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 March 31,1996
- - -------------------------------------------------------------------------------
Commission file number 33-49946
- - -------------------------------------------------------------------------------
REDWOOD MORTGAGE INVESTORS VIII
- - -------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
CALIFORNIA 94-3158788
- - -------------------------------------------------------------------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
650 El Camino Real, Suite G, Redwood City, CA 94063
- - -------------------------------------------------------------------------------
(address of principal executive office)
(415) 365-5341
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(Registrants telephone number, including area code)
NOT APPLICABLE
- - -------------------------------------------------------------------------------
(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 March 31, 1996 (unaudited)
<CAPTION>
ASSETS
Mar. 31, 1996 Dec.31,1995
(unaudited) (audited)
<S> <C> <C>
Cash .............................................. $ 193,729 $ 380,318
---------- -----------
Accounts receivable:
Mortgage loans, secured by deeds of trust ...... 13,904,828 12,047,252
Accrued Interest on Mortgage Loans ............. 94,286 113,301
Advances on Mortgage Loans ..................... 25,445 8,431
Accounts receivable - unsecured ................ 72,326 71,316
----------- -----------
14,096,885 12,240,300
Less Allowance for doubtful accounts ............. 42,731 39,152
----------- -----------
14,054,154 12,201,148
---------- -----------
Formation loan due from Redwood Home
Loan Co. ........................................ 817,027 775,229
Organization Costs, less accumulated
amortization of $6,250 and $5,625,
respectively ..................................... 6,250 6,875
Due from related companies .......................... -0- 3,049
Prepaid Expenses - deferred loan fee ................ 16,188 17,718
--------- -----------
$15,087,348 $13,384,337
=========== ===========
LIABILITIES AND PARTNERS CAPITAL
Liabilities:
Accounts payable and accrued expenses ............. $ 16,585 $ 4,010
Notes payable - bank line of credit ............... 2,871,000 1,910,000
----------- -----------
2,887,585 1,914,010
Partners capital .................................... 12,199,763 11,470,327
----------- -----------
$15,087,348 $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 MONTHS ENDED MARCH 31, 1996
AND 1995 (unaudited)
<CAPTION>
3 months 3 months
ended ended
03/31/96 03/31/95
(unaudited) (unaudited)
<S> <C> <C>
Revenues:
Interest on Mortgage Loans ......................... $344,013 $191,927
Interest on Bank Deposits .......................... 755 2,621
Late Charges & Other ............................... 975 247
Miscellaneous ...................................... 200 75
-------- --------
345,943 194,870
-------- --------
Expenses:
Interest on Note Payable ........................... 42,312 -0-
Amortization of loan origination fee ............... 2,531 -0-
General Partner management fees .................... 3,742 2,414
Amortization of organization costs ................. 625 625
Clerical costs through Redwood Home
Loan Co. ......................................... 8,259 4,562
Professional Fees .................................. 10,154 6,799
Provision for Doubtful Accounts .................... 3,579 5,000
Printing, supplies & postage ....................... 36 87
Other .............................................. 3,890 385
-------- --------
75,128 19,872
-------- --------
Income before interest credited to partners
in applicant status ................................ 270,815 174,998
Interest credited to partners in applicant
status ............................................. 850 1,324
-------- --------
Net income ........................................... $269,965 $173,674
======== ========
Net income: to General Partners (1%) ................ $ 2,700 $ 1,737
to Limited Partners (99%) ............... 267,265 171,937
======== ========
$269,965 $173,674
======== ========
Net income for $1,000 invested by Limited
Partner for entire
period after admission to Partnership:
- where income is reinvested and compounded ........ $ 20.37 $ 20.32
-------- --------
- where Partner receives income in monthly
distributions ................................... $ 20.24 $ 20.18
-------- --------
<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 THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (unaudited)
<CAPTION>
03/31/96 03/31/95
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income: .............................. $269,965 $173,674
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of organization costs ..... 625 625
Increases in allowances for doubtful
accounts .............................. 3,579 5,000
(Increase) decrease in accrued interest
and advances ......................... 2,001 ( 32,392)
(Increase) decrease in prepaid expenses
and other assets ..................... 1,530 ( 2,536)
(Increase) decrease in amount due from
related companies .................... 3,049 -0-
Increase (decrease) in accounts payable 12,575 -0-
------- -------
Net cash provided by operating activities 293,324 144,371
------- -------
Cash flows from investing activities:
Net (increase) decrease in mortgage loans(1,857,576) ( 760,950)
Net (increase) decrease in formation loan( 41,798) ( 59,132)
Net (increase) decrease in account
receivable -unsecured .................( 1,010) -0-
--------- -------
Net cash used in investing activities .(1,900,384) ( 820,082)
--------- ---------
Cash flows from financing activities:
Increase in notes payable - Bank .......... 961,000 -0-
Contributions by partner applicants ....... 634,109 952,109
Interest credited to partners in applicant
status .................................. 850 1,324
Interest withdrawn by partners in applicant
status .................................( 475) ( 663)
Partners withdrawals ......................(125,003) (65,400)
Early withdrawal penalties, net ...........( 175) -0-
Syndication costs incurred ................( 49,835) (85,839)
--------- --------
Net cash provided by financing activities 1,420,471 801,531
--------- -------
Net increase (decrease) in cash and cash
equivalents ..............................( 186,589) 125,820
Cash and cash equivalent at the beginning
of period ................................. 380,318 397,176
========= =======
Cash and cash equivalent balance at the
end of period ............................$ 193,729 $522,996
========== ========
<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
THREE MONTHS ENDED MARCH 31, 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 (236,669) 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- ( 564) 164 ( 400)
----------- ------- ---------- --------- -----------
Balances at December 31, 1995 ................................ -0- 11,325 11,784,937 (325,935) 11,470,327
Contribution on application .................................. 634,109 -0- -0- -0- -0-
Interest credited to partners in appl status.................. 850 -0- -0- -0- -0-
Upon admission to Partnership:
Interest withdrawn ........................................ ( 475) -0- -0- -0- -0-
Transfer to Partners capital .............................. ( 634,484) -0- 634,484 -0- 634,484
Net income ................................................... -0- 2,700 267,265 -0- 269,965
Syndication costs incurred ................................... -0- -0- -0- (49,835) ( 49,835)
Allocation of syndication costs .............................. -0- ( 245) ( 24,255) 24,500 -0-
Partners withdrawals ......................................... -0- (2,455) ( 122,548) -0- (125,033)
Early withdrawal penalties ................................... -0- -0- ( 282) 107 ( 175)
---------- ------- ---------- --------- -----------
Balances at March 31, 1996 ................................... -0- 11,325 12,539,601 (351,163) 12,199,763
========= ====== ========== ========= ==========
<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
MARCH 31, 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
March 31, 1996, the Partnership was in the offering stage, wherein contributed
capital totalled $11,708,569 in limited partner contributions of an approved
$15,000,000 issue, in units of $100 each. All applicants had been admitted to
the Partnership at March 31, 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
March 31, 1996, RHL Co., had borrowed $817,027 from the Partnership to cover
sales commissions relating to $11,708,569 Limited Partners contributions to
date.
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 March 31, 1996, organization costs of approximately $12,500 and offering
costs of $505,485, 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 4.42% 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. At March 31, 1996, there was
no property acquired through foreclosure.
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 withdrew 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 March 31, 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 March 31, 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 three months through March 31, 1996, RHL received the total loan
servicing fees earned of $85,456 and $35,460 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 three months through
March 31, 1996, the fees were also reduced from $11,226 to $3,742 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 March 31, 1996, a General Partner,
GYMNO Corporation, had contributed $11,017 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
three months ended March 31, 1996, interest totalling $18,908, $14,443, $4,641
and $850 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
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 March 31,
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 $2,871,000 and
$1,910,000 at March 31,1996 and December 31, 1995 respectively, and the interest
rate at March 31, 1996 was 9% (8.25% prime + .75%).
NOTE 7 - ASSET CONCENTRATION AND CHARACTERISTICS
The mortgage loans are secured by recorded deeds of trust. At March 31,
1996, there were 57 loan investments outstanding with the following
characteristics:
Number of loan investments outstanding 57
Total loans outstanding $13,904,828
Average loan investment outstanding $ 243,944
Average loan investment as a percent of total 1.75%
Average loan investment as a percent of Partners Capital 2.00%
Largest loan investment outstanding $ 1,050,000
Largest loan investment as a percent of total 7.55%
Largest loan investment as a percent of Partners Capital 8.61%
Number of counties where security is located (all California) 16
Largest percentage of loan investments in one county 26.40%
Average loan investment to appraised value at time loan
was consummated 63.92%
Number of loans in foreclosure status 2
Amount of loans in foreclosure $ 534,016
The cash balance at March 31, 1996 of $193,729 was in three banks with
interest bearing totalling $3,330. The balances exceeded FDIC insurance limits
(up to $100,000 per bank) by $93,175.
<PAGE>
Item II
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
On March 31, 1996, the Partnership was in the offering stage, and
contributed capital totalled $11,708,569 (Limited Partners) of the approved
$15,000,000 issue, in units of $100 each. All investors were admitted into the
program.
At March 31, 1996, mortgage investments totalling $13,904,828 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 March 31, 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 was 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 1995 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
$2,871,000 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 March 31, 1996, the balance remained at
$2,871,000 and in accordance with the line of credit, the Partnership paid all
accrued interest as of that date.
Northern California has been experiencing an economic slump over five of
the last six years, fueled by a downturn in the aerospace, communications,
banking and retail trade industries, and in the federal government sector. This
slump has been, and continues to be, reflected in property values, to a greater
or lesser degree depending upon location. The Partnership's 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. Cash is constantly being generated from subscriptions,
interest earnings, late charges, pre-payments penalties, amortization of Notes
and pay-off of Notes. Currently, this amount substantially 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 underlyingcollateral 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 $42,731 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.
<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 March 31, 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 $ 35,460
General Partners &/or
Affiliate Asset management Fee for managing assets $ 3,742
General Partners 1% interest in profits, losses and
distributions of cash available
for distribution $ 2,700
Less allocation for Syndication Costs $ 245
----------
$ 2,455
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 $173,910
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 $ 3,270
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 MARCH 31, 1996
Partnership Highlights
First Trust Deeds $5,894,494.19
Appraised Value of Properties* 12,607,778.00
Total Investment as a % of Appraisal 46.75%
First Trust Deed Loans 5,894,494.19
Second Trust Deed Loans 7,651,833.64
Third Trust Deed Loans 358,500.00
------------------
$13,904,827.83
First Trust Deeds due other Lenders 31,556,000.00
Second Trust Deeds due other Lenders 575,000.00
------------------
Total Debt $46,035,827.83
Appraised Property Value* $72,026,172.00
Total Investment as a % of Appraisal 63.92%
Number of Loans Outstanding 57
Average Investment $ 243,944.35
Average Investment as a % of Net Partners Capital 2.00%
largest Investment Outstanding 1,050,000.00
Largest Investment as a % of Net Partners Capital 8.61%
Loans as a Percentage of Total Loans
First Trust Deed Loans 42.39%
Second Trust Deed Loans 55.03%
Third Trust Deed Loans 2.58%
------------
Total 100.00%
Loans by Type of Property Amount Percent
Owner Occupied Homes $ 2,087,236.06 15.02%
Non Owner Occupied Homes 1,970,575.68 14.17%
Apartments 2,045,813.48 14.71%
Commercial 7,801,202.61 56.10%
------------------ ------------
Total $13,904,827.83 100.00%
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 $ 3,671,498.39 26.40%
Santa Clara 3,551,513.71 25.54%
San Francisco 2,068,840.10 14.88%
San Joaquin 1,175,750.82 8.45%
Alameda 771,133.34 5.55%
Marin 750,369.07 5.40%
Contra Costa 452,214.02 3.25%
Santa Barbara 419,466.57 3.02%
San Luis Obispo 300,000.00 2.16%
Monterey 205,510.11 1.48%
Fresno 129,687.76 0.93%
El Dorado 119,813.81 0.86%
Tuolumne 90,468.39 0.65%
Sonoma 90,287.82 0.65%
Sacramento 59,688.55 0.43%
Stanislaus 48,585.37 0.35%
------------------ -----------
Total $13,904,827.83 100.00%
<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 March 31, 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 May,
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 May, 1996.
Signature Title Date
- - -----------------------
D. Russell Burwell General Partner May 3, 1996
- - -----------------------
Michael R. Burwell General Partner May 3, 1996
- - -----------------------
D. Russell Burwell President of Gymno Corporation, May 3, 1996
(Principal Executive Officer);
Director of Gymno Corporation
- - ------------------------
Michael R. Burwell Secretary/Treasurer of Gymno May 3, 1996
Corporation (Principal Financial
and Accounting Officer);
Director of Gymno Corporation
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