Senior Secured Demand Notes

Our Senior Secured Demand Notes provide a 6% adjustable interest rate on investments of $50,000 or more. Investments are redeemable at par (face value) after 30 days and provide monthly interest distributions or optional reinvestment, allowing for maximum flexibility.

Security

Our fund structure offers multiple layers of protection for Senior Secured Demand Noteholders.

  • $68.4 million loan portfolio secured by an estimated $98.9 million of real estate collateral. (1)
  • Tiered loan portfolio capital structure provides Senior Secured Demand Noteholders with additional loan-to-value protection relative to Junior Noteholders and Equity Program investors. 
  • As of December 31, 2017, the pro forma loan-to-value of an assumed $5 million investment in the Senior Secured Demand Notes would have been 24% and the real estate asset coverage would have been 4.1 times.  (2)(3)(4)

SHOW DISCLOSURES

  • Real Estate Value

    (1) As part of its underwriting process, Iron Bridge prepares an estimated “after-repair” valuation of the real estate collateral for each loan. The after-repair value assumes that all planned capital improvements to the real estate collateral have been completed and that the company has disbursed all construction loan proceeds, and represents Iron Bridge’s estimate of the market value of the collateral after completion of the project based on information about comparable properties available to it at that time. Actual values may be more or less than that estimated by Iron Bridge. As of December 31, 2017, the estimated “after-repair value” of the real estate collateral securing the loan portfolio was $112,062,500.

    In order to provide an estimate of the “as-is” real estate collateral value at end of period, and to account for projects that are in process of construction or redevelopment, Iron Bridge uses a straight line percentage completion method to estimate the “as-is” real estate value. Specifically, Iron Bridge estimates the percentage completion of all real estate projects based on the percentage of construction funds disbursed as of a particular date and then multiplies this percentage completion by the total estimated value creation (estimated “after-repair” value of real estate minus purchase price) to determine the current value added through capital improvements. The current value added through capital improvements is then added to the original purchase price to calculate the “as-is” value of the real estate collateral as of a particular date. This estimated “as-is” value is then used to analyze the cumulative loan-to-value and real estate asset coverage of each investment program. It is important to note that the “as-is” loan-to-value and asset coverage ratios improve as the percentage completion increases.

    As of December 31, 2017, total construction loan commitments were $21,983,628 and construction funds disbursed were $14,336,035, resulting in an estimated percentage completion of 65%. The estimated after-repair value was $112,062,500 and the purchase price of the real estate was $60,578,984, resulting in total estimated value creation of $51,483,516. Multiplying the total estimated value creation of $51,483,516 by the estimated project completion of 65% equals an estimated $33,573,598 of incremental real estate value creation. Adding $33,573,598 of incremental real estate value creation to the real estate purchase price of $60,578,984 provides an estimated current real estate collateral value of $98,948,148.

    Senior Secured Notes

    (2) Our Senior Secured Demand Notes are being offered only by means of the Offering Circular which is available for downloand on our website. The Offering Circular is part of an Offering Statement that was filed with, and qualified by, the Securities and Exchange Commission under Tier II of Regulation A under the Securities Act of 1933, as amended (the “Securities Act”) during February 2018. No offer to sell or solicitation of an offer to buy the Senior Secured Demand Notes is being made in any jurisdiction in which such offer, sale or solicitation would not be permitted by law.

  • The minimum investment in our Senior Secured Demand Notes is $50,000. Persons who are not “accredited investors” as defined for purposes of Regulation D under the Securities Act will not be permitted to purchase Senior Secured Demand Notes in an amount in excess of 10 percent of the greater of the investor’s annual income or net worth (for natural persons) or revenues or net assets (for entities).

    As of December 31, 2017, Iron Bridge had not issued Senior Secured Demand Notes. Iron Bridge is displaying the pro forma value of $5 million of Senior Secured Demand Notes with an interest rate of 6% to inform prospective investors as to what the pro forma cumulative interest coverage, loan-to-value percentage and asset coverage would have been had the Company issued $5 million of Senior Secured Demand Notes during the year ended December 31, 2017. The total amount of Junior Notes was decreased by $5 million in order to maintain an accurate representation of total debt issued.

    Cumulative Loan to Value

    (3) Cumulative loan-to-value is the value of the debt or equity investment plus any senior debt divided by the estimated “as-is” real estate value ($98.9 million as of December 31, 2017). As of December 31, 2017, the loan-to-value of Bank Borrowings equaled 19% or $19.0 million in Bank Borrowings divided by the estimated “as-is” real estate collateral value of $98.9 million; Cumulative pro forma loan-to-value of Senior Secured Demand Notes equaled 24% or $24.0 million (the sum of $5.0 million in Senior Secured Demand Notes plus $19.0 million in Bank Borrowings) divided by the estimated “as-is” real estate collateral value of $98.9 million; Cumulative loan-to-value of Junior Notes equaled 53% or $52.8 million (the sum of $28.8 million in Junior Notes plus $5.0 million in Senior Secured Demand Notes plus $19.0 million in Bank Borrowings) divided by the estimated “as-is” real estate collateral value of $98.9 million, and; Cumulative loan-to-value of equity equaled 74% or $73.0 million (the sum of $20.2 million in equity plus $28.8 million in Junior Notes plus $5.0 million in Senior Secured Demand Notes plus $19.0 million in Bank Borrowings) divided by the estimated “as-is” real estate collateral value of $98.9 million.

    Cumulative Asset Coverage

    (4) Cumulative Asset Coverage is the estimated “as-is” real estate value ($98.9 million as of December 31, 2017) divided by the debt or equity and any senior debt. As of December 31, 2017, Bank Borrowings equaled 5.2 times or $98.9 million in estimated “as-is” real estate collateral value divided by $19.0 million in Bank Borrowings; Senior Secured Demand Notes equaled 4.1 times or $98.9 million in estimated “as-is” real estate collateral value divided by $24.0 million (the sum of $5.0 million in Senior Secured Demand Notes plus $19.0 million in Bank Borrowings), Junior Notes equaled 1.9 times or $98.9 million in estimated “as-is” real estate collateral value divided by $52.8 million (the sum of $28.8 million in Junior Notes plus $5.0 million in Senior Secured Demand Notes plus $19.0 million in Bank Borrowings), and; Equity equaled 1.4 times or $98.9 million in estimated “as-is” real estate collateral value divided by $73.0 million (the sum of $20.2 million in equity plus $28.8 million in Junior Notes plus $5.0 million in Senior Secured Demand Notes plus $19.0 million in Bank Borrowings).

LIQUIDITY

Senior Secured Demand Notes are redeemable with a 30-day notice which allows you to withdraw or add to your Senior Notes quickly and easily.

Iron Bridge Gross Revenue

(12 months ended December 31, 2017)

INTEREST PAID

8X

Bank Financing
+ Senior Secured Notes (1)
$1,375,991

3X

Bank Financing
+ Senior Secured Notes (1)
+ Junior Notes
$3,971,237

Interest Coverage

Our business model generates strong and stable recurring revenues available to make interest payments.

  • Interest expense paid on the Bank Financing and Senior Secured Demand Notes combined for the 12 months ended December 31, 2017 was $1,375,991. Gross revenues were approximately 8 times the amount necessary to pay this interest expense. (1)
  • Interest expense paid on the Bank Financing, Senior Secured Demand Notes and Junior Notes combined for the 12 months ended December 31, 2017 was $3,971,237 million. Gross revenues were approximately 3 times the amount necessary to pay this interest expense. (1)

Stability

The strength of our loan portfolio comes from our investment in the value creation of our borrowers. We do not speculate on the economy or the real estate market. Our loan portfolio has performed well in both down and up economies since 2009.

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We invest in our borrowers and the talent they bring to their projects.

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Our borrowers make money on the value they create in their projects.

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Short term loans allow us to adapt quickly to changing markets.

Fund Management

Operators

Gerard & Sarah began this fund to provide for their family, perform a valuable service for their borrowers and deliver attractive returns to their investors.

Underwriting

With our in-house loan origination and underwriting process, we have intimate knowledge of the circumstances behind each loan we make.

Loan Servicing

In-house servicing means personal interactions with our borrowers, which leads to successful projects and excellent returns. We’re committed to helping borrowers succeed.

Frequently Asked Questions

Why is Iron Bridge offering Senior Notes?
Iron Bridge Mortgage Fund’s capital structure was comprised of two private investment programs, the Junior Notes and the Equity Program, each offering investors different investment options relative to risk, return and liquidity. The Senior Notes, introduced during the first quarter of 2018, are the third and newest investment program designed to provide investors the highest level of security and liquidity compared to the Company’s Junior Notes and Equity Program. The Senior Notes will also help Iron Bridge lower its blended cost of capital, which will allow the Company to make lower priced loans and attract the highest quality Portfolio Borrowers.
What is unique about the Senior Notes?
Senior Notes have a perpetual maturity and are redeemable at par with 30-day notice to Iron Bridge, providing investors liquidity while minimizing reinvestment risk and interest rate risk. In addition, Senior Noteholders can add to their Senior Notes or withdraw from their Senior Notes intra-month, offering investors the ability to earn interest from the day Iron Bridge receives the funds through the day the funds are returned to the investor. It’s a great way for investors to earn an attractive rate of return on capital that might otherwise be sitting in the bank.
What is my security position in Iron Bridge as a Senior Noteholder?

The Senior Notes will be senior in security interest to the Company’s existing Junior Notes and Equity Program capital, and subordinate to the Company’s Bank Borrowings or any replacement or addition to such borrowings.
Specifically, Equity Program investors share in the profits of Iron Bridge but are only protected by the value of the real estate collateral securing the Company’s loan portfolio and are first at risk of capital loss should the value of the real estate collateral be insufficient to repay the loan portfolio. Junior Noteholders earn an 8% interest rate and are protected by the real estate collateral securing the loan portfolio and further protected by over $20 million in Equity Program capital, which would have to be charged off before a Junior Noteholder would lose any of their principal investment. The Senior Noteholders earn an 6% interest rate and are protected by the real estate collateral, over $20 million in Equity Program capital and further protected by over $28 million in Junior Notes, which would all have to be charged off prior to a Senior Noteholder losing any of their principal investment.
For the three months ended December 31, 2017, the pro forma interest coverage, “as-is” loan-to-value and “as-is” asset coverage would have been 7.1 times, 24% and 4.1 times, respectively.  

What are Bank Borrowings?

Iron Bridge has a $40 million line of credit with Western Alliance Bank, which is senior in security interest in all of the Company’s assets, including Senior Notes. The Company targets a line of credit utilization rate of 50-70%, which allows the Company to meet unanticipated loan requests from borrowers or unanticipated withdrawal requests from investors. Similarly, if the Company’s Portfolio Loans pay off faster than anticipated or if new loan originations do not match the rate of loan payoffs, the line of credit can be paid down while keeping investor capital fully utilized.

What are Junior Notes?

On May 1, 2010, the Company commenced a private placement offering of secured promissory notes with six-month maturities offering an interest rate of 12% per annum. On April 1, 2015, the Company amended the offering, reducing the interest rate to 10% per annum. On April 1, 2017, the Company amended the offering again, reducing the interest rate to 8% per annum. Junior Notes will be subordinate to (at risk before) the Senior Notes.

What is the Equity Program?

On April 1, 2009, the Company commenced a private placement equity offering of 10% Preferred, Participating LLC ownership interests. The private placement offering represents all of the Company’s equity and is a continuous offering that allows the Company to raise additional equity as needed. Equity is subordinate in security interest to (at risk before) the Senior Notes.

What is the Maximum Debt Covenant and how is it calculated?

The aggregate amount of debt provided by Senior Notes, Junior Notes and Bank Borrowings may not exceed eighty percent (80%) of total assets. The Maximum Debt Covenant restricts the total amount of debt the Company can assume and is designed to maintain a minimum buffer of equity protection for Senior Noteholders and Junior Noteholders. This equity protection is in addition to the loan-to-value protection provided by the real estate collateral securing the Portfolio Loans.

How many loans has the Company made since inception and how did they perform?

As of December 31, 2017, the Company had originated 2,058 loans since inception (April 1, 2009) of which 1,826 had paid off and 32 had become REO properties through either the foreclosure or deed in lieu of foreclosure process, resulting in a net 232 active Portfolio Loans. See the Company’s most recent quarterly report for management’s discussion and analysis of loan portfolio originations, payoffs, and overall loan portfolio performance.

How much capital does the Company currently have invested in Portfolio Loans?

As of December 31, 2017, the unpaid principal balance of the Company’s loan portfolio was $68.4 million.The loan portfolio consisted of 232 active loans provided to 151 borrowers. The average number of loans per borrower was 1.5 loans. The largest borrower represented 8% of the unpaid principal balance while the top 3 borrowers represented 17% of the unpaid principal balance. See the Company’s most recent quarterly report for management’s discussion and analysis of loan portfolio originations, payoffs, and overall loan portfolio performance.

How long does the Manager intend to operate the company?

The Manager and its Principals intend to operate Iron Bridge for the foreseeable future.

How will the Company react to future changes in the housing market?

The private money lending industry has thrived in both increasing and decreasing real estate pricing environments and is not dependent on a high volume of distressed real estate sales, a restrictive lending environment or appreciating real estate values. The value of private money lending to a borrower is measured by the speed, specialization and quality of service provided by the lender. While the real estate environment will continue to change, Iron Bridge will adapt to those changes by shifting its loan portfolio to different geographic markets and adjusting loan programs and related underwriting guidelines.

Where does the Company source most of its loans?

The company has developed and continues to develop a network of real estate investors who have a need for private real estate financing to execute their investment strategies. These investors are professional home builders, developers, rehabbers, remodelers, or other real estate oriented professionals who utilize different techniques to acquire, improve and resell real property.

If Portfolio Loans become non-performing, what happens?

Iron Bridge underwrites each loan with the expectation that if it must foreclose on the property, there will be sufficient equity in the real estate collateral to insulate Iron Bridge from a capital loss. The Company relies on outside counsel to manage the foreclosure process. In some cases, it is possible that the Company will earn a greater return on non-performing loans due to the late fees and default interest rates that apply. If the final disposition value of a foreclosed property is less than the principal plus accrued interest due, then the amount of the shortfall is booked against the Company’s loan loss reserve. See the Company’s most recent quarterly report for additional details regarding non-performing assets.

What assurances do I have that I will not lose my money?

There can be no assurance that an investor will not lose some or all of their investment in the Company. However, the Company has established the following guidelines to minimize risk and maximize the preservation of capital: (a) All of the Company’s Portfolio Loans are secured by first lien deeds of trust on real property; (b) The Company does not lend more than 70% of the estimated after-repair value of the real estate collateral; (c) The Company seeks to maintain strong cash flow generation and conservative debt service coverage ratios, and; (d) the Senior Noteholders’ principal investments are further secured by all of the subordinate Junior Notes and equity interests.

How is Iron Bridge confident it will have the cash flow necessary to return my investment capital when I need it?

The Company makes short-term loans with maturities of 12 months or less. These Portfolio Loan payoffs provide a primary source of cash flow to the Company, which can be used to pay back Senior Noteholders or to make new loans. For the twelve months through December 31, 2017, Portfolio Loan payoffs ranged from $4.1 million to $9.3 million per month. In addition, Iron Bridge targets a line of credit utilization rate of 50-70% on its $40 million credit facility, which would provide approximately $12 million to $20 million in line of credit borrowing capacity to meet investor withdrawal requests. If there is still not sufficient liquidity to meet the redemption request, Iron Bridge can elect to delay the return of Junior Noteholder or Senior Noteholder capital for up to 90 days.

What happens if all Senior Noteholders want their money back at the same time?

If the Company receives demands for payment from Senior Noteholders collectively holding more than thirty percent (30%) of the unpaid principal amounts of all outstanding Senior Notes, then the Company may elect to (i) extend the Maturity Date for all Senior Notes while the Company liquidates and winds up its Portfolio Loans to its borrowers, (ii) during any such extension period, make payments, or prepayments as applicable, to all Senior Noteholders in proportion to the relative principal amounts of all outstanding Senior Notes, not just the Senior Noteholders who have demanded payment, and (iii) give notice to the Senior Noteholders that the Company is electing to take these actions.

What secures the Senior Notes and is there a collateral agent to administer the security agreements?

Yes. The Senior Notes will be secured by all of the assets of the Company, including but not limited to bank accounts, Portfolio Loans, and personal property of the Company, whether tangible or intangible, either now owned or hereafter acquired (the “Collateral”) pursuant to the Security Agreement for the benefit of the Senior Noteholders between the Company and the law firm, Carr Butterfield, LLC, as Collateral Agent (the “Security Agreement”). The Company has limited fixed, tangible assets and its primary assets are Portfolio Loans. The Collateral Agent is also available to organize Senior Noteholders if needed.

Has Iron Bridge ever been in default with any of its creditors?

No. Since Company inception (April 1, 2009) all interest and principal payments to creditors of the Company have been made in full when due.

Have investors ever lost money in Iron Bridge or another investment sponsored by the Manager or its Principals?

No investor has ever lost money in Iron Bridge Mortgage Fund or in any other investment program sponsored by the Manager or its Principals.

How is the Manager compensated and do I pay a fee to the Manager?

Senior Noteholders do not pay any fees to Iron Bridge. The Manager earns compensation from two sources: (a) A loan servicing fee, equal to 3% of the principal value of the Portfolio Loans, and; (b) A performance fee equal to 50% of Company profits in excess of the 10% preferred return payable to Equity Program investors.

Compensation to the Manager is paid from profits earned by the Company, and only after all accrued interest has been paid on Bank Borrowings, Senior Notes and Junior Notes.

What ongoing financial reports will Iron Bridge provide Senior Noteholders?

Annual audited financials concerning the Company’s business affairs will be provided to Senior Noteholders. Each Senior Noteholder will receive a copy of the Company’s income statement, balance sheet and statement of cash flows prepared by an Independent Certified Public Accountant. The Company will also provide Senior Noteholders with (i) monthly interest statements related to their investment accounts, and (ii) quarterly financial reports, including portfolio metrics and unaudited financial statements. The Company’s books and records are maintained on the accrual basis for accounting purposes and for reporting income and losses for federal income tax purposes. In connection with this offering, the Company will also be required to file with the SEC annual, semiannual, and current event reports for at least the fiscal year in which this Offering Circular was qualified and for so long as offers and sales of Senior Notes are ongoing.

What accounting firm performs the annual financial audit of Iron Bridge and for how many years?

Armanino, the largest California-based CPA & consulting firm, completed the Company’s 2011 through 2017 financial audits. Armanino brings a deep industry expertise surrounding real estate and more specifically mortgage pools, providing the Iron Bridge with proactive counsel throughout the year. Copies of our 2009 through 2017 financial audits are available upon request.

What IRS tax forms will Iron Bridge provide Senior Noteholders?

Senior Noteholder’s will receive their respective IRS Form 1099-INT.

What investment returns can I expect if I choose to reinvest my monthly interest payments?

The Senior Notes pay investors a fixed 6% annualized rate of return. Senior Noteholders may elect to have their monthly interest distributions sent to them in the form of electronic ACH transfers or reinvested into additional principal (“Roll-Over Interest”). Senior Noteholders who elect Roll-Over Interest will benefit from monthly compounding, providing the Senior Noteholders an annualized yield of approximately 6.17%. Changes in principal value will be kept in the records of the Company and reported on the investor’s monthly investment history report.

Can I change my Roll-Over investment election?

Yes. A Senior Noteholder may change their distribution election with 30-day written notice to the Company.

Can I use my IRA money to invest in the Senior Notes?

Yes. Self-directed IRA investments are allowed. However, due to regulatory restrictions, the Company may not accept more than 25% of its investment capital from IRA accounts. IRA investors should inquire whether the Company is currently accepting IRA investments.

Are there any restrictions on who can invest or how much an investor can invest in Senior Notes?

There is no restriction on the amount an accredited investor can invest in Senior Notes. However, Senior Noteholders may be limited to $1 million per month in redemptions. Investors that are not “accredited investors,” as defined for purposes of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) will not be permitted to purchase more than 10% of the greater of the investor’s annual income or net worth (for natural persons) or revenue or net assets (for entities).
An accredited investor is generally defined as an individual who has a net worth of at least $1,000,000, excluding the value of the investor’s primary residence, or has had an individual income in excess of $200,000 for each of the two most recent years, or a joint income with the investor’s spouse of
$300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year.

Does Iron Bridge have to verify my status as an accredited investor prior to investing in Senior Notes?

No. Iron Bridge will ask prospective investors to make representations with respect to their status as an “accredited investor,” and with respect to their annual income or revenue, and net worth or net assets. Iron Bridge will not ask prospective investors for personal financial information and will not direct a third party to collect or evaluate the investors’ personal financial information.

What is the minimum investment?

The minimum investment in the Senior Notes is $50,000. However, the Manager has the discretion to allow investments of less than $50,000. Investors should inquire whether the Company is currently accepting investments of less than $50,000.

How do I make an investment in Senior Notes?

Investors who wish to purchase Senior Notes must complete and sign a Senior Note Subscription Agreement, the Senior Note Purchase Agreement and an investor suitability questionnaire. The subscription documents must be delivered to the Manager together with a check, ACH, or wire transfer in an amount equal to the principal amount of the investment.

How do I add money to or withdraw money from my Senior Notes?

Senior Noteholders provide Iron Bridge with a deposit request form or a withdrawal request form. After verbal verification, Iron Bridge will initiate an ACH debit or credit to the Noteholder bank account. For security purposes, Iron Bridge will not send investor withdrawals to third-party bank accounts.

Is my investment transferable to others?

No. Senior Notes are subject to restrictions on transferability and resale based on federal and state securities laws.

Our Senior Secured Demand Notes are being offered only by means of the Offering Circular which is available at www.ironbridgelending.com. The Offering Circular is part of an Offering Statement that was filed with, and qualified by, the Securities and Exchange Commission under Tier II of Regulation A under the Securities Act of 1933, as amended (the “Securities Act”). No offer to sell or solicitation of an offer to buy the Senior Secured Demand Notes is being made in any jurisdiction in which such offer, sale or solicitation would not be permitted by law.

The minimum investment in our Senior Secured Demand Notes is $50,000. Persons who are not “accredited investors” as defined for purposes of Regulation D under the Securities Act will not be permitted to purchase Senior Secured Demand Notes in an amount in excess of 10 percent of the greater of the investor’s annual income or net worth (for natural persons) or revenues or net assets (for entities).

This presentation includes “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are generally identifiable by the use of words such as “may,” “should,” “expects,” “plans,” “believes,” “estimates,” “predicts,” and similar words or expressions. Such statements include information concerning our plans, expectations, possible or assumed future financial results, trends and business plans, and involve risks and uncertainties that are difficult to predict and subject to change based on various important factors, many of which are beyond our control. Such factors include, but are not limited to, those discussed in the “Risk Factors” section of the Offering Circular. These and other important factors could cause actual results to differ materially from those described in any forward-looking statement. You should not place undue reliance on our forward-looking statements and information. The forward-looking statements included in this presentation are made as of the date hereof and we assume no obligation and do not intend to update such forward-looking statements or the reasons actual results could differ from those described in such forward-looking statements. All forward-looking statements contained in this presentation are expressly qualified by these cautionary statements. Statements other than statements of historical fact are forward-looking statements.

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