FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
WASHINGTON DC 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Period Ended September 30, 1999
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Commission file number 33-12519
REDWOOD MORTGAGE INVESTORS VI
(exact name of registrant as specified in its charter)
California 94-3031211
- ----------------------------------------- --------------------------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
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650 El Camino Real, Suite G, Redwood City, CA. 94063
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(address of principal executive office)
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(650) 365-5341
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(Registrant's telephone number, including area code)
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NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed
since last report)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES XX NO
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES NO NOT APPLICABLE XX
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest date.
NOT APPLICABLE
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1998 (audited) AND
SEPTEMBER 30, 1999 (unaudited)
ASSETS
Sept 30, 1999 Dec 31, 1998
(unaudited) (audited)
------------------ ---------------
<S> <C> <C>
Cash $374,135 $299,775
------------------ ---------------
Accounts receivable:
Mortgage Investments, secured by deeds of trust 7,003,801 7,969,735
Accrued interest on Mortgage Investments 859,419 717,719
Advances on Mortgage Investments 170,316 162,083
Accounts receivables, unsecured 23,776 23,775
----------------- ---------------
8,057,312 8,873,312
Less allowance for doubtful accounts 214,471 202,344
----------------- ---------------
7,842,841 8,670,968
----------------- ---------------
Real estate owned, held for sale, acquired through foreclosure 8,941 169,922
Partnership Interest 14,067 0
================== ===============
Total Assets $8,239,984 $9,140,665
================== ===============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Liabilities:
Accounts payable $0 $22,668
Deferred interest 0 20,463
Note payable - bank line of credit 0 390,000
Total Liabilities 0 433,131
Partners' Capital:
Limited Partners' capital, subject to redemption, (note 4D) 8,230,218 8,697,768
General Partners' capital 9,766 9,766
-------------- --------------
Total Partners' capital 8,239,984 8,707,534
=============== ==============
Total Liabilities and Partners' capital $8,239,984 $9,140,665
=============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF INCOME
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (unaudited)
9 months 9 months 3 months 3 months
ended ended ended ended
Sept 30, Sept 30, 1998 Sept 30, Sept 30, 1998
(unaudited) (unaudited) (unaudited) (unaudited)
============= ============== ============= ==============
Revenues:
<S> <C> <C> <C> <C>
Interest on Mortgage Investments $588,361 $652,377 $180,525 $218,060
Interest on bank deposits 3,497 5,908 1,494 840
Late charges, prepayment penalties and fees 19,346 12,979 7,111 5,387
------------- -------------- ------------- ------------
611,204 671,264 189,130 224,287
------------- -------------- ------------- ------------
Expenses:
Mortgage servicing fees 40,804 55,785 9,188 25,677
Asset management fees 8,043 3,840 2,634 2,864
Clerical costs through Redwood Mortgage Corp. 16,305 18,512 5,174 5,997
Interest and line of credit cost 14,713 38,438 2,582 3,027
Provision for losses on real estate acquired
through foreclosure and doubtful accounts 111,762 141,459 36,312 55,525
Professional services 16,867 17,757 761 929
Other 10,306 12,726 1,661 3,092
------------- -------------- ------------- ------------
218,800 288,517 58,312 97,111
------------- -------------- ------------- ------------
Net income $392,404 $382,747 $130,818 $127,176
============= ============== ============= ============
Net income: to General Partners (1%) $3,924 $3,827 $1,308 $1,271
Net income: to Limited Partners (99%) $388,480 $378,920 $129,510 $125,905
------------- -------------- ------------- ------------
$392,404 $382,747 $130,818 $127,176
============= ============== ============= ============
Net income per $1000 invested by Limited
Partners for entire period:
- where income is reinvested and compounded $46.21 $41.31 $15.45 $13.80
============= ============== ============= ============
- where partner receives income in monthly $45.29 $40.58 $15.37 $13.74
============= ============== ============= ============
See accompanying notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1998 (audited) AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (unaudited)
PARTNERS' CAPITAL
-------------------------------------------------------------------------------------
LIMITED PARTNERS' CAPITAL
--------------------------------------------------
Capital
Account Formation General
Limited Loan Partners
Partners Receivable Total Capital Total
- ---------------------------------- -------------- -- ------------- -- --------------- -- ------------ --- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 $11,396,716 $ (184,177) $11,212,539 $9,766 $11,222,305
Formation Loan collections 0 56,803 56,803 0 56,803
Net income 582,280 0 582,280 5,882 588,162
Early withdrawal penalties (8,721) 5,525 (3,196) 0 (3,196)
Partners' withdrawals (1,463,174) 0 (1,463,174) (5,882) (1,469,056)
-------------- ------------- --------------- ------------ --------------
Balances at December 31, 1996 $10,507,101 $(121,849) $10,385,252 $9,766 $10,395,018
Formation Loan collections 0 53,833 53,833 0 53,833
Net income 523,895 0 523,895 5,292 529,187
Early withdrawal penalties (13,409) 8,495 (4,914) 0 (4,914)
Partners' withdrawals (1,536,379) 0 (1,536,379) (5,292) (1,541,671)
-------------- ------------- -------------- ------------- --------------
Balances at December 31, 1997 $9,481,208 ($59,521) $9,421,687 $9,766 $9,431,453
Formation Loan collections 0 53,291 53,291 0 53,291
Net income 507,380 0 507,380 5,125 512,505
Early withdrawal penalties (9,834) 6,230 (3,604) 0 (3,604)
Partners' withdrawals (1,280,986) 0 (1,280,986) (5,125) (1,286,111)
-------------- ------------- -------------- ------------- --------------
Balances at December 31, 1998 $8,697,768 $0 $8,697,768 $9,766 $8,707,534
Net income 388,480 0 388,480 3,924 392,404
Early withdrawal penalties (6,698) 0 (6,698) 0 (6,698)
Partners' withdrawals (849,332) 0 (849,332) (3,924) (853,256)
-------------- ------------- -------------- ------------- --------------
Balances at September 30, 1999 $8,230,218 $0 $8,230,218 $9,766 $8,239,984
============== ============= ============== ============= ==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 and SEPTEMBER 30, 1998 (unaudited)
Sept 30, 1999 Sept 30, 1998
(unaudited) (unaudited)
------------------ -----------------
Cash flows from operating activities:
<S> <C> <C>
Net income $392,404 $382,747
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for doubtful accounts 111,762 286,477
Provision for losses on real estate held for sale 0 425
Early withdrawal penalty credited to income (6,698) (2,792)
(Increase) decrease in assets:
Accrued interest & advances (149,933) (67,961)
Prepaid expenses and other assets 0 0
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (22,668) 39,209
Deferred interest on Mortgage Investments (20,463) (898)
------------------ -----------------
Net cash provided by operating activities 304,404 637,207
------------------ -----------------
Cash flows from investing activities:
Principal collected on Mortgage Investments 1,557,392 1,764,575
Mortgage Investments made (591,458) (1,795,593)
Additions to real estate held for sale (2,800) (11,313)
Dispositions of real estate held for sale 64,146 87,688
Investment in Partnership (14,067) 708,141
Accounts receivable unsecured (1) (29,263)
------------------ -----------------
Net cash provided by investing activities 1,013,212 724,235
------------------ -----------------
Cash flows from financing activities:
Net increase (decrease) in note payable-bank (390,000) (574,011)
Partners withdrawals (853,256) (914,169)
Formation Loan collections 0 41,552
------------------ -----------------
Net cash provided by (used in) financing activities (1,243,256) (1,446,628)
------------------ -----------------
Net increase (decrease) in cash 74,360 (85,186)
Cash - beginning of period 299,775 331,143
================== =================
Cash - end of period $374,135 $245,957
================== =================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (audited) AND
SEPTEMBER 30, 1999 (unaudited)
NOTE 1 - ORGANIZATION AND GENERAL Redwood Mortgage Investors VI, (the
"Partnership") is a California Limited Partnership, of which the General
Partners are D. Russell Burwell, Michael R. Burwell and Gymno Corporation, a
California corporation owned and operated by the individual General Partners.
The partnership was organized to engage in business as a mortgage lender for the
primary purpose of making Mortgage Investments secured by Deeds of Trust on
California real estate. Mortgage Investments are being arranged and serviced by
Redwood Mortgage Corp., an affiliate of the General Partners. The offering was
closed with contributed capital totalling $9,781,366.
Each month's income is distributed to partners based upon their
proportionate share of partners' capital. Some partners have elected to withdraw
income on a monthly, quarterly or annual basis.
A. Sales Commissions - Formation Loan Sales commissions ranging from 0%
(units sold by General Partners) to 10% of gross proceeds were paid by Redwood
Mortgage Corp., an affiliate of the General Partners that arranges and services
the Mortgage Investments. To finance the sales commissions, the Partnership
loaned to Redwood Mortgage Corp. $623,255 (the "Formation Loan") relating to
contributed capital of $9,781,366. The Formation Loan was unsecured, and was
repaid, without interest, over ten years, commencing December 31, 1989. The last
payment was made during 1998.
The following reflects transactions in the Formation Loan account through
December 31, 1998:
Amount loaned during 1987,1988 and 1989 $623,255
Less:
Cash repayments $566,586
Allocation of early withdrawal penalties 56,669 $623,255
============ ===========
Balance December 31, 1998 $0
===========
The Formation Loan, which was a receivable from Redwood Mortgage Corp., an
affiliate of the General Partners', was deducted from Limited Partners' capital
in the balance sheet. As amounts were collected from Redwood Mortgage Corp., the
deduction from capital was reduced. As of December 31, 1998, there was no longer
a deduction.
B. Other Organizational and Offering Expenses Organizational and offering
expenses, other than sales commissions, but including printing costs, attorney
and accountant fees, and other costs, were paid by the Partnership from the
offering proceeds and totalled $360,885 or 3.69% of the gross proceeds
contributed by the Partners. Such costs have been fully amortized and allocated
to the Partners.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Accrual Basis
Revenues and expenses are accounted for on the accrual basis of accounting
wherein income is recognized as earned and expenses are recognized as incurred.
Once a Mortgage Investment is categorized as impaired, interest is no longer
accrued thereon.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (audited) AND
SEPTEMBER 30, 1999 (unaudited)
B. Management Estimates
In preparing the financial statements, management is required to make
estimates based on the information available that affects the reported amounts
of assets and liabilities as of the balance sheet date and revenues and expenses
for the related periods. Such estimates relate principally to the determination
of the allowance for doubtful accounts, including the valuation of impaired
mortgage investments, and the valuation of real estate acquired through
foreclosure. Actual results could differ significantly from these estimates.
C. Mortgage Investments, Secured by Deeds of Trust
The Partnership has both the intent and ability to hold the Mortgage
Investments to maturity, i.e., held for long-term investment. They are therefore
valued at cost for financial statement purposes with interest thereon being
accrued by the simple interest method.
Financial Accounting Standards Board Statements (SFAS) 114 and 118
(effective January 1, 1995) provide that if the probable ultimate recovery of
the carrying amount of a Mortgage Investment, with due consideration for the
fair value of collateral, is less than the recorded investment and related
amounts due and the impairment is considered to be other than temporary, the
carrying amount of the investment (cost) shall be reduced to the present value
of future cash flows. The adoption of these statements did not have a material
effect on the financial statements of the Partnership because that was
essentially the valuation method previously used on impaired loans.
At September 30, 1999, December 31, 1998 and 1997, reductions in the cost
of Mortgage Investments categorized as impaired by the Partnership totalled
$84,736, $84,736 and $0, respectively. The reduction in stated value was
accomplished by increasing the allowance for doubtful accounts.
As presented in Note 10 to the financial statements as of September 30,
1999, the average mortgage investment to appraised value of security at the time
the loans were consummated was 68.38%. When a loan is valued for impairment
purposes, an updating is made in the valuation of collateral security. However,
a low loan to value ratio tends to minimize reductions for impairment.
D. Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents
include interest bearing and non-interest bearing bank deposits.
E. Real Estate Owned, Held for Sale
Real estate owned, held for sale, includes real estate acquired through
foreclosure and is stated at the lower of the recorded investment in the
property, net of any senior indebtedness, or at the property's estimated fair
value, less estimated costs to sell.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (audited) AND
SEPTEMBER 30, 1999 (unaudited)
The following schedule reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, less estimated
costs to sell as of September 30, 1999 and December 31, 1998 and 1997:
September 30, December 31, December 31,
1999 1998 1997
---------------- -------------- --------------
Costs of properties $141,999 $366,655 $449,319
Reduction in value 133,058 196,733 140,000
================ ============== ==============
Fair value reflected in
financial statements $8,941 $169,922 $309,319
================ ============== ==============
Effective January 1, 1996, the Partnership adopted the provisions of
statement No 121 (SFAS 121) of the Financial Accounting Standards Board,
"Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to
be disposed of". The adoption of SFAS 121 did not have a material impact on the
Partnership's financial position because the methods indicated were essentially
those previously used by the Partnership.
F. Investment in Partnership (see note 5)
G. Income Taxes
No provision for Federal and State income taxes is made in the financial
statements since income taxes are the obligation of the partners if and when
income taxes apply.
H. Organization and Syndication Costs
The Partnership bears its own organization and syndication costs, other
than certain sales commissions and fees described above, including legal and
accounting expenses, printing costs, selling expenses, a 1% wholesale brokerage
fee and filing fees. Organizational costs of $14,750 were capitalized and were
amortized over a five year period. Syndication costs of $346,135 were charged
against partners' capital and were allocated to individual partners consistent
with the Partnership Agreement.
I. Allowance for Doubtful Accounts
Mortgage Investments and the related accrued interest, fees and advances
are analyzed on a continuous basis for recoverability. Delinquencies are
identified and followed as part of the Mortgage Investment system. A provision
is made for doubtful accounts to adjust the allowance for doubtful accounts to
an amount considered by management to be adequate with due consideration to
collateral value to provide for unrecoverable accounts receivable, including
impaired Mortgage Investments, other mortgage investments, accrued interest and
advances on Mortgage Investments, and other accounts receivable (unsecured). The
composition of the allowance for doubtful accounts as of September 30, 1999,
December 31, 1998 and 1997 was as follows:
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (audited) AND
SEPTEMBER 30, 1999 (unaudited)
September 30, December 31, December 31,
1999 1998 1997
---------------- ------------ --------------
Impaired Mortgage Investments $84,736 $84,736 $0
Other Mortgage Investments 105,959 93,833 13,432
Accounts receivable, unsecured 23,776 23,775 15,182
================ ============ ==============
$214,471 $202,344 $28,614
================ ============ ==============
J. Net Income Per $1,000 Invested
Amounts reflected in the statements of income as net income per $1,000
invested by Limited Partners for the entire period are actual amounts allocated
to Limited Partners who have their investment throughout the period and have
elected to either leave their earnings to compound or have elected to receive
monthly distributions of their net income. Individual income is allocated each
month based on the Limited Partners' pro rata share of Partners' Capital.
Because the net income percentage varies from month to month, amounts per $1,000
will vary for those individuals who made or withdrew investments during the
period, or selected other options. However, the net income per $1,000 average
invested has approximated those reflected for those whose investments and
options have remained constant.
NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES
The following are commissions and/or fees which are paid to the General
Partners and/or related parties.
A. Mortgage Brokerage Commissions
Mortgage brokerage commissions for services in connection with the review,
selection, evaluation, negotiation and extension of the Mortgage Investments
were limited up to 12% of the principal amount of the loans through the period
ending 6 months after the termination date of the offering. Thereafter,
commissions are limited to an amount not to exceed 4% of the total Partnership
assets per year. Such commissions are paid by the borrowers, thus, not an
expense of the Partnership. For the nine months ended September 30, 1999, the
commissions totalled $22,277 and for the years ended 1998 and 1997, the
commissions were $36,700 and $10,000, respectively.
B. Mortgage Servicing Fees
Redwood Mortgage Corp. receives monthly mortgage servicing fees of up to
1/8 of 1% (1.5% annual) of the unpaid principal, or such lesser amount as is
reasonable and customary in the geographic area where the property securing the
Mortgage Investment is located. Mortgage servicing fees of $40,804, $70,630, and
$39,918, were incurred for nine months ended September 30, 1999, and for years
1998 and 1997.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (audited) AND
SEPTEMBER 30, 1999 (unaudited)
C. Asset Management Fee
The General Partners are authorized to receive monthly fees for managing
the Partnership's Mortgage Investment portfolio and operations of up to 1/32 of
1% (3/8 of 1% annually). Management fees incurred for the nine months ended
September 30, 1999, and for years 1998 and 1997 were $8,043, $6,640 and $0,
respectively.
D. Other Fees
The Partnership Agreement provides for other fees such as reconveyance,
mortgage assumption and mortgage extension fees. These fees are paid by the
borrowers to parties related to the General Partners.
E. Income and Losses
All income is credited or charged to partners in relation to their
respective partnership interests. The partnership interest of the General
Partners (combined) is a total of 1%.
F. Operating Expenses
The General Partners or their affiliate (Redwood Mortgage Corp.) are
reimbursed by the Partnership for all operating expenses actually incurred by
them on behalf of the Partnership, including without limitation, out-of-pocket
general and administration expenses of the Partnership, including accounting,
legal fees and expenses, postage and preparation of reports to Limited Partners.
In 1997, 1998, and the nine month period ended September 30, 1999, clerical
costs totalling $27,786 $24,440 and $16,305, respectively, were reimbursed to
Redwood Mortgage Corp. and are included in expenses in the Statements of Income.
NOTE 4 - OTHER PARTNERSHIP PROVISIONS
A. Term of the Partnership
The term of the Partnership is approximately 40 years, unless sooner
terminated as provided. The provisions provided for no capital withdrawal for
the first five years, subject to the penalty provision set forth in (D) below.
Thereafter, investors have the right to withdraw over a five-year period, or
longer.
B. Election to Receive Monthly, Quarterly or Annual Distributions
Upon subscription, investors elected either to receive monthly, quarterly
or annual distributions of earnings allocations, or to allow earnings to
compound for at least a period of 5 years.
C. Profits and Losses
Profits and losses are allocated monthly among the Limited Partners
according to their respective capital accounts after 1% is allocated to the
General Partners.
D. Withdrawal From Partnership
A Limited Partner had no right to withdraw from the Partnership or to
obtain the return of his capital account for at least five years after such
units were purchased, which in all instances had occurred by September 30, 1999.
After that time, at the election of the Limited Partner, capital accounts can be
liquidated over a five year period in 20 equal quarterly installments or such
longer period as is requested.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (audited) AND
SEPTEMBER 30, 1999 (unaudited)
Notwithstanding the above, in order to provide a certain degree of
liquidity to the Limited Partners, the General Partners may liquidate a Limited
Partner's entire capital account in four quarterly installments beginning on the
last day of the calendar quarter following the quarter in which the notice of
withdrawal is given. Such liquidations shall, however, be subject to a 10% early
withdrawal penalty applicable to any sums withdrawn prior to the time when such
sums otherwise could have been withdrawn pursuant to the liquidation procedure
set forth above. The 10% early withdrawal penalty will be received by the
Partnership, and a portion of the sums collected as such penalty will be applied
toward the next installment(s) of principal under the Formation Loan owed to the
Partnership by Redwood Mortgage. Such portion shall be determined by the ratio
between the initial amount of Formation Loan and the total amount of other
organization and syndication costs incurred by the Partnership in this offering.
The balance of any such early withdrawal penalties shall be retained by the
Partnership for its own account and applied against syndication costs. Since the
syndication costs have been fully amortized as of December 31, 1993, and the
formation loan was paid in 1998, the early withdrawal penalties gained in the
future will be credited to income for the period received.
The Partnership will not establish a reserve from which to fund withdrawals
and, accordingly, the Partnership's capacity to return a Limited Partner's
capital account is restricted to the availability of Partnership cash flow.
Furthermore, no more than 20% of the total Limited Partners' capital account
outstanding at the beginning of any year shall be liquidated during any calendar
year.
NOTE 5 - INVESTMENT IN PARTNERSHIP
The Partnership's interest in land located in East Palo Alto, CA., was
acquired through foreclosure. The Partnership's interest was invested with that
of two other Partnerships. The Partnerships had been attempting to develop the
property into single family residences. Significant community resistance, as
well as environmental and fish and wildlife concerns affected efforts to obtain
the required approvals. The Partnership, in resolving disputes which arose
during the course of the Partnerships attempt to obtain entitlements to develop
the property, entered into agreements on May 8, 1998 with Rhone-Poulanc, Inc.
These agreements, among other things, restrict the property to non-residential
uses, provide for appropriate indemnifications, and include other consideration
including the payment of cash. The Partnership still retains liability for the
remediation of pesticide contamination affecting the property. Investigation of
remediation options are ongoing. At this time management does not believe that
remediation of the pesticide contaminants will have a material adverse effect on
the financial condition of the Partnership. As of September 30, 1999, the
Partnership had received $131,376 in excess of its costs.
NOTE 6 - NOTE PAYABLE BANK - LINE OF CREDIT
The Partnership had a bank line of credit secured by its Mortgage
Investment portfolio up to $2,000,000 at 1% over prime. The balances were
$899,011, $390,000 and $0 at December 31, 1997 and 1998, and September 30, 1999,
respectively, and the interest rate at September 30, 1999 was 9.25% (8.25% prime
+ 1%). Commencing January 1, 1999, the Partnership had reduced its borrowing
limit to $1,000,000 with the same conditions as previously stipulated. As of
September 30, 1999, the Partnership was current in its interest payment. The
line of credit expires December 31, 1999.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (audited) AND
SEPTEMBER 30, 1999 (unaudited)
NOTE 7 - LEGAL PROCEEDINGS
Legal actions against borrowers and other involved parties have been
initiated by the Partnership to recover payments against unsecured accounts
receivable totaling $23,776. The Partnership, along with numerous others,
including a developer, a contractor and other lenders, is named as a defendant
in a lawsuit involving the Partnership's attempt to recover its investment in
real estate acquired through foreclosure.
Management anticipates that the ultimate outcome of the legal matters will
not have a material adverse effect on the net assets of the Partnership, with
due consideration having been given in arriving at the allowance for doubtful
accounts.
NOTE 8 - INCOME TAXES
The following reflects a reconciliation from net assets (Partners' Capital)
reflected in the financial statements to the tax basis of those net assets:
Sept. 30 Dec. 31 Dec. 31
1999 1998 1997
------------ ----------- -----------
Net assets - Partners' Capital per
financial statements $8,239 $8,707,534 $9,431,453
Formation Loan receivable 0 0 59,521
Allowance for doubtful accounts 214,471 202,344 28,614
------------ ----------- -----------
Net assets tax basis $8,454,455 $8,909,878 $9,519,588
============= =========== ===========
In 1998, approximately 71% of taxable income was allocated to tax exempt
organizations i.e., retirement plans. Such plans do not have to file income tax
returns unless their "unrelated business income" exceeds $1,000. Applicable
amounts become taxable when distribution is made to participants.
NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of financial instruments:
(a) Cash and Cash Equivalents - The carrying amount equals fair value. All
amounts, including interest bearing, are subject to immediate withdrawal.
(b) The Carrying Value of Mortgage Investments - (see note 2 (c)) is
$7,003,801. The September 30, 1999 fair value of these investments of $7,069,846
is estimated based upon projected cash flows discounted at the estimated current
interest rates at which similar loans would be made. The applicable amount of
the allowance for doubtful accounts along with accrued interest and advances
related thereto should also be considered in evaluating the fair value versus
the carrying value.
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (audited) AND
SEPTEMBER 30, 1999 (unaudited)
NOTE 10- ASSET CONCENTRATIONS AND CHARACTERISTICS
The Mortgage Investments are secured by recorded deeds of trust. At
September 30, 1999, there were 49 Mortgage Investments outstanding with the
following characteristics:
Number of Mortgage Investments outstanding 49
Total Mortgage Investments outstanding $7,003,801
Average Mortgage Investment outstanding $142,935
Average Mortgage Investment as percent of total 2.04%
Average Mortgage Investment as percent of Partners' Capital 1.73%
Largest Mortgage Investment outstanding $1,376,117
Largest Mortgage Investment as percent of total 19.65%
Largest Mortgage Investment as percent of Partners' Capital 16.70%
Number of counties where security is located (all California) 13
Largest percentage of Mortgage Investments in one county 31.51%
Average Mortgage Investment to appraised value of security at time
Mortgage Investment was consummated 68.38%
Number of Mortgage Investments in foreclosure 4
The following categories of mortgage investments are pertinent at September
30, 1999, and December 31, 1998 and 1997:
September 30 December 31 December 31
1999 1998 1997
------------ ------------ ------------
First Trust Deeds $4,158,118 $4,432,246 $4,588,169
Second Trust Deeds 2,203,350 2,892,870 2,869,543
Third Trust Deeds 392,334 394,620 397,273
Fourth Trust Deeds 249,999 249,999 249,999
------------- ------------- ------------
Total mortgage investments 7,003,801 7,969,735 8,104,984
Prior liens due other lenders 10,903,162 12,348,933 11,075,429
============= ============= ============
Total debt $17,906,963 $20,318,668 $19,180,413
============= ============= ============
Appraised property value at
time of loan $26,185,607 $31,128,892 $28,422,684
============= ============= ============
Total investments as a percent
of appraised value 68.38% 65.27% 67.48%
============= ============= ============
Investments by Type of Property
Owner occupied homes $852,527 $944,491 $1,057,067
Non-Owner occupied homes 170,653 374,408 380,142
Apartments 773,794 817,819 791,755
Commercial 5,206,827 5,833,017 5,876,020
============= ============= ===========
$7,003,801 $7,969,735 $8,104,984
============= ============= ===========
<PAGE>
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (audited) AND
SEPTEMBER 30, 1999 (unaudited)
Scheduled maturity dates of mortgage investments as of September 30, 1999
are as follows:
Year Ending
December 31,
-------------------
1999 $2,173,836
2000 2,814,639
2001 703,893
2002 421,520
2003 377,127
Thereafter 512,786
================
$7,003,801
================
The scheduled maturities for 1999 include $2,160,836 in Mortgage
Investments which are past maturity at September 30, 1999. $816,898 of those
Mortgage Investments were categorized as delinquent over 90 days.
Twelve Mortgage Investments with principal outstanding of $3,183,051 had
interest payments overdue in excess of 90 days.
The cash balance at September 30, 1999 of $374,135 was in two banks with
interest bearing balances totalling $350,213. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $174,135. When deposits in the
Partnerships bank accounts increase significantly beyond the insured limit, the
funds are either placed in new Mortgage Investments or used to pay down the line
of credit balance.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On September 2, 1989, the Partnership had sold 97,725.94 Units and its
contributed capital totalled $9,772,594 of the approved $12,000,000 issue, in
Units of $100 each. As of that date the offering was formally closed. On
September 30, 1999, the Partnership's net capital totalled $8,239,984.
Partnership Mortgage Investments outstanding were:
9 months
through
Dec 31, 1996 Dec 31, 1997 Dec 31, 1998 Sept 30, 1999
------------ ------------ ------------ -------------
Mortgage Investments
Outstanding $9,313,924 $8,104,984 $7,969,735 $7,003,801
The decrease in Mortgage Investments outstanding of $2,310,123 from
December 31, 1996 to September 30, 1999, was due primarily to the Partnership
utilizing Mortgage Investment payoffs to meet Limited Partner capital
liquidations and line of credit pay-down. During the years 1996, 1997, 1998 and
nine months through September 30, 1999, Mortgage Investment principal
collections exceeded Limited Partner liquidations.
Currently, general mortgage interest rates are lower than those prevalent
at the inception of the Partnership. New Mortgage Investments will be originated
at these lower interest rates. The result is to reduce the average return across
the entire Mortgage Investment portfolio held by the Partnership. In the future,
interest rates likely will change from their current levels. The General
Partners cannot at this time predict at what levels interest rates will be in
the future. Although the rates charged by the Partnership are influenced by the
level of interest rates in the market, the General Partners do not anticipate
that rates charged by the Partnership to its borrowers will change significantly
from the beginning of 1999 over the next 12 months. As of September 30, 1999 the
Partnership's Real Estate Owned account and the Investment in Partnership
account have been reduced to a $8,941 balance. These accounts had balances of
$169,922, $1,017,460 and $ 1,937,047 as of December 31, 1998, 1997 and 1996,
respectively. The conversion of these non-earning assets will allow the
Partnership to produce current income from previously non earning assets. The
overall effect of these developments will allow the Partnership's yield to rise.
Each year, the Partnership negotiates a line of credit with a commercial
bank which is secured by its Mortgage Investment portfolio. The outstanding
balance of the bank line of credit was $1,530,511, $899,011, $390,000 and $0 for
the years ended December 1996, 1997, 1998 and nine months through September 30,
1999, respectively. The interest rate on the bank line of credit has remained at
Prime plus one percent since inception. For the nine months ended September 30,
1999 and years ended December 31, 1998, 1997 and 1996 , interest on Note
Payable-Bank was $14,713, $43,170, $133,577and $158,175 respectively. The
primary reason for this decrease was that the Partnership had a lower overall
credit facility utilization from 1995 to 1996 and from 1996 to September 30,
1999. As of September 30, 1999, the Partnershi's borrowing was $0 and the
interest rate was Prime plus one percent. This added source of funds will help
in maximizing the Partnership yield by allowing the Partnership to minimize the
amount of funds in lower yield investment accounts when appropriate Mortgage
Investments are not currently available and because the Mortgage Investments
made by the Partnership usually bear interest at a rate in excess of the rate
payable to the bank which extended the line of credit, the amount to be retained
by the Partnership, after payment of the line of credit cost, will be greater
than without the use of the line of credit.
The Partnership's operating results and delinquencies are within the normal
range of the General Partners expectations, based upon their experience in
managing similar Partnerships over the last twenty-two years. Foreclosures are
a normal aspect of partnership operations and the General Partners anticipate
that they will not have a material effect on liquidity. As of September 30,
1999, there were two properties in foreclosure.
<PAGE>
Cash is continually being generated from interest earnings, late charges,
prepayment penalties, amortization of notes and pay-off of notes. Currently,
this amount exceeds Partnership expenses and earnings and principal payout
requirements. As Mortgage Investment opportunities become available, excess cash
and available funds are invested in new Mortgage Investments.
The General Partners regularly review the Mortgage Investment portfolio,
examining the status of delinquencies, the underlying collateral securing these
Mortgage Investments, REO expenses, sales activities, and borrowers' payment
records and other data relating to the Mortgage Investment portfolio. Data on
the local real estate market, and on the national and local economy are studied.
Based upon this information and more, Mortgage Investment loss reserves and
allowance for doubtful accounts are increased or decreased. Because of the
number of variables involved and the General Partners' inability to control many
of these factors, actual results may and do sometimes differ significantly from
estimates made. Management provided $312,684, $268,101, $180,054 and $111,762,
as provision for doubtful accounts for the years ended December 31, 1996,
December 31, 1997, and December 31, 1998 and nine months through September 30,
1999, respectively. The decrease in the provision reflects the decrease in the
amount of REO, unsecured receivables and the decreasing levels of delinquency
within the portfolio. Additionally, the General Partners felt that the bottom of
the real estate cycle had been reached, reflecting a decreasing need to set
aside reserves for the continuously declining real estate values as had been the
case in the early 1990's. As of September 30, 1999, the Partnership reduced the
REO balance from $1,501,712 as of December 31, 1995, to $8,941 through September
30, 1999. This reduction assisted the Partnership in increasing yields in 1999,
as non-earning assets were converted to earning assets.
The September 23, 1999 issue of the San Mateo Times, published a new UCLA
Anderson forecast which focused on the California economy. The General Partners
agree with their observations and predictions. The UCLA focus stated:
"The California economy will grow at a healthy pace over the next two
decades, but there is little chance of returning to the sustained economic boom
that carried the state during the first four decades following World War II.
California's economic growth will be limited by the consequences of
population growth: high housing costs, traffic congestion and long commute
times, according to the quarterly forecast released Tuesday. Looking at the
national scene, the forecast predicted the Federal Reserve Board will raise
interest rates another half percent over the next few months and then hold
steady at 5.75 percent through 2000 to further curb inflation risks. The
increase will slow economic growth from 3.9 percent in 1999 to 2.5 percent.
"This forecast is for a very soft landing", the forecast said. In
California, employment will grow by about 2.1 percent annually through 2020,
good for a cumulative increase of 50 percent.
That rate contrasts with an average growth rate of 3.5 percent from 1950 to
1990, when the California economy depended heavily on the Cold War arms race and
expanding government space programs, said Tom Lieser, executive director of the
Anderson Forecast and author of the repor's California section.
"A lot of that basically fell from the sky so to speak," Lieser said."It
came from the defense budget right to our doorstep. California was blessed with
conditions that made this the capital of the aerospace industr".
That market changed in 1990 when the Cold War ended and defense spending
fell sharply.
The United States fell into recession, with California suffering more than
most other states. What eventually emerged, Lieser said, is an economy that is
more diverse and less vulnerable to the federal budget.
"Now we have a market-driven economy, which was built on the technological
specialization that we had from aerospace and our universities. We build on
that, but we don't have to worry about that going away," he said.
<PAGE>
Aerospace employment peaked in the 1980s at 380,000, and fell to 165,000 by
1996 in the wake of the downsizing. Aerospace employment has stabilized, but
growth will be limited, the report said.
The challenge of the next two decades will be to build housing, roads and
other infrastructure that sustained growth will require".
To the Partnership, the above evaluation of the California economy means an
increase in property values, job growth, personal income growth, etc., which all
translates into more loan activity, which of course, is healthy for the
Partnership's lending activity.
The Partnership's interest in land located in East Palo Alto, Ca, was
acquired through foreclosure. The Partnership's interest was invested with that
of two other Partnerships. The Partnership's basis of $14,067, $0, $708,141 and
$496,040 for the nine months through September 30, 1999 and for the years ended
December 31, 1998, December 31, 1997 and 1996 respectively, has been invested
with that of two other Partnerships. The Partnership had been attempting to
develop property into an approximately 63 units residential subdivision, (the
"Development"). The proposed Development had gained significant public awareness
as a result of certain environmental, fish and wildlife, population density, and
other concerns. Incorporated into the proposed Development were various
mitigation measures included remediation of hazardous material existing on the
property and protection of potentially affected species due to the proximity to
the San Francisco Baylands. These issues and others sparked significant public
controversy. Opposition against and support for the proposed Development
existed. Among those in opposition to the project was Rhone Poulanc, Inc., which
is responsible for a nearby hazardous waste site. Rhone Poulanc, Inc. has been
identified as the Responsible Party for the "Arsenic Contamination" which
affected a portion of the property. On May 8, 1998, the Partnership, in order to
resolve disputes which arose during the course of attempts to obtain
entitlements for this Development, entered into agreements with Rhone-Poulanc,
Inc., which among other things, restricted the property to non residential uses,
provided for appropriate indemnification and included other consideration
including a cash payment to the Partnership. The Partnership has retained
ownership of the property, which is subject to various deed restrictions,
options and or first rights of refusal. The General Partners are pleased with
this outcome to the residential development attempt. The General Partners may
now explore other available options with respect to alternative uses for the
property. In order to pursue these options, rezoning of the property's existing
residential zoning classification will be required. The Partnership is
continuing to explore remediation options available to mitigate the pesticide
contamination which affects the property. This pesticide contamination appears
to be the result of agricultural operations by prior owners, and is unrelated to
the Arsenic Contamination for which Rhone Poulanc, Inc. remains responsible. The
General Partners do not believe at this time that remediation of the pesticide
contaminants will have a material adverse effect on the financial condition of
the Partnership.
At the time of subscription to the Partnership, Limited Partners made a
decision to either take distributions of earnings monthly, quarterly or annually
or to compound earnings in their capital account. During the last three years
and the nine month period ending September 30, 1999, the following distribution
of earnings, after allocation of syndication costs, were made to the Limited
Partners. These earnings are tabulated separately for compounding and
distributing partners.
9 months
December 31, December 31, December 31, through
1996 1997 1998 Sept 30, 1999
------------ ------------ ------------ -----------
Compounding Partners $293,484 $271,517 $276,668 $230,317
Distributing Partners $288,796 $252,378 $230,712 $158,163
------------ ------------ ------------ -----------
Total Earnings $582,280 $523,895 $507,380 $388,480
As of December 31, 1996, December 31, 1997, and December 31, 1998 and nine
months through September 30, 1999, Limited Partners electing to withdraw
earnings represented 49 %, 46%, 43% and 43% respectively of the Limited Partners
outstanding capital accounts.
<PAGE>
The Partnership also allows the Limited Partners to withdraw their capital
account subject to certain limitations (see liquidation provisions of
Partnership Agreement). For the years ended December 31, 1996, December 31,
1997, December 31, 1998, and nine months through September 30, 1999, $96,362,
$159,732, $122,069 and $88,912, respectively, were liquidated subject to the 10%
penalty for early withdrawal. These withdrawals are within the normally
anticipated range that the General Partners would expect in their experience in
this and other Partnerships. The General Partners expect that a small percentage
of Limited Partners will elect to liquidate their capital accounts over one year
with a 10% early withdrawal penalty. In originally conceiving the Partnership,
the General Partners wanted to provide Limited Partners needing their capital
returned a degree of liquidity. Generally, Limited Partners electing to withdraw
over one year need to liquidate investments to raise cash. The trend the
Partnership is experiencing in withdrawals by Limited Partners electing a one
year liquidation program represents a small percentage of Limited Partner
capital as of December 31, 1996, December 31, 1997, December 31, 1998 and
September 30, 1999, respectively and is expected by the General Partners to
commonly occur at these levels.
Additionally, for the years ended December 31, 1996, December 31, 1997,
December 31, 1998 and nine months through September 30, 1999, $1,086,737,
$1,137,677, $938,040 and $608,954, respectively, were liquidated by Limited
Partners who have elected a liquidation program over a period of five years or
longer. Once the initial five year hold period has passed, the General Partners
expect to see an increase in liquidations due to the ability of Limited Partners
to withdraw without penalty. This ability to withdraw after five years by
Limited Partners has the effect of providing Limited Partner liquidity which the
General Partners then expect a portion of the Limited Partners to avail
themselves of. This has the anticipated effect of the partnership growing,
primarily through reinvestment of earnings in years one through five. The
General Partners expect to see increasing numbers of Limited Partner withdrawals
in years five through eleven, at which time the bulk of those Limited Partners
who have sought withdrawal will have been liquidated. After year eleven,
liquidation generally subsides and the Partnership capital again tends to
increase.
Actual liquidation of both capital and earnings from year five (1992)
through September 30, 1999 is shown hereunder:
Years ended December 31,
------------------------
1992 1993 1994 1995
------------ ------------ ------------ --------------
Earnings $323,037 377,712 303,014 303,098
Capital* $232,370 528,737 729,449 892,953
------------ ------------ ------------ --------------
Total $555,407 $906,449 $1,032,463 $1,196,051
============ ============ ============ ==============
1996 1997 1998 Sept 30, 1999
------------ ------------ ------------ --------------
Earnings 294,678 257,670 235,837 158,163
Capital* 1,183,099 1,297,410 1,060,109 697,866
------------ ------------ ------------ --------------
Total $1,477,777 $1,555,080 $1,295,946 $856,029
============ ============ ============ ==============
*These amounts represent gross of early withdrawal penalties.
The Year 2000 will be a challenge for the entire world, with respect to the
conversion of existing computerized operations. The Partnership is completing
its assessment of Year 2000 hardware and software issues. The hardware issue is
fully complete and tested. The Partnership relies on Redwood Mortgage Corp., an
affiliate of the Partnership, third party and software vendors for its computer
software. Major services provided to the Partnership by these companies are loan
servicing, accounting and investor services. The software for loan servicing is
installed and is in compliance with Year 2000 issues. Installation of accounting
software that is Year 2000 compliant began and was completed during the second
quarter of 1999 and has been tested since that time. The investor servicing
software is still being modified, however software maintenance agreements
provide for Year 2000 compliance. Additionally, the Partnership has contacted
several outside vendors that provide investor services as a possible alternative
to providing investor services in house. These service providers will be more
expensive than the current in house systems, but they do provide a back-up
alternative. Reports are being run parallel to insure accuracy of Year 2000
compliance. This will continue through December 31, 1999.
The costs of updating the various software systems will be borne by the
various companies that supply the Partnership with services. Therefore, no
significant capital outlays are anticipated and the Partnership expects only
incidental costs of conversion for Year 2000 issues.
The Partnership is in the business of making Mortgage Investments secured
by real estate. The most important factor in making the Mortgage Investments is
the value of the real estate security. Year 2000 issues have some potential to
affect industries and businesses located in the marketplaces in which the
Partnership places its Mortgage Investments. This would only have an effect on
the Partnership if Year 2000 issues cause a significant downturn in the northern
California economy. The fact that Silicon Valley is located in our marketplace,
there may be significant increased demand for Silicon Valley type services and
goods as companies make ready for the Year 2000 conversion.
Although almost complete, if any or all accounting, loan servicing and
investor services conversions should fail, the size and scope of the
Partnership's activities are such that a failure could be handled at an equal or
higher cost. This could be done on a manual basis or outsourced to other
servicers existing in the industry, while correcting systems problems and are
likely to be temporarily in nature. While this would entail some initial set up
costs, these costs would likely not be so significant as to have a material
effect upon the Partnership. Shifting portions of daily operations to manual or
outsourced systems may result in time delays, which could negatively affect
customer relations and lead to the potential loss of new loans and Limited
Partner investments.
The foregoing analysis of Year 2000 issues includes forward-looking
statements and predictions about possible or future events, results of
operations and financial condition. As such, this analysis may prove to be
inaccurate because of assumptions made by the General Partners or the actual
development of future events. No assurance can be given that any of these
statements or predictions will ultimately prove to be correct or even
substantially correct.
Various other risks and uncertainties could also affect the Year 2000
analysis causing a more severe effect on the Partnership than discussed above.
The General Partners Year 2000 compliance testing cannot guarantee that all
computer systems will function without error beyond the Year 2000. Risks also
exist with respect to Year 2000 compliance by external parties who may have no
relationship to the Partnership or the General Partners, but who have a
significant relationship with one or more third parties, and may have a system
failure that adversely affects the Partnership's ability to conduct business.
While the General Partners are attempting to identify such external parties, no
assurance can be given that it will be able to do so.
Furthermore, third parties with direct relationships with the Partnership,
whose systems have been identified as likely to be Year 2000 compliant, may
suffer a breakdown due to unforeseen circumstances. It is also possible that the
information collected by the General Partners' for these third parties regarding
their compliance with Year 2000 issues may be incorrect. Finally, it should be
noted that the foregoing discussion of Year 2000 issues assumes that to the
extent the General Partners systems fail, whether because of unforeseen
complications or because of third parties' failure, switching to manual
operations will allow the Partnership to continue to conduct its business. While
the General Partner believes this assumption to be reasonable, if it is
incorrect, the Partnership's results of operations would likely be adversely
affected.
<PAGE>
COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP
------------------------------------------------------------------
The Partnership has no officers or directors. The Partnership is managed by
the General Partners. There are certain fees and other items paid to management
and related parties. A more complete description of management compensation is
found in the Prospectus, pages 11-12, under the section "Compensation of the
General Partners and the Affiliates", which is incorporated by reference. Such
compensation is summarized below.
The following compensation has been paid to the General Partners and their
affiliates for services rendered during the nine months ended September 30,
1999. All such compensation is in compliance with the guidelines and limitations
set forth in the Prospectus.
Entity Receiving Description of Compensation and Amount
Services Rendered
- --------------------------------------------------------------------------------
I.
Redwood Mortgage Mortgage Servicing Fee for
Corp. servicing Mortgage Investments $40,804
General Partners Asset Management Fee for managing
&/or affiliates assets $8,043
General Partners 1% interest in profits $3,924
II. FEES PAID BY BORROWERS ON MORTGAGE INVESTMENTS PLACED BY COMPANIES
RELATED TO THE GENERAL PARTNERS WITH THE PARTNERSHIP (EXPENSES OF BORROWERS NOT
OF THE PARTNERSHIP):
Redwood Mortgage Mortgage Brokerage Commissions for services
Corp. in connection with the review, selection,
evaluation, negotiation, and extension of the
Mortgage Investments paid by the borrowers
and not by the Partnership $22,277
Redwood Mortgage Processing and Escrow Fees for services in
Corp. connection with notary, document preparation,
credit investigation, and escrow fees payable by
the borrowers and not by the Partnership $1,239
III. IN ADDITION, THE GENERAL PARTNER AND/OR RELATED COMPANIES PAY CERTAIN
EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE
STATEMENT OF INCOME......................................................$16,305
<PAGE>
As of September 30, 1999, a summary of the Partnership's Mortgage
Investment portfolio is set forth below.
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deeds $4,158,117.88
Appraised Value of Properties 5,980,340.00
Total Investment as a % of Appraised Value 69.53%
First Trust Deeds $4,158,117.88
Second Trust Deed Mortgage Investments 2,203,350.35
Third Trust Deed Mortgage Investments 392,333.49
Fourth Trust Deed Mortgage Investments* 249,999.40
--------------------
7,003,801.12
First Trust Deeds due other Lenders 9,734,527.00
Second Trust Deeds due other Lenders 990,064.00
Third Trust Deeds due other Lenders 178,571.00
Total Debt $17,906,963.12
Appraised Property Value $26,185,607.00
Total Investments as a % of Appraised Value 68.38%
Number of Mortgage Investments Outstanding 49
Average Investment 142,934.72
Average Investment as a % of Net Assets 1.73%
Largest Investment Outstanding 1,376,117.03
Largest Investment as a % of Net Assets 16.70%
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deeds 59.37%
Second Trust Deeds 31.46%
Third Trust Deeds 5.60%
Fourth Trust Deeds 3.57%
-------------------------
Total 100.00%
Mortgage Investments by Type of Amount Percent
Owner Occupied Homes $852,527.34 12.17%
Non-Owner Occupied Homes 170,653.23 2.44%
Apartments 773,793.83 11.05%
Commercial 5,206,826.72 74.34%
---------------- -------------
Total $7,003,801.12 100.00%
*Footnote on following page
<PAGE>
The following is a distribution of Mortgage Investments outstanding as of
September 30, 1999 by Counties.
Santa Clara $2,206,788.57 31.51%
Alameda 1,154,520.58 16.48%
San Mateo 825,404.64 11.78%
Contra Costa 749,998.21 10.71%
Stanislaus 697,333.47 9.96%
Sacramento 593,994.41 8.48%
San Francisco 321,873.39 4.60%
Sonoma 179,931.36 2.57%
Shasta 80,451.27 1.15%
Monterey 70,070.38 1.00%
Santa Cruz 69,564.40 0.99%
Marin 40,870.44 0.58%
Ventura 13,000.00 0.19%
------------------- -----------
Total $7,003,801.12 100.00%
* Redwood Mortgage Investors VI, together with other Redwood partnerships
hold a second and a fourth trust deed against the secured property. In addition,
the principals behind the borrower corporation have given personal guarantees as
collateral. The overall loan to value ratio on this loan is 76.52%. The borrower
is paying a fixed interest rate of 12.25%, and the Partnership and other lenders
will also be entitled to share in the profits generated by the corporation with
respect to the secured property. The affiliates of the Partnership had entered
into previous loan transactions with this borrower which have been concluded
successfully, resulting in additional revenue beyond interest payments for the
affiliates involved.
Statement of Condition of Mortgage Investments:
Number of Mortgage Investments in Foreclosure 4
<PAGE>
PART 2
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
No legal action has been initiated against the
Partnership. The Partnership had filed a legal
action for collection against borrowers, which is
routine litigation incidental to its business.
Please refer to note (7) of financial statements.
Item 2. Changes in the Securities
-------------------------
Not Applicable
Item 3. Defaults upon Senior Securities
-------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not Applicable
Item 5. Other Information
-----------------
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Not Applicable
(b) Form 8-K
The registrant has not filed any reports on
Form 8-K during the three month period ending
September 30, 1999.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934 the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized on the 10th day of
November, 1999.
REDWOOD MORTGAGE INVESTORS VI
By: /s/ D. Russell Burwell
---------------------------------------------
D. Russell Burwell, General Partner
By: /s/ Michael R. Burwell
---------------------------------------------
Michael R. Burwell, General Partner
By: Gymno Corporation, General Partner
By: /s/ D. Russell Burwell
---------------------------------------------
D. Russell Burwell, President
By: /s/ Michael R. Burwell
---------------------------------------------
Michael R. Burwell, Secretary/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the registrant
and in the capacity indicated on the 10th day of November, 1999.
Signature Title Date
- ------------------------ ----------------------------------- -------------------
/s/ D. Russell Burwell
- -----------------------
D. Russell Burwell General Partner November 10, 1999
/s/ Michael R. Burwell
- -----------------------
Michael R. Burwell General Partner November 10, 1999
/s/ D. Russell Burwell
- -----------------------
D. Russell Burwell President of Gymno November 10, 1999
Corporation, (Principal
Executive Officer);
Director of Gymno
Corporation
/s/ Michael R. Burwell
- ----------------------
Michael R. Burwell Secretary/Treasurer of November 10, 1999
Gymno Corporation (Principal
Financial and Accounting Officer);
Director of Gymno Corporation
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 374,135
<SECURITIES> 0
<RECEIVABLES> 8,057,312
<ALLOWANCES> 214,471
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,239,984
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,239,984
<TOTAL-LIABILITY-AND-EQUITY> 8,239,984
<SALES> 0
<TOTAL-REVENUES> 611,204
<CGS> 0
<TOTAL-COSTS> 92,325
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 111,762
<INTEREST-EXPENSE> 14,713
<INCOME-PRETAX> 392,404
<INCOME-TAX> 0
<INCOME-CONTINUING> 392,404
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 392,404
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
