quarter.
F-10
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Profits and Losses
Subject to performance of the Company and after paying Company expenses, management fees and interest on the line of credit, profits and losses are allocated in the following order:
| ● | Losses are allocated pro-rata to Limited Partners |
| ● | Profits are allocated pro-rata to Limited Partners to the extent of prior losses; then to pay for cumulative preferred returns; thereafter 100% to the General Partner. |
Distributions
The Company distributes or reinvests amounts equal to the Limited Partners’ 7.00% non-compounded preferred return on their proportionate units based on the Company’s excess distributable cash each month. PIM will distribute funds only to the extent that funds are available.
Management and Related Party Fees
The Manager and/or its affiliates are entitled to receive certain fees, compensation and expense reimbursements from the Company, such as, but not limited to, the amounts specified below.
BridgeWell Capital LLC services loans and collects a servicing fee of up to 3.00% of the principal balance. This is outlined in the Note Servicing Agreement.
PIM is entitled to receive an asset management fee of 1.00% per annum on assets under management. This is outlined in the Regulation A filing.
The Company receives certain operating and administrative services from PIM, some of which may not be reimbursed to PIM. The Company’s financial position and results of operations would likely be different without this relationship with the Manager.
F-11
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Accounting and Use of Estimates
The Company’s financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. The Company is an investment company that follows the specialized accounting and reporting guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services - Investment Companies. The accrual basis of accounting requires the use of estimates and assumptions that affect the assets, liabilities, revenues and expenses reported in the financial statements, as well as amounts included in the notes thereto, including discussion and disclosure of contingent liabilities. Although the Company uses its best estimates and judgements, actual results could differ from these estimates as future confirming events occur.
Mortgage Loans Receivable
Mortgage loans receivable are recorded at their outstanding principal balance with interest thereon being accrued as earned. Company loans will have varying terms at the discretion of the Manager. Most Company loans will generally have a term of 12 months and provide for monthly payments of interest with a “balloon payment” at the end of the term. As of December 31, 2019, there are certain loans that have terms of two, three and 30 years. The Company will not recognize interest income on loans once they are determined to be impaired until the interest is collected in cash. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the underlying collateral.
Allowance for Loan Losses
The allowance for loans losses will be established for future potential loan losses. Loan losses will be charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, will be credited to income. The allowance for loan loss is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the types and dollar amounts of loans in the portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. As of December 31, 2019 and 2018, there were no allowances for loan losses recorded.
F-12
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Real Estate Investments
Real Estate Purchases
The Company invests in real estate and real estate trusts in select locations, redevelops them with the goal of selling them for retail market value or holding them for appreciation and/or income generation, providing investor attractive returns. Investments in real estate are carried at fair value. Real estate investments are comprised of commercial properties or raw land that is initially recorded at the purchase price plus closing costs when acquired. Improvements and development costs are capitalized as a component of the cost. Real estate investments are accounted for in accordance with FASB Topic 946, which requires investments to be initially measured at their transaction price and subsequently measured at fair value when the real estate rehabilitation or development is close to completion or completed and management is able to make an assessment of fair value. The fair value of each real estate investment is based on the price that would be received to sell an asset in an orderly transaction between marketplace participants at the measurement date. Unrealized new gains or loss are recorded in the statement of income.
Foreclosed Assets (Real Estate Owned)
Real estate owned includes real estate acquired in full or partial settlement of loan obligations plus capitalized construction and other development costs incurred while preparing the real estate for sale. At the time of foreclosure, the property is recorded at fair value, and the gains or losses on foreclosure are recorded in operating income or expense. Following foreclosure, valuations are periodically performed with any subsequent write-downs recorded as a separate valuation allowance against real estate owned and charged to other operating expenses.
Subsequent increases to real estate owned are only allowed up to the original cost basis, which is equal to the value of the property at the time of foreclosure.
F-13
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Real Estate Investments (continued)
Foreclosed Assets (Real Estate Owned) (continued)
The maintenance of the real estate owned for which rent is collected, is expensed as incurred. The maintenance of real estate owned that does not have rent collected is capitalized. The Fund actively works to sell the acquired real estate, and gains and losses on these dispositions are recorded in operating income or expense. Recognition of gains
on the sale of real estate is dependent upon the transaction meeting certain criteria related to the nature of the property, terms of sale and potential financing.
While the Fund holds real estate properties, it may rent them on a month-to-month basis. Rental income is considered incidental. Therefore, rental income is recorded as received and no depreciation expense is recorded.
During the current year, the Company foreclosed on 3 properties that were related to mortgage loans in the amount of $634,687.
Revenue Recognition
Mortgage interest income on performing loans is recognized as revenue when earned according to the contractual terms of the loan.
Gain or loss on sale of real estate investment is recognized at the time of sale of the asset.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an assert or paid to transfer liability in the principal of most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company determines the fair values of its assets and liabilities based on a fair value hierarchy established under applicable accounting guidance which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are 3 levels of inputs that may be used to measure fair value. The 3 levels are defined as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
F-14
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value Measurements (continued)
Level 2 inputs are those other than quoted prices that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs reflect the Company’s own assumptions about the interferences that market participants would use in pricing an asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the Company’s own data. All assets are considered Level 3. See Valuation and Process Techniques below.
Valuation Process and Techniques
The Company has various processes and controls in place to ensure that fair value is reasonably estimated. A model validation policy governs the use and control of valuation models used to estimate fair value. Periodic reassessments of the models are performed to ensure that they are continuing to perform as designed.
While the Company believes its valuation methods are the appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
The following methods and assumptions were used to estimate the fair value of assets and liabilities:
Performing mortgage loans that management intends to hold to maturity are valued at historical cost. Non-performing and impaired mortgage loans are reported at the net realizable value of the underlying collateral based on an observable market price or a current appraised value. Mortgage loans are classified as Level 3.
F-15
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value Measurements (continued)
Valuation Process and Techniques (continued)
Real estate investments are fair valued on a quarterly basis when the rehabilitation or development of the asset is close to completion and fair value is determinable. Management determines fair value using valuations or market estimates from third parties. Investments are classified as Level 3. Foreclosed real estate , or real estate owned (“REO”), is reported at the property’s estimated fair value less estimated costs to sell, to the extent fair value does not exceed the asset’s fair value at foreclosure based on its appraised value at the time of foreclosure less subsequent impairments, real estate owned is classified as Level 3.
Income Taxes
The Company has elected to be a partnership under the Internal Revenue Code and a similar section of the state code. The members of a partnership are taxed on their proportionate share of the Company’s taxable income. Therefore, no provision or liability for income taxes has been included in these financial statements.
The Company has evaluated its current tax positions and has concluded that as of December 31, 2019 and 2018, no significant uncertain tax positions exist for which a reserve would be necessary.
The Company’s income tax returns are subject to review and examination by federal, state and local governmental authorities. As of December 31, 2019, there are 2 years open to examination by the Internal Revenue Service and various for state and local governmental authorities. To the extent penalties and interest are incurred through the examinations, they would be included in the accompanying statements of income.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses for the years ended December 31, 2019 and 2018 were $51,010 and $9,840, respectively. These balances are included in General & Administrative Expenses on the statements of income.
F-16
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 1 - SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements
Accounting Standards Issued but Not Yet Effective
Credit Losses – In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326), and was clarified by FASB ASU 2019-04, Codification Improvements, and FASB ASUs 2019-05 and 2019-11, Targeted Transition Relief and Clarification. Prior to this pronouncement, generally accepted accounting principles required use of the incurred loss method for recognizing credit losses in the reserve. The incurred loss method recognizes a credit loss when it is probable that a loss has been incurred. The new guidance replaces the incurred loss method with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The pronouncement also allows for the irrevocable election of the fair value measurement for certain financial assets. Management is in the process of evaluating this guidance but does not believe it will have a significant impact on the financial statements of the Company. The effective date of FASB ASUs 2018-19 and 2019-10, Codification Improvements to Topic 326, Financial Instruments – Credit Losses have deferred the adoptions of these standards until interim and annual periods beginning after December 15, 2022. Management has not commenced evaluating the impact it will have on the financials statements of the Company.
Fair Value Measurement – In August 2018, the FASB issued ASU 2018-13 Disclosure Framework (Topic 820) – Changes to the Disclosure Requirements for Fair Value Measurement. This guidance removes or modifies various disclosures relating to the activity or reconciliations of Level 1, 2 and 3 fair value measurements. It is effective for interim and annual periods beginning after December 15, 2019. Management is in the process of evaluating this guidance but does not believe it will have a significant impact on the financial statements of the Company.
NOTE 2 - CASH CONCENTRATION
The Company maintains funds in a financial institution that is a member of the Federal Deposit Insurance Corporation. As such, funds are insured based on the Federal Reserve limit of $250,000. The Company has not experienced any losses to date, and management believes it is not exposed to any significant credit risk on the current account balance. At times, cash balances may exceed insured amounts.
F-17
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 3 - MORTGAGE LOANS RECIEVABLE
Mortgage loans receivable consist of notes to individuals and companies, secured by deeds of trust, bearing interest at 5.00% to 14.95% per annum with either a balloon payment due at maturity or periodic amortizing payments. These notes have maturity dates ranging from January 2020 to February 2050.
At December 31, 2019, mortgage loans receivable mature as follows:
| Years Ending December 31, | Amount | |||
| 2020 | $ | 10,139,674 | ||
| 2021 | 1,171,751 | |||
| 2022 | - | |||
| 2023 | 250,000 | |||
| 2024 | - | |||
| Thereafter | 2,972,789 | |||
| Total | $ | 14,534,214 | ||
As of December 31, 2019, the Company has outstanding rehabilitation loans of $9,381.670, with a commitment to fund an additional $1,962,207. As of December 31, 2018, the Company had outstanding rehabilitation loans of $6,012,866, with a commitment to fund an additional $2,635,558. Commitments are funded by a combination of collections of mortgage loans receivable and credit line advances. No loans were modified for the year ended December 31, 2019. As of December 31, 2019, 17 loans amounting to $1,546,607 were in default, five of which had missed one monthly payment, and 12 of which had missed 2 monthly payments (non-performing). Three of the loans in default were subsequently brought current, one loan subsequently became an REO, and the remainder subsequently became non-performing.
No loans were modified for the year ended December 31, 2018. As of December 2018, 7 loans amounting to $234,823 were in default, five of which had missed one monthly payment, and two of which had missed two monthly payments. Four of the loans were subsequently brought current, one loan subsequently became an REO, and two loans subsequently became non-performing. The Company does not accrue interest owed on past due loans. Loans are restored to accrual status when interest payments are brought current. At December 31, 2019 and 2018, unaccrued interest was $66,989 and $1,146, respectively. As of June 19, 2020, of the $1,968,590 in loans with 2019 original maturity dates, $768,738 had paid off, $577,514 were performing but still past maturity, and $704,338 became non-performing.
F-18
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 4 - LINE OF CREDIT
In 2019 and 2018, the Company had access to a line of credit (“LOC”) for $2,000,000 through an agreement with the servicer, BridgeWell Capital LLC (“BWC”). The LOC agreement had a variable rate of interest based on 1-year LIBOR plus 4.50% with a minimum interest rate of 7.50%. At December 31, 2019 and 2018, the borrowing rate was 7.50% and 7.53%, respectively. The LOC is renewed annually and is collateralized by the Company’s assets and is also personally guaranteed by the principal of BWC. In February of 2019, the Company obtained a $5,000,000 dedicated warehouse line of credit with Silvergate Bank. The line went into productive use in mid-May 2019. The Company reimbursed BWC, the servicer, for $27,360 in credit line interest and fees incurred on the $2,000,000 line for the year ended December 31, 2019, and $9,065 for the year ended December 31, 2018. The Company paid its own fees and interest on the Silvergate Line.
NOTE 5 - RELATED PARTY TRANSACTIONS
Management Fees
PIM earned $123,408 in management fees for the year ended December 31, 2019, of which $113,408 is included in related party payable on the accompanying balance sheets.
PIM earned $37,328 in management fees for the year ended December 31, 2018, all of which is included in related party payable on the accompanying balance sheets.
Servicing Fees
BridgeWell Capital LLC (“BWC”) earned $27,348 in servicing fees for the year ended December 31, 2019, all of which were included in related party payable on the accompanying balance sheet. BWC earned $57,148 in servicing fees for the year ended December 31, 2018 of which $36,723 is included in the related party payable on the accompanying balance sheet.
F-19
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED)
Related Party Payable
For the year ended December 31, 2019 BWC provided $59,184 for activities related to raising capital, such as advertising and investor seminars, all of which were in included in related party payable on the accompanying balance sheet. The Company paid back BWC $150,000 of related party payable during the year ended December 31, 2019. This repayment included the $10,000 advance from the General Partner in 2018, which was made to cover costs associated with Syndication. These repayments are reflected in the related party payable on the accompanying balance sheet at December 31, 2019.
For the year ended December 31, 2018, BWC provided $97,194 to the Company for Regulation A+ related syndication costs, all of which were included in the related party payable on the accompanying balance sheet.
Investments
The General Partner’s equity investment in the Company was $70,185 and $51,600 at December 31, 2019 and 2018, respectively.
NOTE 6 - FAIR VALUE MEASUREMENTS
The following table represents the Company’s fair value hierarchy for its assets’ measures at fair value on a recurring basis as of December 31,
| 2019 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Mortgage Loans Receivable | $ | - | $ | - | $ | 14,534,214 | ||||||
| Real Estate Purchases | - | - | 1,946,445 | |||||||||
| Real Estate Owned | - | - | 634,687 | |||||||||
| $ | - | $ | - | $ | 17,115,346 | |||||||
F-20
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 6 - FAIR VALUE MEASUREMENTS (CONTINUED)
The following table represents the Company’s fair value hierarchy for its asset’s measures at fair value on a recurring basis as of December 31,
| 2018 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Mortgage Loans Receivable | $ | - | $ | - | $ | 7,514,870 | ||||||
| Real Estate Purchases | - | - | 1,465,934 | |||||||||
| Real Estate Owned | - | - | - | |||||||||
| $ | - | $ | - | $ | 8,980,804 | |||||||
For the year ended December 31, 2019, the Company had the following Level 3 assets:
| Mortgage Loans Receivable | Real Estate Investments | |||||||
| Beginning Balance | $ | 7,514,870 | $ | 1,465,934 | ||||
| Real Estate Purchases | 12,721,831 | 640,700 | ||||||
| Conversion of Mortgage Loans | ||||||||
| Receivable to REOs | - | 634,687 | ||||||
| Unrealized Fair Value | ||||||||
| Adjustment | - | - | ||||||
| Payoffs or Sales | (5,702,487 | ) | (160,189 | ) | ||||
| Total | $ | 14,534,214 | $ | 2,581,132 | ||||
For the year ended December 31, 2018, the Company had the following Level 3 assets:
| Mortgage Loans Receivable | Real Estate Investments | |||||||
| Beginning Balance | $ | - | $ | - | ||||
| Real Estate Purchases | 7,516,150 | 1,695,019 | ||||||
| Unrealized Fair Value Adjustment | - | - | ||||||
| Payoffs or Sales | (1,280 | ) | (229,085 | ) | ||||
| Total | $ | 7,514,870 | $ | 1,465,934 | ||||
F-21
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 6 - FAIR VALUE MEASUREMENTS (CONTINUED)
Due to their short-term nature, the carrying values of cash, accounts payable and accrued liabilities, line of credit and related party payable approximate their fair values at December 31, 2019 and 2018.
NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company may become a party to litigation matters involving claims against it. At December 31, 2019, there are no current matters that would have a material effect on the Company’s financial positions or results of operations.
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through June 19, 2020, the date the financial statement was available to be issued, and the following events are noted.
Reclassifications
Reclassifications have been made to the prior year financial statements to conform to the classifications used in the current year financial statements. These reclassifications have no effect on prior year income.
Loans in Default
As described in Note 3, of the 12 loans that were non-performing at December 31, 2019, one loan was subsequently brought current, one loan subsequently became an REO, and the remainder subsequently became non-performing. Of the performing loans at December 31, 2019 four loans became non-performing as of June 19, 2020. The Company has not incurred any losses on such loans, and believes the underlying collateral exceeds the value recorded as of December 31, 2019. As of June 19, 2020 non-performing loans as a percent of total mortgage loans receivable was 8.2%.
Warehouse Line of Credit
The $2,000,000 warehouse line with Ameris Bank that was obtained through BWC, the servicer, was closed due to non-use. Another warehouse line had been obtained specifically for BridgeWell Preferred Income LP on more favorable terms. A new $5,000,000 warehouse facility with Silvergate Bank came on line in first quarter 2019.
F-22
BridgeWell Preferred Income LP
Notes to Financial Statements
December 31, 2019 to 2018
NOTE 8 - SUBSEQUENT EVENTS (CONTINUED)
Warehouse Line of Credit (continued)
On March 25, 2020, the Manager (PIM) was informed by Silvergate Bank that they could not currently fund BridgeWell loans due to the impact of the COVID-19 Pandemic on Silvergate Bank’s operations. The line is considered temporarily suspended and the Manager is in continuing discussions with Silvergate as to the terms and conditions of re-opening the line. At the current time, the Company has sufficient cash to purchase new loans, thereby making the temporary loss of the use of this warehouse line of no significant impact in the near term.
Investment Capital
From January 1, 2020 through June 19, 2020 the Company issued an additional 4,269.2 Limited Partnership Units for $4,269,154 and returned 1,461.8 Limited Partnership Units for $1,461,772.
COVID-19
In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in China and has since spread to other countries, including the U.S. The extent of the impact of COVID-19 outbreak on operations of the Company will depend on future developments, including the duration and spread of the outbreak, related advisories and restrictions, government actions, the impact on financial markets and the overall economy, all of which are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s operations can be affected. Future potential impacts may include the borrowers’ ability to pay the required monthly loan payments or ability to solicit additional capital. New institutional buyers of long-term mortgage notes may need to be sourced. Operating functions that may be changed include site visits, borrower draws, and new loan applications and funding. Foreclosure actions on non-performing loans may be delayed. Permitting, zoning and other issues related to real estate held for development or rehabilitation may be delayed. Changes to the operating environment may increase operating costs. Depending on the severity and length of the outbreak, the novel coronavirus could present uncertainty and risk with respect to the Company, its performance, and its financial results.
F-23
BridgeWell Preferred Income LP
Supplemental Schedule - Loan Concentrations and Characteristics
December 31, 2019
The loans are secured by recorded deeds of trust. Outstanding loan charactersitics are as follows:
| Number of Secured Loans Outstanding | 175 | |||
| Total Secured Loans Outstanding | $ | 14,534,214 | ||
| Average Secured First Loan Outstanding | $ | 136,897 | ||
| Average Secured Second Loan Outstanding | $ | 51,543 | ||
| Average Secured Loan as Percent of Total Secured Loans | 1.30 | % | ||
| Average Secured Loan as Percent of Members' Equity | 1.29 | % | ||
| Largest Secured Loan Outstanding | $ | 474,500 | ||
| Largest Secured Loan as Percent of Total Secured Loans | 3.26 | % | ||
| Largest Secured Loan as Percent of Members' Equity | 3.25 | % | ||
| Number of Counties Where Secured Loans are Located | 67 | |||
| The following categories of secured loans were held: | ||||
| First Trust Deeds | $ | 8,761,394 | ||
| Second Trust Deeds | 5,772,820 | |||
| Total | $ | 14,534,214 | ||
| The following types of secured loans were held: | ||||
| Single-Family Residential | $ | 14,534,214 | ||
| Total | $ | 14,534,214 |
See Notes to Financial Statements
F-24
SIGNATURE
Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BridgeWell Preferred Income LP | |
| /s/ John Parrett | |
| John
Parrett, Manager of BridgeWell Preferred Manager LLC |
|
| Manager | |
| June 19, 2020 |
9