FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Period Ended June 30, 1996
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Commission file number 33-49946
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REDWOOD MORTGAGE INVESTORS VIII
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(exact name of registrant as specified in its charter)
CALIFORNIA 94-3158788
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
650 El Camino Real, Suite G, Redwood City, CA 94063
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(address of principal executive office)
(415) 365-5341
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(Registrants telephone number, including area code)
NOT APPLICABLE
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(Former name,former address and former fiscal year if changed since last report)
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
- ------------------------- ----------------------
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
- --------- ------------- -----------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers class of
common stock, as of the latest date.
NOT APPLICABLE
<PAGE>
<TABLE>
Part I
Item 1
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
Balance Sheets
December 31, 1995 (audited)
and June 30, 1996 (unaudited)
<CAPTION>
ASSETS
June 30, 1996 Dec. 31, 1995
(unaudited) (audited)
<S> <C> <C>
Cash ............................................. $ 671,546 $ 380,318
----------- -----------
Accounts receivable:
Mortgage loans, secured by deeds of trust ..... 14,196,953 12,047,252
Accrued Interest on Mortgage Loans ............ 122,684 113,301
Advances on Mortgage Loans .................... 8,541 8,431
Accounts receivable - unsecured ............... 72,866 71,316
---------- -----------
14,401,044 12,240,300
Less Allowance for doubtful accounts ............ 86,505 39,152
----------- -----------
14,314,539 12,201,148
----------- -----------
Formation loan due from Redwood Home Loan Co. ...... 860,599 775,229
Organization Costs, less accumulated amortization
of $6,875 and $5,625, respectively ................. 5,625 6,875
Due from related companies .......................... -0- 3,049
Prepaid Expenses - deferred loan fee ................ 12,657 17,718
---------- -----------
$15,864,966 $13,384,337
=========== ===========
LIABILITIES AND PARTNERS CAPITAL
Liabilities:
Accounts payable and accrued expenses ............$ -0- $ 4,010
Notes payable - bank line of credit .............. 2,892,000 1,910,000
Subscriptions to Partnerships in applicant status. 16,000 -0-
----------- -----------
$ 2,908,000 1,914,010
Partners capital ................................... 12,956,966 11,470,327
----------- -----------
$15,864,966 $13,384,337
=========== ===========
<FN>
See accompanying notes to Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (unaudited)
<CAPTION>
6 mos. ended 6 mos. ended 3 mos. ended 3 mos. ended
June 30, 1996 June 30, 1995 June 30,1996 June 30, 1995
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
<S> <C> <C> <C> <C>
Interest on Mortgage Loans ........................... $740,513 $395,683 $396,500 $203,756
Interest on bank deposits ............................ 1,417 6,828 662 4,207
Late Charges ......................................... 2,059 1,722 1,084 1,475
Miscellaneous ........................................ 300 351 100 276
-------- -------- -------- --------
744,289 404,584 398,346 209,714
-------- -------- -------- --------
Expenses:
Interest on Note Payable .............................. 110,638 -0- 68,326 -0-
Amortizatin of loan origination fee ................... 5,062 -0- 2,531 -0-
General partner management fees ....................... 7,760 5,064 4,018 2,650
Amortization of organization costs .................... 1,250 1,250 625 625
Clerical costs thru Redwood Home Loan Co............... 17,647 9,629 9,388 5,067
Professional Fees ..................................... 16,214 13,161 6,060 6,362
Provision for doubtful accounts ....................... 19,085 5,000 15,506 -0-
Printing, Supplies & Postage .......................... 993 92 957 5
Other ................................................. 3,910 1,225 20 840
-------- -------- -------- --------
182,559 35,421 107,431 15,549
-------- -------- -------- --------
Income before interest credited to
partners in applicant status ........................... 561,730 369,163 290,915 194,165
Interest credited to partners in
applicant status........................................ 1,096 6,069 246 4,745
-------- -------- -------- --------
Net Income ............................................. $560,634 $363,094 $290,669 $189,420
======== ======== ======== ========
Net income: to General Partners (1%) ................... $ 5,606 $ 3,631 $ 2,906 $ 1,894
Net income: to Limited Partners (99%) .................. 555,028 359,463 287,763 187,526
-------- -------- -------- --------
$560,634 $363,094 $290,669 $189,420
======== ======== ======== ========
Net income per $1,000 invested by
Limited Partners for entire period:
-Where income is reinvested and compounded............ $ 41.12 $ 40.89 $ 20.33 $ 20.16
-------- -------- -------- --------
-Where partner receives income in
monthly distributions ........................... $ 40.43 $ 40.21 $ 20.19 $ 20.03
-------- -------- -------- --------
<FN>
See accompanying notes to Financial Statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (unaudited)
<CAPTION>
June 30, 1996 June 30, 1995
(unaudited) (unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income: ........................................ $ 560,634 $ 363,094
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of organization costs ............... 1,250 1,250
Increases in allowances for doubtful accounts .... 47,353 5,000
(Increase) decrease in accrued interest
and advances .................................... ( 9,493) ( 25,797)
(Increase) decrease in prepaid expenses and
other assets .................................... 5,061 -0-
(Increase) decrease in amount due from related
companies ....................................... 3,049 -0-
Increase (decrease) in accounts payable .......... ( 4,010) -0-
---------- ---------
Net cash provided by operating activities .......... 603,844 343,547
========= =========
Cash flows from investing activities:
Net (increase) decrease in mortgage loans ......... (2,149,701) (1,522,682)
Net (increase) decrease in formation loan ......... ( 85,370) ( 127,426)
Net (increase) decrease in account receivable
-unsecured ....................................... ( 1,550) ( 70,385)
---------- ---------
Net cash used in investing activities ........... (2,236,621) (1,720,493)
---------- ---------
Cash flows from financing activities:
Increase in notes payable - Bank .................. 982,000 -0-
Contributions by partner applicants ............... 1,270,399 1,909,705
Interest credited to partners in applicant
status .......................................... 1,096 6,069
Interest withdrawn by partners in applicant
status .......................................... ( 550) ( 3,554)
Partners withdrawals .............................. ( 242,635) ( 136,759)
Early withdrawal penalties, net ................... ( 1,117) -0-
Syndication costs incurred ........................ ( 85,188) ( 101,792)
---------- --------
Net cash provided by financing activities ....... 1,924,005 1,673,669
---------- ---------
Net increase (decrease) in cash and cash equivalents 291,228 296,723
Cash and cash equivalent at the beginning of period . 380,318 397,176
========= =========
Cash and cash equivalent balance at the end of period 671,546 693,899
========= =========
<FN>
See accompanying notes to Financial Statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS CAPITAL
FOR THE PERIOD FROM INCEPTION, APRIL 14, 1993,
THROUGH DECEMBER 31, 1995 (audited) and for the
SIX MONTHS ENDED JUNE 30, 1996 (unaudited)
<CAPTION>
PARTNERS CAPITAL
---------------------------------------------------------------
PARTNERS IN UNALLOCATED
APPLICANT GENERAL LIMITED SYNDICATION
STATUS PARTNERS PARTNERS COSTS TOTAL
--------------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Contribution on application ................ $ 2,890,530 $ -0- $ -0- $ -0- $ -0-
Interest credited to Partners in appl.status 4,641 -0- -0- -0- -0-
Upon admission to Partnership:
Interest withdrawal ..................... ( 1,956) -0- -0- -0- -0-
Transfer to Partners Capital ............ ( 2,764,443) 2,887 2,761,556 -0- 2,764,443
Net income ................................. -0- 1,050 103,965 -0- 105,015
Syndication costs incurred ................. -0- -0- -0- ( 199,564) ( 199,564)
Allocation of syndication costs ............ -0- ( 92) ( 9,130) 9,222 -0-
Partners withdrawals ....................... -0- ( 958) ( 46,856) -0- ( 47,814)
------------ ----------- ----------- ----------- ----------
Balances at December 31, 1993 .............. 128,772 2,887 2,809,535 ( 190,342) 2,622,080
Contribution on application ................ 4,560,683 -0- -0- -0- -0-
Interest credited to Partners in appl.status 14,443 -0- -0- -0- -0-
Upon admission to Partnership:
Interest withdrawn ...................... ( 5,774) -0- -0- -0- -0-
Transfer to Partners capital ........... ( 4,508,824) 4,542 4,504,282 -0- 4,508,824
Net income ................................. -0- 4,099 405,770 -0- 409,869
Syndication costs incurred ................. -0- -0- -0- ( 81,023) ( 81,023)
Allocation of syndication costs ............ -0- ( 347) ( 34,349) 34,696 -0-
Partners withdrawals ....................... -0- ( 3,444) ( 165,814) -0- ( 169,258)
------------ ----------- ----------- ----------- ----------
Balances at December 31, 1994 .............. 189,300 7,737 7,519,424 ( 23,669) 7,290,492
Contribution on application ................ 3,634,264 -0- -0- -0- -0-
Interest credited to Partners in appl.status 18,908 -0- -0- -0- -0-
Upon admission to Partnership:
Interest withdrawn ...................... ( 7,673) -0- -0- -0- -0-
Transfer to Partners capital ............ (3,834,799) 3,588 3,831,211 -0- 3,834,799
Net income ................................. -0- 8,368 828,465 -0- 836,833
Syndication costs incurred ................. -0- -0- -0- (175,334) ( 175,334)
Allocation of syndication costs ............ -0- ( 859) ( 85,045) 85,904 -0-
Partners withdrawals ....................... -0- ( 7,509) ( 308,554) -0- ( 316,063)
Early withdrawal penalties ................. -0- -0- ( 654) 164 ( 400)
---------- ----------- ----------- ----------- ----------
Balances at December 31, 1995 .............. -0- 11,325 11,784,937 (325,935) 11,470,327
Contribution on application ................ 1,270,399 -0- -0- -0- -0-
Interest credited to partners in appl status 1,096 -0- -0- -0- -0-
Upon admission to Partnership:
Interest withdrawn ...................... ( 550) -0- -0- -0- -0-
Transfer to Partners capital ............ (1,254,945) 1,253 1,253,692 -0- 1,254,945
Net income ................................. -0- 5,606 555,028 -0- 560,634
Syndication costs incurred ................. -0- -0- -0- ( 85,188) ( 85,188)
Allocation of syndication costs ............ -0- ( 522) ( 51,678) 52,200 -0-
Partners withdrawals ....................... -0- ( 5,084) ( 237,551) -0- ( 242,635)
Early withdrawal penalties ................. -0- -0- ( 1,814) 697 ( 1,117)
------------ ----------- ----------- ----------- ----------
Balances at June 30, 1996................... $ 16,000 $ 12,578 $13,302,614 $( 358,226) $12,956,966
============== ========== =========== =========== ===========
<FN>
See accompanying notes to Financial Statements
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 (audited) and
JUNE 30, 1996 (unaudited)
1. ORGANIZATION AND GENERAL
Redwood Mortgage Investors VIII, (the Partnership), is a California Limited
Partnership, of which the General Partners are D. Russell Burwell, Michael R.
Burwell (Individual General Partners) 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 loans secured by Deeds of Trust on California real
estate. Partnership loans are being arranged and serviced by Redwood Home Loan
Co. (RHL Co.), dba Redwood Mortgage, an affiliate of the General Partners. At
June 30, 1996, the Partnership was in the offering stage, wherein contributed
capital totalled $12,343,606 in limited partner contributions of an approved
$15,000,000 issue, in units of $100 each. All applicants except one, had been
admitted to the Partnership at June 30, 1996.
A minimum of 2,500 units ($250,000) and a maximum of 150,000 units
($15,000,000) are being offered through qualified broker-dealers. As mortgage
loans are identified, partners are transferred from applicant status to admitted
partners participating in mortgage loan operations. Each months 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 are being paid by RHL Co., an affiliate of the General
Partners that arranges and services the mortgage loans. To finance the sales
commissions, the Partnership will loan to RHL Co., an amount not to exceed 9.1%
of the gross proceeds; provided that amounts funded under the Formation Loan,
until the minimum offering amount was obtained, could equal up to 10% of gross
proceeds. The General partners have estimated that the Formation Loan will
approximate 7.1% of the gross proceeds. The Formation Loan will be unsecured,
and will be repaid, without interest, in ten annual installments of principal,
which will commence on January 1, following the year the offering closes. At
June 30, 1996, RHL Co., had borrowed $862,116 from the Partnership to cover
sales commissions relating to $12,343,606 Limited Partners contributions to
date. The Formation loan balance at the end of June, 1996 was $860,599 after
applying a credit of $1,517 gained through early withdrawal penalties.
B. Other Organizational and Offering Expenses
Organizational and offering expenses, other than sales commissions,
(including printing costs, attorney and accountant fees, registration and filing
fees, and other costs), will be paid by the Partnership up to 10% of the gross
proceeds of the offering or $600,000, whichever is less. The General Partners
will pay any amount of such expenses in excess of the lesser of 10% of the gross
proceeds or $600,000.
At June 30, 1996, organization costs of approximately $12,500 and offering
costs of $540,248, net of early withdrawal penalties applied, had been incurred
by the Partnership, which is less than the 10% of the gross proceeds limitation
indicated above. It is anticipated that ultimately the sum of organization and
offering costs will be less than the present level of 4.48% of the gross
proceeds contributed by the Partners.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenues and expenses are accounted for on the accrual basis of accounting.
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, and filling fees.
Organizational costs have been capitalized and will be amortized over a five
year period. Syndication costs are charged against partners capital and will be
allocated to individual partners consistent with the partnership agreement.
If property is acquired through foreclosure, it will be held for prompt
sale to return the funds to the loan portfolio. Such property will be recorded
at cost, which includes the principal balance of the former loan made by the
Partnership, plus accrued interest, payments made to keep the senior loans
current, costs of obtaining title and possession, less rental income, or at
estimated net realizable value. The difference between such costs and
estimated net realizable value will be deducted from cost in the Balance Sheet
to arrive at the carrying value of such property. In May of 1996, one property
was acquired through foreclosure and subsequently sold in June, 1996, realizing
a net gain on sale of $28,268. At June 30, 1996, there was no property acquired
through foreclosure remaining. The gian has been credtied to the reserve for
doubtful accounts.
Mortgage loans 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 loan system. A provision is made for
doubtful accounts to adjust the allowance for doubtful accounts to an amount
considered by management to be adequate to provide for unrecoverable accounts
receivable.
In preparing the financial statements, management is required to make
estimates based on the information available that affect the reported amounts of
assets and liabilities as of the balance sheet date and revenues and expenses
for the related period. Such estimates relate principally to the determination
of the allowance for doubtful accounts and the valuation of real estate acquired
through foreclosure. Actual results could differ significantly from these
estimates.
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.
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 make or withdraw investments during the period,
or select other options. However, the net income per $1,000 average invested has
approximated those reflected for those whose investments and options have
remained constant.
The interim financial statements dated June 30, 1996, are unaudited, but in
the opinion of the General Partners all adjustments (consisting soley of normal
adjustments) necessary to a fair presentation of the financial statements at
June 30, 1996, have been made.
<PAGE>
3. GENERAL PARTNERS AND RELATED PARTIES The following are commissions
and/or fees which will be paid to the General Partners and/or related parties.
A. Loan Brokerage Commissions
Fees in connection with the review, selection, evaluation, negotiation, and
extension of Partnership loans in an amount up to 12% of loans until six months
after the termination date of the offering are paid to Redwood Home Loan Co.
Thereafter, loan brokerage commissions will be limited to an amount not to
exceed 4% of the total Partnership assets per year. The loan brokerage
commissions are paid by the borrowers, and thus, not an expense of the
Partnership.
B. Loan Servicing Fees
Monthly loan servicing fees of up to the lesser of 1/8 of 1% (1.5% annual)
of the unpaid principal is paid to Redwood Home Loan Co., or such lesser amount
as is reasonable and customary in the geographic area where the property
securing the loan is located. Currently, such servicing fees are at 1/12 of 1%
per month (1% annually). Amounts remitted to the Partnership and recorded as
interest on mortgage loans is net of such fees. In 1993, $3,028 of the total
loan servicing fees of $8,528 were waived by Redwood Home Loan Co. In 1994,
$15,278 of the total loan servicing fees of $44,405 were also waived. In 1995,
and for the six months through June 30, 1996, RHL received the total loan
servicing fees earned of $85,456 and $67,389 respectively.
C. Asset Management Fee
The General Partners will receive a monthly fee for managing the
Partnerships loan portfolio and operations equal to up to 1/32 of 1% of the net
asset value (3/8 of 1% per year). Such fees were reduced from $4,331 to $192 in
1993, with the difference being waived by the General Partners. Fees were
reduced from $17,718 to $5,906 in 1994 with the difference being waived. In
1995, fees were reduced from $34,773 to $11,587 and for the six months through
June 30, 1996, the fees were also reduced from $23,280 to $7,760 with the
difference being waived by the General Partners.
D. Other Fees
The Partnership Agreement provides for other fees such as reconveyance,
loan assumption and loan extension fees. Such fees are incurred by the borrowers
and are paid to parties related to the General Partners.
E. Income and Losses
All income will be credited or charged to partners in relation to their
respective partnership interests. The partnership interest of the General
partners (combined) shall be a total of 1%.
F. Operating Expenses
The General Partners or their affiliate (Redwood Home Loan Co.) 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, accounting and audit
fees, legal fees and expenses, postage and preparation of reports to Limited
Partners. Such reimbursements are reflected as expenses in the Statement of
Income.
The General Partners, collectively or severally are to contribute an amount
equal to 1/10 of 1% of cash contributions as proceeds from the offering are
admitted to Limited Partner capital. As of June 30, 1996, a General Partner,
GYMNO Corporation, had contributed $12,270 as capital in accordance with Section
4.02 (a) of the Partnership Agreement.
4. OTHER PARTNERSHIP PROVISIONS
A. Applicant Status
Subscription funds received from purchasers of units are not admitted to
the Partnership until appropriate lending opportunities are available. During
the period prior to the time of admission, which is anticipated to be between 1
- -120 days in most cases, purchasers subscriptions will remain irrevocable and
will earn interest at money market rates, which are lower than the anticipated
return on the Partnerships loan portfolio.
<PAGE>
During the periods ending December 31, 1995, 1994, and 1993, and for the
six months ended June 30, 1996, interest totalling $18,908, $14,443, $4,641 and
$1,096 respectively, was credited to partners while they were in applicant
status. As loans were made and partners were transferred to regular status to
begin sharing in income from loans secured by deeds of trust, the interest
credited was either paid to the investors or transferred to partners capital
along with the original investment.
B. Term of the Partnership
The term of the Partnership is approximately 40 years, unless sooner
terminated as provided. The provisions provide for no capital withdrawal for the
first five years, except as discussed in (E) below. Thereafter, investors have
the right to withdraw over a five-year period, or longer.
C. Election to Receive Monthly, Quarterly or Annual Distributions
Upon subscription, investors elect either to receive monthly, quarterly or
annual distributions of earnings allocations, or to allow earnings to compound.
Subject to certain limitations, an investor may subsequently change his
election.
D. Profits and Losses
Profits and losses are allocated among the Limited Partners according to
their respective capital accounts after 1% is allocated to the General Partners.
E. Liquidity, Capital Withdrawals and Early Withdrawals
There are substantial restrictions on transferability of Units and
accordingly an investment in the Partnership is illiquid. Limited Partners have
no right to withdraw from the Partnership or to obtain the return of their
capital account for at least one year from the date of purchase of units. In
order to provide a certain degree of liquidity to the Limited Partners after the
one-year period, Limited Partners may withdraw all or part of their Capital
Accounts from the Partnership in four quarterly installments beginning on the
last day of the calendar quarter following the quarter in which the notice of
withdrawal is given, (30 days notice is required), subject to a 10% early
withdrawal penalty. The 10% penalty is applicable to the amount withdrawn and
will be deducted from the Capital Account and the balance distributed in four
quarterly installments. Withdrawal after the one-year holding period and before
the five-year holding period will be permitted only upon the terms set forth
above.
Limited Partners will also have the right after five years from the date of
purchase of the Units to withdraw from the Partnership on an installment basis,
generally over a five year period in twenty (20) quarterly installments or
longer. No penalty will be imposed if withdrawal is made in twenty (20)
quarterly installments or longer. Notwithstanding the minimum twenty installment
withdrawal procedure, a Limited Partner may liquidate all or a part of a Limited
Partners 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, subject to a 10% early withdrawal penalty applicable to any
sums withdrawn prior to the time when such sums could have been withdrawn
pursuant to the five-year (or longer) withdrawal period.
The Partnership will not establish a reserve from which to fund withdrawals
and, accordingly, the Partnerships capacity to return a Limited Partners
capital account is restricted to the availability of the Partnership cash flow.
F. Guaranteed Interest Rate for Offering Period
During the period commencing with the day a Limited Partner is admitted to
the Partnership and ending 3 months after the offering termination date, the
General Partners shall guarantee an earnings rate equal to the greater of actual
earnings from mortgage operations or 2% above the Weighted Average Cost of Funds
Index for the Eleventh District Savings Institutions (Savings & Loan & Thrift
Institutions) as computed by the Federal Home Loan Bank of San Francisco, up to
a maximum interest rate of 12%. From the date of inception through June 30,
1996, actual realization exceeded the guaranteed amount for each month.
5. LEGAL PROCEEDINGS
The Partnership is neither a defendant nor a plaintiff in any legal
actions.
<PAGE>
6. NOTES PAYABLE - LINE OF CREDIT
The Partnership has a bank line of credit secured by its mortgage loan
portfolio up to $3,000,000 at .75% over prime. The balances were $2,892,000 and
$1,910,000 at June 30,1996 and December 31, 1995 respectively, and the interest
rate at June 30, 1996 was 9% (8.25% prime + .75%).
NOTE 7 - ASSET CONCENTRATION AND CHARACTERISTICS
The mortgage loans are secured by recorded deeds of trust. At June 30,
1996, there were 54 loan investments outstanding with the following
characteristics:
Number of loan investments outstanding 54
Total loans outstanding $14,196,953
Average loan investment outstanding $ 262,907
Average loan investment as a percent of total 1.85%
Average loan investment as a percent of Partners Capital 2.03%
Largest loan investment outstanding $1,050,000
Largest loan investment as a percent of total 7.40%
Largest loan investment as a percent of Partners Capital 8.10%
Number of counties where security is located (all California) 17
Largest percentage of loan investments in one county 26.13%
Average loan investment to appraised value at time loan
was consummated 62.37%
Number of loans in foreclosure status 2
Amount of loans in foreclosure $353,829
The cash balance at June 30, 1996 of $671,546 was in one bank with interest
bearing totalling $503,984. The balance exceeded FDIC insurance limits (up to
$100,000 per bank) by $571,546.
<PAGE>
Item II
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On June 30, 1996, the Partnership was in the offering stage, and
contributed capital totalled $12,343,606 (Limited Partners) of the approved
$15,000,000 issue, in units of $100 each. All investors except one, were
admitted into the program.
At June 30, 1996, mortgage investments totalling $14,196,953 had been made
with interest rates ranging from 10.00% to 14.50%. The Partnership began funding
mortgage loans on April 14, 1993 and as of June 30, 1996, distributed income at
an average annualized yield of 8.36%. Currently, mortgage interest rates have
decreased a little from those prevalent at the inception of the Partnership. New
loans will be originated at these lower interest rates. The result is to reduce
the average return across the entire 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 1996 over the next 12 months. Based upon the rates payable
in connection with the existing loans, the current and anticipated interest
rates to be charged by the Partnership and the General Partners experience, the
General Partners anticipate that the annualized yield will range between eight &
nine percent (8% - 9%).
The Partnership established a line of credit with a commercial bank secured
by its mortgage loans to a limit of $3,000,000. Currently, it has borrowed
$2,892,000 at an interest rate of prime + 3/4%. This facility could increase as
the Partnership capital increases. This added source of funds will help in
maximizing the Partnership yield because the loans made by the Partnership bear
interest at a rate in excess of the rate payable to the bank which extended the
line of credit. As a result, once the principal and interest is paid to the
bank, the amount to be retained by the Partnership will be greater than without
the use of the line of credit. As of June 30, 1996, the balance remained at
$2,892,000 and in accordance with the line of credit, the Partnership paid all
accrued interest as of that date.
The Partnerships income and expenses, accruals and delinquencies are within
the normal range of the General Partners expectations, based upon their
experience in managing similar Partnerships over the last nineteen years.
Borrowers foreclosures, as set forth under Results of Operations, are a normal
aspect of partnership operations and the General Partners anticipate that they
will not have a material effect on liquidity. Cash is constantly being generated
from interest earnings, late charges, pre-payment penalties, amortization of
Notes and pay-off on Notes. Currently, cash flow exceeds Partnership expenses
and earnings payout requirements. As loan opportunities become available, excess
cash and available funds are invested in new loans.
The General Partners are continually reviewing the loan portfolio,
examining the status of delinquencies, the underlying collateral securing these
properties, borrowers payment records, etc.. Data on the local real estate
market and on the national and local economy are studied. Based upon this
information and other data, loss reserves are increased or decreased. Currently
loss reserves are $86,505 which the General Partners consider as being adequate.
Because of the number of variables involved, the magnitude of the swings
possible and the General Partners inability to control many of these factors,
actual results may and do sometimes differ significantly from estimates made by
the General Partners.
Its now clear the Northern California recession reached bottom in 1993.
Since then, the California economy has been improving, slowly at first, but now,
more vigorously. A wide variety of indicators suggest that the economy in
California was strong in the first half of 1996, and the State is well -
positioned for fast growth in the second half of the year. This improvement is
reflective in increasing property values, in job growth, personal income growth,
etc., which all translates into more loan activity. Which of course, is healthy
for our lending activity.
<PAGE>
I. COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP
The following compensation has been paid to the General Partners and
Affiliates for services rendered during the period ended June 30, 1996. All such
compensation is in compliance with the guidelines and limitations set forth in
the Prospectus:
Entity Receiving Description of Compensation
Compensation and Services Rendered Amount
- -------------------------------------------------------------------------------
RHL Co. Loan Servicing Fee for servicing loans $ 67,389
General Partners
&/or Affiliate Asset management Fee for managing assets $ 7,760
($15,520 waived by the General Partners)
General Partners 1% interest in profits, losses and $ 5,606
distributions of cash available for
distribution
Less allocation for Syndication Costs $ 522
II. FEES PAID BY BORROWERS ON MORTGAGE LOANS PLACED BY COMPANIES RELATED TO
THE GENERAL PARTNERS WITH THE PARTNERSHIP (EXPENSES OF BORROWERS NOT OF THE
PARTNERSHIP):
RHL Co. Loan Brokerage Commissions for services in connection
with the review, selection, evaluation, negotiation,
and extension of the Partnership Loans paid by the borrower
and not by the Partnership $236,435
RHL Co. Processing and Escrow Fees for services in connection with
notary, document preparation, credit investigation, and
escrow fees payable by the borrower and not by the
Partnership $ 6,950
III. IN ADDITION, THE GENERAL PARTNERS AND/OR RELATED COMPANIES PAY CERTAIN
EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE
STATEMENT OF INCOME.
<PAGE>
LOAN PORTFOLIO SUMMARY AS OF JUNE 30, 1996
Partnership Highlights
First Trust Deeds $5,917,836.83
Appraised Value of Properties* 15,093,129.00
Total Investment as a % of Appraisal 39.21%
First Trust Deed Loans 5,917,836.83
Second Trust Deed Loans 7,979,116.08
Third Trust Deed Loans 300,000.00
------------------
$14,196,952.91
First Trust Deeds due other Lenders 30,259,155.00
Second Trust Deeds due other Lenders 360,000.00
------------------
Total Debt $44,816,107.91
Appraised Property Value* $71,856,128.00
Total Investment as a % of Appraisal 62.37%
Number of Loans Outstanding 54
Average Investment $ 262,906.54
Average Investment as a % of Net Partners Capital 2.03%
largest Investment Outstanding 1,050,000.00
Largest Investment as a % of Net Partners Capital 8.10%
Loans as a Percentage of Total Loans
First Trust Deed Loans 41.68%
Second Trust Deed Loans 56.20%
Third Trust Deed Loans 2.12%
------------
Total 100.00%
Loans by Type of Property Amount Percent
Owner Occupied Homes $1,710,188.60 12.05%
Non Owner Occupied Homes 2,381,244.24 16.77%
Apartments 2,389,965.88 16.83%
Commercial 7,715,554.19 54.35%
------------------ ------------
Total $14,196,952.91 100.00%
Statement of Conditions of Loans
Number of Loans in Foreclosure 2
*Values used are the appraisal values utilized at the time the loan was
consummated.
<PAGE>
Diversification by County
San Mateo $3,709,450.07 26.13%
Santa Clara 3,491,905.37 24.60%
San Francisco 2,349,572.02 16.55%
San Joaquin 1,174,581.75 8.27%
Contra Costa 625,679.90 4.41%
Marin 622,663.85 4.39%
Alameda 614,947.21 4.33%
Santa Barbara 418,613.49 2.95%
San Luis Obispo 300,000.00 2.11%
Monterey 229,293.94 1.62%
Fresno 129,614.32 0.91%
Mendocino 125,000.00 0.88%
El Dorado 119,813.81 0.84%
Tuolumne 89,503.81 0.63%
Sonoma 89,681.62 0.63%
Sacramento 58,783.28 0.41%
Stanislaus 47,848.47 0.34%
------------------ -----------
Total $14,196,952.91 100.00%
<PAGE>
PART 2
OTHER INFORMATION
Item 1. Legal Proceedings
None
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 quarter ended
June 30, 1996.
<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 3rd day of August,
1996.
REDWOOD MORTGAGE INVESTORS VIII
By:
---------------------------------------------
D. Russell Burwell, General Partner
By:
---------------------------------------------
Michael R. Burwell, General Partner
By: Gymno Corporation, General Partner
By:
---------------------------------------------
D. Russell Burwell, President
By:
---------------------------------------------
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 3rd day of August, 1996.
Signature Title Date
- --------------------
D. Russell Burwell General Partner August 3, 1996
- --------------------
Michael R. Burwell General Partner August 3, 1996
- --------------------
D. Russell Burwell President of Gymno Corporation, August 3, 1996
(Principal Executive Officer);
Director of Gymno Corporation
- ---------------------
Michael R. Burwell Secretary/Treasurer of Gymno August 3, 1996
Corporation (Principal Financial
and Accounting Officer);
Director of Gymno Corporation
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