Accounting Policies, by Policy (Policies)

9 Months Ended

Dec. 31, 2024

Significant Accounting Policies [Abstract]

Basis of Presentation

The Fund is an investment company and follows the accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies.

All shareholders bear the common expenses of the Fund and earn income including realized gains/losses from the portfolio pro rata based on the average daily net assets of the Fund.

Basis of Consolidation

Basis of Consolidation

The Fund consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or voting interest model. The Fund is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Fund determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Fund consolidates an entity when it holds a majority voting interest in an entity.

VIE Model

VIE Model

An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights.

The Fund consolidates entities that are VIEs when the Fund determines it is the primary beneficiary. Generally, the primary beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

Voting Model

Voting Model

If a legal entity fails to meet any of the three characteristics of a VIE (i.e., insufficiency of equity, existence of non-substantive voting rights, or lack of a controlling financial interest), the Fund then evaluates such entity under the voting model. Under the voting model, the Fund consolidates the entity if the Fund determines that it, directly or indirectly, have greater than 50% of the voting shares (or own a majority of the membership interest’s kick-out rights through voting interests), and that other equity holders do not have substantive participating rights.

All intercompany balances and transactions have been eliminated in consolidation.

Non-Controlling Interests

Non-Controlling Interests

Non-controlling interests consists of ownership interests held by investors in certain entities that are consolidated but are not 100% owned. The portion of net assets that is attributable to non-controlling interest in Icarus PE is presented as “Non-Controlling Interest in Wellings Icarus PE Member I, LLC”, a component of total net assets, on the Fund’s consolidated statements of assets and liabilities.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated statement of assets and liabilities. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents can include demand deposits with financial institutions and short-term, highly liquid investments (e.g., money market funds, U.S. Treasury notes, and similar type instruments). Cash and cash equivalents are carried at cost which approximates fair value. The Fund places its cash and cash equivalents with financial institutions and, at times, cash held in money market accounts may exceed the Federal Deposit Insurance Corporation insured limit. As of December 31, 2024, the Fund holds no cash and short-term investments in the amount of $16,666,507. As of March 31, 2024, the Fund held no cash and short-term investments in the amount of $9,315,090.

Investments at Fair Value

Investments at Fair Value

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and can include investments charged off during the period, net of recoveries. Unrealized gains or losses primarily reflect the change in investment values, and can include the reversal of previously recorded unrealized gains or losses when gains or losses are realized.

The valuation of the Fund’s investments is determined as of the close of business at the end of each reporting period (the “Valuation Date”), which is generally quarterly.

The Board of Trustees (the “Board”) is responsible for overseeing the Fund’s valuation policies, making recommendations to the Adviser on valuation-related matters, and overseeing implementation by the Adviser of such valuation policies.

The Board has delegated day-to-day management of the valuation process to the Adviser as the appointed valuation designee (“Valuation Designee”) and has authorized the Adviser to utilize independent third-party valuation and pricing services that have been approved by the Board. The Adviser has established a valuation committee (the “Adviser Valuation Committee”) to carry out this function. The Valuation Designee is subject to the oversight of the Board. The Valuation Designee is responsible for assessing and managing key valuation risk, and is generally responsible for the review, approval and testing of valuation methodologies and the determination of the fair value of the Fund’s investments.

The Fund applies FASB ASC 820, Fair Value Measurement (“ASC 820”), as amended, which establishes a framework for measuring fair value in accordance with U.S. GAAP and requires disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value.

The valuation policies approved by the Board provide that, where deemed appropriate by the Adviser and consistent with the 1940 Act, investments may be valued at cost. Cost would be used only when cost is determined to best approximate the fair value of the particular investment under consideration. For example, cost may not be appropriate when the Fund is aware of sales of similar securities to third parties at different prices or in other circumstances where cost may not approximate fair value (which could include situations where there are no sales to third parties). In such a situation, the Fund’s investment will be revalued in a manner that the Adviser Valuation Committee, in accordance with the valuation procedures, determines in good faith best reflects fair value. Valuation methodologies which may be utilized include the public market methodology, private market methodology, analytical methodology (e.g., discounted cash flow analysis), cost methodology, or the use of the net asset value (“NAV”) of the investment as a practical expedient to fair value (see below).

The inputs used to determine the fair value of the Fund’s investments are summarized in the three broad levels listed in the fair value hierarchy below:

●

Level 1—unadjusted quoted prices in active markets for identical investments and registered investment companies where the value per share (unit) is determined and published and is the basis for current transactions for identical assets or liabilities at the Valuation Date;

●

Level 2—investments with other significant observable inputs (including quoted prices for similar investments, interest rates, benchmark yields, bids, offers, transactions, spreads, cash collateral, and other relationships observed in the markets among market securities, underlying equity of the issuer, proprietary pricing models, credit risk, etc.); or

●

Level 3—investments with significant unobservable inputs (which may include the Fund’s own assumptions in determining the fair value of investments).

Changes in valuation techniques may result in transfers in or out of an assigned level within the fair value hierarchy. The Fund discloses transfers between levels based on valuations at the end of the reporting period. The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those investments.

The following is a summary categorization of the Fund’s investments based on the level of inputs utilized in determining the value of such investments as of December 31, 2024. Investments valued at NAV as a practical expedient (see below) are listed in a separate column to permit reconciliation to the total value of investments:

Investments Type	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
Common Equity	$	-	$	-	$	29,666,704	$	5,501,228	$	35,167,932
Preferred Equity		-		-		28,974,236		-		28,974,236
Short-Term Investments		16,666,507		-		-		-		16,666,507
Total Investments	$	16,666,507	$	-	$	58,640,940	$	5,501,228	$	80,808,675

The following is a summary categorization of the Fund’s investments based on the level of inputs utilized in determining the value of such investments as of March 31, 2024. Investments valued at NAV as a practical expedient (see below) are listed in a separate column to permit reconciliation to the total value of investments:

Investments Type	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total
Common Equity	$	-	$	-	$	27,293,000	$	5,783,316	$	33,076,316
Preferred Equity		-		-		17,834,683		-		17,834,683
Short-Term Investments		9,315,090		-		-		-		9,315,090
Total Investments	$	9,315,090	$	-	$	45,127,683	$	5,783,316	$	60,226,089

The Fund’s portfolio investments will generally not be in publicly traded securities. Investments for which observable market prices in active markets do not exist are reported at fair value, as determined in good faith by the Investment Adviser under consistently applied policies and procedures approved by the Board in accordance with U.S. GAAP. The Board has designated the Investment Adviser to be the Valuation Designee to prepare portfolio company valuations. The Valuation Designee has adopted appropriate segregation protocols to minimize the Fund portfolio managers’ influence on the Adviser’s Fair Value process. The types of factors that the Investment Adviser will take into account in determining fair value, subject to review and ratification where required by the Board with respect to such non-traded investments, will include, as relevant and, to the extent available, the portfolio company’s earnings, the markets in which the portfolio company does business, comparison to valuations of publicly traded companies in the portfolio company’s industry, comparisons to recent sales of comparable companies, the discounted value of the cash flows of the portfolio company, the rights and preferences of the specific securities held, and other relevant factors. This information may not be available because it is difficult to obtain financial and other information with respect to private companies. In considering the extent and nature of information utilized in the valuation process, management will generally apply a greater weighting to that information which is recent and observable. Because such valuations are inherently uncertain and may be based on estimates, the determinations of fair value may differ materially from the values that would be assessed if a readily available market for these securities existed. Based on these factors, the investments in private companies will generally be presented as a Level 3 investment. Changes in accounting standards may not be adopted consistently by issuers or at the same time, and as a result varied implementation may make it more difficult for the Fund to properly evaluate or compare financial information provided by portfolio companies of the Fund or to determine the validity of data of publicly traded company comparables for purposes of valuing the Fund’s portfolio holdings.

The Fund is permitted to invest in investments that may not have a readily determinable fair value. The Fund may use the NAV reported by the investment as a practical expedient, without further adjustment, unless it is probable that the investment will be sold at a value significantly different than the reported NAV. A listing of the categories of investments held by the Fund which are reported using NAV as a practical expedient (and their respective redemption-related attributes) as of December 31, 2024 are as follows:

Investment
Category

Investment
Strategy

Fair Value
December 31, 2024

Unfunded
Commitments

Remaining
Life*

Redemption
Frequency*

Notice
Period
(in Days)*

Redemption
Restrictions
and Terms*

Light
Industrial

Targeting value-add investments with established companies

2,740,607

5-7 years

Non-
redeemable

N/A

Multifamily

Equity in a fund that lends in first lien position on commercial real estate development

2,760,621

N/A

Quarterly

One-year hard lock-up, quarterly redemptions thereafter with 60 days notice. Redemptions will be paid as cash flow allows and/or as underlying debt is paid off.

Total

5,501,228

A listing of the categories of investments held by the Fund (and their respective redemption-related attributes) as of March 31, 2024, are as follows:

Investment
Category

Investment
Strategy

Fair Value
March 31, 2024

Unfunded
Commitments

Remaining
Life*

Redemption
Frequency*

Notice
Period
(in Days)*

Redemption
Restrictions
and Terms*

Light
Industrial

Targeting value-add investments with established companies

2,792,548

5-7 years

Non-
redeemable

N/A

Multifamily

Equity in a fund that lends in first lien position on commercial real estate development

2,990,768

N/A

Quarterly

One-year hard lock-up, quarterly redemptions thereafter with 60 days notice. Redemptions will be paid as cash flow allows and/or as underlying debt is paid off.

Total

5,783,316

The information summarized in the tables above represent the general terms for the specified asset category. Individual investments may have terms that are more or less restrictive than those terms indicated for the asset class as a whole. In addition, most investments have the flexibility, as provided for in their constituent documents, to modify and/or waive such terms.

The following is a summary of quantitative information about significant unobservable valuation inputs for Level 3 fair value measurements for investments held as of December 31, 2024:

Investment Type

Fair Value
December 31,
2024

Valuation
Methodologies

Unobservable Input

Input Range
(Weighted Average)

Common Equity

28,371,183

Income Approach / Discounted Cash Flow

Cost of Equity

14.1% - 31.8% (22.2%)

1,295,521

Cost

Transaction Price

N/A

Preferred Equity

20,920,411

Income Approach / Discounted Cash Flow

Cost of Equity

14.0% - 36.2%
(21.4%)

8,053,825

Cost

Transaction Price

N/A

Total

58,640,940

The following is a summary of quantitative information about significant unobservable valuation inputs for Level 3 fair value measurements for investments held as of March 31, 2024:

Investment Type

Fair Value
March 31,
2024

Valuation
Methodologies

Unobservable Input

Input Range
(Weighted Average)

Common Equity

27,293,000

Income Approach / Discounted Cash Flow

Cost of Equity

12.5% - 26.6% (21.5%)

Capitalization Rate

7.5%

Preferred Equity

2,191,352

Cost

Transaction Price

N/A

15,643,331

Income Approach / Discounted Cash Flow

Cost of Equity

14.1% - 36.2% (22.0%)

Total

45,127,683

The following is a roll-forward of the activity in investments in which significant unobservable inputs (Level 3) were used in determining fair value for the nine months ended December 31, 2024:

Investment Type	Balance as of April 1, 2024		Transfers Into/(Out of) Level 3		Purchases		Proceeds From Sales or Other Dispositions*			Realized Gain/(Loss)		Change in Unrealized Appreciation		Balance as of December 31, 2024
Common Equity	$	27,293,000	$	-	$	1,295,521	$	-		$	-	$	1,078,183	$	29,666,704
Preferred Equity		17,834,683		-		19,179,798		(8,500,000	)		-		459,755		28,974,236
Total	$	45,127,683	$	-	$	20,475,319	$	(8,500,000	)	$	-	$	1,537,938	$	58,640,940

*	Includes return of capital.

Affiliate and Control Investments

Affiliate and Control Investments

Certain investments of the Fund are deemed to be investments in affiliated or controlled issuers under the 1940 Act. Control investments generally are defined by the 1940 Act, as investments in companies in which a fund owns more than 25% of the company’s capital and/or has the power to exercise control over the management or policies of the company (“Control Investments”). Affiliate investments generally are defined by the 1940 Act as investments in companies in which a fund owns between 5% and 25% of the company’s capital (“Affiliate Investments”). The activity resulting from Affiliate Investments and Control Investments, including as applicable; interest income, dividend income, fee income, as well as realized and unrealized gains and losses, is identified in the consolidated Statements of Operations. A listing of these investments (including activity for the nine months ended December 31, 2024) is shown below:

	Principal/	Principal/				Transfers										Net Change
	Shares/Units	Shares/Units		Fair Value		Into/(Out of)					Proceeds From					in Unrealized			Fair Value
	April 1,	December 31,		April 1,		Investment					Sales or Other			Net Realized		Appreciation			December 31,		Dividend		Fee
Portfolio Company	2024	2024		2024		Category			Purchases		Dispositions*			Gain (Loss)		(Depreciation)			2024		Income		Income
Non-Control/Affiliate Investments:
Crystal View Capital Fund IV, L.P. (1)(3)	N/A (2)		N/A (2)	$	-	$	14,034,000		$	-	$	-		$	-	$	-		$	14,034,000	$	-	$	-
Great Escapes RV Fund IV, L.P. (1)	N/A (2)		N/A (2)		3,953,800		-			-		-			-		446,200			4,400,000		-		-
LBX Deptford Investors LLC (1)(4)	N/A (2)		N/A (2)		770,000		(770,000	)		-		-			-		-			-		-		-
LBX Fair Oaks Investors LLC (1)	N/A (2)		N/A (2)		1,108,800		-			-		-			-		193,100			1,301,900		63,366		-
LBX Fashion Square Investors LLC (1)	N/A (2)		N/A (2)		775,900		-			-		-			-		105,100			881,000		154,700		-
LBX Manchester Investors LLC (1)	N/A (2)		N/A (2)		661,700		-			-		-			-		15,200			676,900		51,190		-
LBX Mount Prospect Investors LLC (1)	N/A (2)		N/A (2)		740,000		-			-		-			-		-			740,000		3,298		-
Newark-Forest MHPS LLC (1)	N/A (2)		N/A (2)		650,500		-			-		-			-		29,500			680,000		19,148		-
Post Sandstone Partners LLC (1)	N/A (2)		N/A (2)		813,000		-			-		-			-		-			813,000		38,223		-
PR Estates JB LLC (1)	N/A (2)		N/A (2)		-		-			547,696		-			-		75,888			623,584		69,576		16,587
Riparian Baltimore SFR Investors I LLC (1)(5)	N/A (2)		N/A (2)		-		5,460,000			-		-			-		280,000			5,740,000		260,641		-
SCC Flint River Holdings, LP (1)	N/A (2)		N/A (2)		1,738,238		-			1,258,978		-			-		-			2,997,216		258,998		-
TC-BKM US Industrial Fund I, L.P. (1)	N/A (2)		N/A (2)		2,792,548		-			-		-			-		(51,941	)		2,740,607		76,554		-
Total Non-Control/Affiliate Investments					14,004,486		18,724,000			1,806,674		-			-		1,093,047			35,628,207		995,694		16,587

Control Investments:
Crystal View Capital Fund IV, L.P. (1)(3)	N/A (2)		N/A (2)		14,034,000		(14,034,000	)		-		-			-		-			-		779,538		-
Fairbridge Credit LLC (1)	N/A (2)		N/A (2)		5,000,000		-			-		-			-		-			5,000,000		628,796		-
Fairbridge Grand Hampton LLC (1)	N/A (2)		N/A (2)		3,805,093		-			135,375		-			-		-			3,940,468		234,826		-
Icarus Wellings JV LLC (1)	N/A (2)		N/A (2)		-		-			16,000,000		(8,500,000	)		-		-			7,500,000		134,630		29,929
Madison Terrace Group LLC (1)	N/A (2)		N/A (2)		2,191,352		-			683,925		-			-		119,380			2,994,657		102,114		-
Total Control Investments					25,030,445		(14,034,000	)		16,819,300		(8,500,000	)		-		119,380			19,435,125		1,879,904		29,929

Total Non-Control/Affiliate and Control Investments				$	39,034,931	$	4,690,000		$	18,625,974	$	(8,500,000	)	$	-	$	1,212,427		$	55,063,332	$	2,875,598	$	46,516

(1)

Fund holds non-voting shares or voting rights have been waived for this investment.

(2)

Investment does not issue units or shares.

(3)

Investment reclassified from Control to Non-Control/Affiliate.

(4)

Investment reclassified from Non-Control/Affiliate to Non-Control/Non-Affiliate.

(5)

Investment reclassified from Non-Control/Non-Affiliate to Non-Control/Affiliate.

Includes return of capital and other corporate actions.

The Fund has determined that Crystal View Capital Fund IV, L.P. meets the definition of a “significant subsidiary” under Rule 4-08(g) of Regulation S-X. The summarized financial information included in this quarterly report for the quarter ended December 31, 2024, do not include the complete financial information for Crystal View Capital Fund IV, L.P.

While the Fund is unable to provide financial information for Crystal View Capital Fund IV, L.P. as of December 31, 2024, the summarized financial information for the three and nine months ended September 30, 2024 and 2023, are included in the table below.

There have been no material changes in the operations or financial condition of Crystal View Capital Fund IV, L.P. since September 30, 2024.

The following tables present summarized financial information for Crystal View Capital Fund IV, L.P. in accordance with Rule 4-08(g) of Regulation S-X:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Results of Operations
Revenue	$	2,126,469	$	348,664	$	4,334,687	$	574,217
Operating Expenses	$	2,430,925	$	306,750	$	2,430,925	$	662,156
Net operating income (loss)	$	1,903,762	$	41,914	$	1,903,762	$	(87,938	)

Qualifying Assets

Qualifying Assets

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, or “qualifying assets,” unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of December 31, 2024, the Fund does not hold any non-qualifying assets.

Allocation of Profits and Losses

Allocation of Profits and Losses

On each Valuation Date, the Fund will allocate income, gains, losses, and deductions for the period since the last Valuation Date pro rata in proportion to the balances in the opening capital accounts in the Fund on the first day of the period (after taking into account any subscriptions, distributions and redemptions since the previous Valuation Date). The profits and losses for any period will reflect unrealized profits and losses on the value of the Fund’s assets during the period, as well as realized capital gains and losses, and any income during the period.

Interest and Dividend Income

Interest and Dividend Income

Interest income is recorded on the accrual basis and can include amortization of discounts or premiums. Dividend income on common equity securities is recorded as earned or on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. For the three months ended December 31, 2024, the Fund had interest income of $221,073 and dividend income of $1,280,123. For the nine months ended December 31, 2024, the Fund had interest income of $593,295 and dividend income of $3,142,293. For the three months ended December 31, 2023, the Fund had interest income of $86,410 and dividend income of $715,279. For the nine months ended December 31, 2023, the Fund had interest income of $244,480 and dividend income of $1,466,473.

Distributions received in advance relate to special terms from the Fund’s preferred equity investments. Due to the general complexities and terms of these deals, the Fund may receive future cash flow at the time of investment. Prior to being recognized as dividend income, cash is held in the Distributions received in advance account.

Fee Income

Fee Income

The Fund may receive various fees in the ordinary course of business from portfolio companies such as underwriting, structuring, consent, waiver, amendment, and other non-recurring upfront fees or miscellaneous fees for services rendered by the Fund to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. Other fee income as presented on the Consolidated Statements of Operations relates to similar fees received from prospective investments that are not consummated. For the three months and nine months ended December 31, 2024, the Fund had fee income of $39,206 and $131,999, respectively. For the three months and nine months ended December 31, 2023, the Fund had fee income of $153,119 and $472,033, respectively.

Wellings Real Estate Income Fund 10-Q