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, 1997
- -------------------------------------------------------------------------------
Commission file number 33-49946
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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
- --------------------------------------------------------------------------------
(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, 1996 (audited)
and March 31, 1997 (unaudited)
ASSETS
<CAPTION>
Mar. 31, 1997 Dec. 31, 1996
(unaudited) (audited)
<S> <C> <C>
Cash $532,682 $664,434
--------------- ---------------
Accounts receivable:
Mortgage investments, secured by deeds of trust 18,568,076 15,642,990
Accrued Interest on Mortgage Investments 107,381 196,530
Advances on Mortgage Investments 9,295 8,679
Accounts receivable - unsecured 75,731 75,334
--------------- ---------------
18,760,483 15,923,533
Less Allowance for doubtful accounts 127,797 117,803
--------------- ---------------
18,632,686 15,805,730
--------------- ---------------
Real estate owned, acquired through foreclosure, at
estimated net realizable value 67,128 66,991
Investment in limited liability corporation, at cost which
approximates market 221,139 191,139
Formation loan due from Redwood Mortgage 1,223,756 1,073,706
Organization Costs, less accumulated amortization of $8,750
and $8,125, respectively 3,750 4,375
Due from related companies 0 311
Prepaid Expenses 25,211 20,720
--------------- ---------------
$20,706,352 $17,827,406
=============== ===============
LIABILITIES AND PARTNERS CAPITAL
Liabilities:
Accounts payable and accrued expenses $0 $20,625
Notes payable - bank line of credit 2,315,000 1,500,000
Deferred interest income 0 217,480
Subscriptions to Partnership in applicant status 0 310,937
--------------- ---------------
2,315,000 2,049,042
Partners capital 18,391,352 15,778,364
--------------- ---------------
$20,706,352 $17,827,406
=============== ===============
<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, 1997 AND 1996 (unaudited)
<CAPTION>
3 mos. ended 3 mos. ended
March 31, 1997 March 31, 1996
(unaudited) (unaudited)
================= =================
Revenues:
<S> <C> <C>
Interest on Mortgage Investments $458,783 $344,013
Interest on bank deposits 3,734 755
Late charges 348 975
Miscellaneous 50 200
-------------- --------------
462,915 345,943
-------------- --------------
Expenses:
Interest on note payable - bank 13,836 42,312
Amortization of loan origination fees 4,406 2,531
Provision for doubtful accounts and losses on real
estate
acquired through foreclosure 9,994 3,579
Asset management fee - General Partner 5,510 3,742
Amortization of organization costs 625 625
Clerical costs through Redwood Mortgage 12,402 8,259
Professional services 7,696 10,154
Printing, supplies and postage 784 36
Other 2,675 3,890
-------------- --------------
57,928 75,128
-------------- --------------
Income before interest credited to partners in 404,987 270,815
applicant status
Income credited to partners in applicant status 3,937 850
-------------- --------------
Net Income $401,050 $269,965
============== ==============
Net Income: to General Partners (1%) $4,011 $2,700
to Limited Partners (99%) 397,039 267,265
============== ==============
$401,050 $269,965
============== ==============
Net income for $1,000 invested by Limited Partners for
entire period:
- where income is reinvested and compounded $20.36 $20.37
============== ==============
- where Partner received income in monthly $20.22 $20.24
distributions
============== ==============
<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, 1997 AND 1996 (unaudited)
<CAPTION>
March 31, 1997 March 31, 1996
(unaudited) (unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income: $401,050 $269,965
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of organization costs 625 625
Increase in allowance for doubtful accounts 9,994 3,579
Increase (decrease) in accounts payable (20,625) 12,575
(Increase) decrease in accrued interest and advances 88,533 2,001
(Increase) decrease in amount due from related companies 311 3,049
(Increase) decrease in prepaid expenses and other assets (4,491) 1,530
Increase (decrease) in deferred interest income (217,480) 0
------------- -------------
Net cash provided by operating activities 257,917 293,324
------------- -------------
Cash flows from investing activities:
Net (increase) decrease in:
Mortgage Investments (2,925,086) (1,857,576)
Formation loan (150,050) (41,798)
Account receivable -unsecured (397) (1,010)
Real Estate acquired through foreclosure (137) 0
Investment in limited liability corporation (30,000) 0
------------- -------------
Net cash used in investing activities (3,105,670) (1,900,384)
------------- -------------
Cash flows from financing activities:
Increase (decrease) in note payable - Bank 815,000 961,000
Contributions by partner applicants 2,103,427 634,109
Interest credited to partners in applicant status 3,937 850
Interest withdrawn by partners in applicant status (855) (475)
Partners withdrawals (166,202) (125,003)
Early withdrawal penalties, net (3,473) (175)
Syndication costs incurred (35,833) (49,835)
------------- -------------
Net cash provided by financing activities 2,716,001 1,420,471
------------- -------------
Net increase (decrease) in cash and cash equivalents (131,752) (186,589)
Cash and cash equivalent at the beginning of period 664,434 380,318
============= =============
Cash and cash equivalent balance at the end of period $532,682 $193,729
============= =============
<FN>
See accompanying notes to Financial Statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1996 (audited) AND
THREE MONTHS ENDED MARCH 31, 1997 (unaudited)
<CAPTION>
PARTNERS CAPITAL
--------------------------------------------------------------
PARTNERS IN UNALLOCATED
APPLICANT GENERAL LIMITED SYNDICATION
STATUS PARTNERS PARTNERS COSTS TOTAL
-------------- ------------- ----------- ---------------- --------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1993 128,772 2,887 2,809,535 (190,342) 2,622,080
Contributions on application 4,560,683 0 0 0 0
Interest credited to partners in 14,443 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn (5,774) 0 0 0 0
Transfers 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 0.00 (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
Contributions on application 3,634,264 0 0 0 0
Interest credited to partners in 18,908 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn (7,673) 0 0 0 0
Transfers 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
Contributions on application 4,172,718 0 0 0 0
Interest credited to partners in 2,618 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn (863) 0 0 0 0
Transfers to Partners capital (3,863,536) 4,224 3,859,312 0 3,863,536
Net income 0 12,309 1,218,598 0 1,230,907
Syndication costs incurred 0 0.00 0.00 (214,689) (214,689)
Allocation of syndication costs 0 (1,177) (116,523) 117,700 0
Partners withdrawals 0 (11,132) (553,027) 0 (564,159)
Early withdrawal penalties 0 0.00 (12,108) 4,550 (7,558)
----------- ---------- ----------- ----------- ------------
Balances at December 31, 1996 310,937 15,549 16,181,189 (418,374) 15,778,364
<FN>
carried to next page
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1996 (audited) AND
THREE MONTHS ENDED MARCH 31, 1997 (unaudited)
<CAPTION>
PARTNERS CAPITAL
--------------------------------------------------------------
PARTNERS IN UNALLOCATED
APPLICANT GENERAL LIMITED SYNDICATION
STATUS PARTNERS PARTNERS COSTS TOTAL
-------------- ------------- ----------- ---------------- --------
Forward from previous page:
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1996 310,937 15,549 16,181,189 (418,374) 15,778,364
Contributions on application 2,103,427 0 0 0 0
Interest credited to partners in 3,937 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn (855) 0 0 0 0
Transfers to Partners capital (2,417,446) 0 2,417,446 0 2,417,446
Net income 0 4,011 397,039 0 401,050
Syndication costs incurred 0 0 0 (35,833) (35,833)
Allocation of syndication costs 0 (360) (35,640) 36,000 0
Partners withdrawals 0 (3,650) (162,552) 0 (166,202)
Early withdrawal penalties 0 0 (5,427) 1,954 (3,473)
----------- ---------- ------------ ----------- ------------
Balances at March 31, 1997 $0 $15,550 $18,792,055 ($416,253) $18,391,352
=========== ========== ============ =========== ============
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
MARCH 31,1 997 (unaudited)
NOTE 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 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. Mortgage Investments are
being arranged and serviced by Redwood Home Loan Co. dba Redwood Mortgage, an
affiliate of the General Partners. At March 31, 1997, the Partnership was in the
offering stage, wherein contributed capital totalled $17,346,381 in limited
partner contributions of an approved aggregate offering of $45,000,000, in units
of $100 each. All applicants had been admitted to the Partnership as of March
31, 1997.
A minimum of 2,500 units ($250,000) and a maximum of 150,000 units
($15,000,000) were initially offered through qualified broker-dealers. This
initial offering was closed in October, 1996. In December 1996, the Partnership
commenced a second offering of an additional 300,000 Units ($30,000,000) of
which none remained in applicant status at March 31, 1997. As Mortgage
Investments are identified, partners are transferred from applicant status to
admitted partners participating in Mortgage Investment 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 are not paid
directly by the Partnership out of the offering proceeds. Instead, the
Partnership will loan to Redwood Mortgage, an affiliate of the General Partners,
amounts to pay all sales commissions and amounts payable in connection with
unsolicited orders. This loan is referred to as the Formation Loan. It is
unsecured and non-interest bearing.
The Formation Loan relating to the initial $15,000,000 offering totalled
$1,074,840, which was 7.2% of limited partners contributions of $14,932,017
(under the limit of 9.1% relative to the initial offering). It is to be repaid,
without interest, in ten annual installments of principal, which must commence
on January 1, following the year the initial offering closes, which was in 1996.
The Formation Loan relating to the second offering ($30,000,000) totalled
$195,789 at March 31, 1997, which was 8.11% of the limited partners
contributions of $2,414,364. Sales commissions range from 0% (units sold by
General Partners) to 9% of gross proceeds. The Partnership anticipates that the
sales commissions will approximate 7.6% based on the assumption that 65% of
investors will reinvest earnings, which generate 9% commissions. The principal
balance of the Formation Loan will increase as additional sales of units are
made each year. The amount of the annual installment payment to be made by
Redwood Mortgage, during the offering stage, will be determined at annual
installments of one-tenth of the principal balance of the Formation Loan as of
December 31 of each year. Such payment shall be due and payable by December 31
of the following year with the first such payment to be made by December 31,
1997. Upon completion of the offering, the balance will be repaid in ten equal
annual installments.
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
MARCH 31,1 997 (unaudited)
<CAPTION>
The following summarizes Formation Loan transactions to March 31, 1997
Initial Subsequent Total
Offering of Offering of
$15,000,000 $30,000,000
--------------- --------------- ---------------
<S> <C> <C> <C>
Limited Partner contributions $14,932,017 $2,414,364 $17,346,381
=============== =============== ===============
Formation Loan made $1,074,840 195,789 1,270,629
Payments to date (35,842) 0 (35,842)
Early withdrawal penalties applied (11,031) 0 (11,031)
--------------- --------------- ---------------
Balance December 31, 1996 $1,027,967 $195,789 $1,223,756
=============== =============== ===============
Percent loaned of Partners contributions 7.2% 8.11% 7.33%
=============== =============== ===============
</TABLE>
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.
Through March 31, 1997, organization costs of $12,500 and syndication costs
of $706,443 had been incurred by the Partnership with the following
distribution:
<TABLE>
Syndication Costs
--------------------------------------------
<CAPTION>
Offering
----------------------------
Initial Subsequent Organization
15,000,000 30,000,000 Total Costs Total
----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Costs incurred $569,865 136,578 706,443 12,500 718,943
Early withdrawal penalties (6,668) 0 (6,668) 0 (6,668)
applied
Allocated and amortized to (283,522) 0 (283,522) (8,750) (292,272)
date
----------- ---- ----------- --- ----------- ---- --------- ---- ----------
March 31, 1997 balance $279,675 136,578 416,253 3,750 420,003
=========== ==== =========== === =========== ==== ========= ==== ==========
<FN>
Organization and syndication costs attributable to the initial offering
($15,000,000) were limited to the lesser of 10% of the gross proceeds or
$600,000 with any excess being paid by the General Partners. Applicable gross
proceeds were $14,932,017. Related expenditures totalled $582,365 ($569,865
syndication costs plus $12,500 organization expense) or 3.90%.
As of March 31, 1997, syndication costs attributable to the subsequent
offering ($30,000,000) totalled $136,578, with the costs of the offering
document being greater at the initial stages. The syndication costs payable by
the Partnership are estimated to be $1,200,000 if the maximum is sold (4% of
$30,000,000). The General Partners will pay any syndication expenses (excluding
selling commissions) in excess of ten percent of the gross proceeds or
$1,200,000.
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
MARCH 31, 1997 (unaudited)
NOTE 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 filing fees.
Organizational costs have been capitalized and will be amortized over a five
year period. Syndication costs are charged against partners capital and are
being allocated to individual partners consistent with the partnership
agreement.
When property is acquired through foreclosure, it is held for sale to
return the funds to the Mortgage Investment portfolio. Such property is recorded
at cost which includes the principal balance of the former Mortgage Investment
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, if less. The difference between such costs
and estimated net realizable value is included in an allowance for losses and
deducted from cost in the Balance Sheet to arrive at the carrying value of such
property. ($67,128 at March 31, 1997).
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 account 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 periods. 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 will be 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 made 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, 1997, are unaudited, but
in the opinion of the General Partners all adjustments (consisting solely of
normal adjustments) necessary to a fair presentation of the financial statements
at March 31, 1997 have been made.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
MARCH 31, 1997 (unaudited)
NOTE 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. Mortgage Brokerage Commissions For fees in connection with the review,
selection, evaluation, negotiation and extension of Partnership Mortgage
Investments in an amount up to 12% of the Mortgage Investments until 6 months
after the termination date of the offering. Thereafter, mortgage brokerage
commissions will be limited to an amount not to exceed 4% of the total
Partnership assets per year. The mortgage brokerage commissions are paid by the
borrowers, and thus, not an expense of the partnership.
B. Mortgage Servicing Fees Monthly mortgage servicing fees of up to 1/8 of
1% (1.5% annual) of the unpaid principal, are paid to Redwood Mortgage, or such
lesser amount as is reasonable and customary in the geographic area where the
property securing the mortgage 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 Investments is net of such fees. In 1994,
$15,278 of the total mortgage servicing fees of $44,405 were waived by Redwood
Mortgage. In 1995, and 1996, Redwood Mortgage received the total mortgage
servicing fees earned of $85,456 and $155,912 respectively. For the three months
through March 31, 1997, the Partnership paid $31,564 in mortgage servicing fees
to Redwood Mortgage.
C. Asset Management Fee The General Partners will receive a monthly fee for
managing the Partnerships Mortgage Investment portfolio and operations equal to
1/32 of 1% of the net asset value (3/8 of 1% annual). Fees were reduced by the
General Partners from $17,718 to $5,906 in 1994, with the difference being
waived. In 1995, 1996, and for the quarter under review, fees were reduced from
$34,773 to $11,587, from $51,158 to $17,053, and from $16,530 to $5,510
respectively, with the differences being waived by the General Partners.
D. Other Fees The Partnership Agreement provides for other fees such as
reconveyance, mortgage assumption and mortgage 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
Mortgage) 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 were to contribute 1/10 of
1% in cash contributions as proceeds from the offering are admitted to limited
Partner capital. As of March 31, 1997 a General Partner, GYMNO Corporation, had
contributed $15,241, as capital in accordance with Section 4.02(a) of the
Partnership Agreement.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
MARCH 31, 1997 (unaudited)
NOTE 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 Mortgage Investment
portfolio.
During the period ended March 31, 1997, and years ended 1996, 1995, and
1994, interest totalling $3,937, $2,618, $18,908 and $14,443 respectively, was
credited to partners in applicant status. As Mortgage Investments were made and
partners were transferred to regular status to begin sharing in income from
Mortgage Investments 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, subject to the penalty provision
set forth 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
subscriptions, 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, subject to a 10% early withdrawal penalty. The 10% penalty is applicable
to the amount withdrawn as stated in the Notice of Withdrawal 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 in the
Partnership Agreement.
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. Once this five year period expires, no penalty will be imposed if
withdrawal is made in twenty (20) quarterly installments or longer.
Notwithstanding the five-year (or longer) withdrawal period, the General
partners will liquidate all or 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.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
MARCH 31, 1997 (unaudited)
The Partnership will not establish a reserve from which to fund withdrawals
and, accordingly, the Partnerships capacity to return a Limited Partners
capital is restricted to the availability of 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 on a monthly basis, up to a
maximum interest rate of 12%. To date, actual realization exceeded the
guaranteed amount for each month.
NOTE 5- LEGAL PROCEEDINGS
The Partnership is not a defendant in any legal actions.
NOTE 6 - NOTE PAYABLE - BANK LINE OF CREDIT
The Partnership has a bank line of credit of up to $5,000,000 at .5% over
prime secured by its Mortgage Investment portfolio. The note payable balances
were $2,315,000 and $1,500,000 at March 31, 1997, and December 31, 1996,
respectively, and the interest rate was 9.00% at March 31, 1997, (8.50% prime
plus .50%).
NOTE 7 - INVESTMENT IN LIMITED LIABILITY CORPORATION
As a result of acquiring real property through foreclosure, the Partnership
has contributed its interest (principally land) to a Limited Liability
Corporation which will complete the construction and sell the property. The
Partnership expects to realize a profit from the venture.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
MARCH 31, 1997 (unaudited)
NOTE 8 - ASSET CONCENTRATIONS AND CHARACTERISTICS
The Mortgage Investments are secured by recorded deeds of trust. At March
31, 1997, there were 50 Mortgage Investments outstanding with the following
characteristics:
Number of Mortgage Investments outstanding 50
Total Mortgage Investments outstanding $18,568,076
Average Mortgage Investment outstanding $371,362
Average Mortgage Investment as percent of total 2.00%
Average Mortgage Investment as percent of Partners Capital 2.02%
Largest Mortgage Investment outstanding $1,800,000
Largest Mortgage Investment as percent of total 9.69%
Largest Mortgage Investment as percent of Partners Capital 9.79%
Number of counties where security is located (all California) 16
Largest percentage of Mortgage Investments in one county 22.07%
Average Mortgage Investment to appraised value of security at time loan was
consummated 59.95%
Number of Mortgage Investments in foreclosure status 1
Amount of Mortgage Investments in foreclosure $118,811
The cash balance at March 31. 1997 of $532,682 was in one bank with
interest bearing balances totalling $499,325. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $432,682.
Item II
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On March 31, 1997, the Partnership was in the offering stage of its second
offering, and contributed capital totalled $17,346,381 (Limited Partners). Of
this amount, none remained in applicant status. The Partnership has sought and
received approval of an additional offering of $30,000,000 from the Securities
and Exchange Commission, the State of California and the NASD, effective on
December 4, 1996. Accordingly, the Partnership had approval of an aggregate
offering of $45,000,000 in Units of $100 each.
At March 31, 1997, the Partnerships Mortgage Investments outstanding
totalled $18,568,076 with interest rates ranging from 10.00% to 14.50%. The
Partnership began funding Mortgage Investments on April 14, 1993 and as of March
31, 1997, distributed earnings 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
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 1997 over the next 12 months. Based upon the rates payable in
connection with the existing Mortgage Investments, 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 Investments and has increased the limit from $3,000,000 to
$5,000,000. Currently, it has borrowed $2,315,000 at an interest rate of prime +
1/2%. This facility could increase as the Partnerships capital increases. 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
because the mortgage investments 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, 1997, the balance remained at $2,315,000 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 twenty 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
principal and pay-off on Mortgage Investments. Currently, cash flow exceeds
Partnership expenses and earnings payout requirements. As mortgage investment
opportunities become available, excess cash and available funds are invested in
new mortgage investments.
The General Partners are regularly reviewing the Mortgage Investments
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 $127,797 which the General Partners consider
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>
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. 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>
<TABLE>
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, 1997. All
such compensation is in compliance with the guidelines and limitations set forth
in the Prospectus:
<CAPTION>
Entity Receiving Description of Compensation
Compensation and Services Rendered Amount
- -------------------------- --------------------------------------------------- ----------
<S> <C>
Redwood Mortgage Mortgage Servicing Fee for servicing mortgage $31,564
investments
General Partners Asset management Fee for managing assets $5,510
&/or Affiliate ($11,020 waived by the General Partners)
General Partners 1% interest in profits, losses and distributions
of cash available for distribution $4,011
Less allocation for Syndication Costs $360
-------------
$3,651
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):
<S> <C>
Redwood Mortgage Mortgage Brokerage Commissions for services in
connection with the review, selection, evaluation,
negotiation, and extension of the Partnership s
Mortgage Investments, paid by the borrower and not
by the Partnership $124,700
Redwood Mortgage 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 $2,165
</TABLE>
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>
MORTGAGE INVESTMENT PORTFOLIO SUMMARY AS OF MARCH 31,1997
Partnership Highlights
First Trust Deeds $7,282,982.16
Appraised Value of Properties* 16,594,414.00
Total Investment as a % of Appraisal 43.89%
First Trust Deed Mortgage Investments 7,282,982.16
Second Trust Deed Mortgage Investments 10,985,093.69
Third Trust Deed Mortgage Investments 300,000.00
-------------------
18,568,075.85
First Trust Deeds due other Lenders 31,592,911.00
Second Trust Deeds due other Lenders 360,000.00
-------------------
Total Debt $50,520,986.85
Appraised Property Value* $84,270,798.00
Total Investment as a % of Appraisal 59.95%
Number of Mortgage Investments Outstanding 50
Average Investment $371,361.52
Average Investment as a % of Net Partners Capital 2.02%
Largest Investment Outstanding 1,800,000.00
Largest Investment as a % of Net Partners Capital 9.79%
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deed Mortgage Investments 39.22%
Second Trust Deed Mortgage Investments 59.16%
Third Trust Deed Mortgage Investments 1.62%
--------------
Total 100.00%
Mortgage Investments by Type of Amount Percent
Property
Owner Occupied Homes $1,659,021.70 8.94%
Non Owner Occupied Homes 2,486,229.89 13.39%
Apartments 4,550,044.92 24.50%
Commercial 9,872,779.34 53.17%
----------------- --------------
Total $18,568,075.85 100.00%
Statement of Conditions of Mortgage Investments
Number of Mortgage Investments in Foreclosure 1
*Values used are the appraisal values utilized at the time the mortgage
investment was consummated.
<PAGE>
Diversification by County
San Francisco $4,097,608.26 22.07%
San Mateo 3,201,548.99 17.24%
Santa Clara 3,033,994.20 16.34%
Alameda 2,195,807.53 11.82%
Stanislaus 1,495,512.78 8.05%
Marin 1,431,153.67 7.71%
San Joaquin 1,169,420.53 6.30%
Contra Costa 623,647.78 3.36%
Santa Barbara 415,578.75 2.24%
San Luis Obispo 300,000.00 1.61%
Fresno 129,223.44 0.70%
Mendocino 125,000.00 0.67%
El Dorado 118,810.72 0.64%
Sonoma 88,405.56 0.48%
Tuolumne 86,449.71 0.47%
Sacramento 55,913.93 0.30%
------------------ -----------
Total $18,568,075.85 100.00%
<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, 1997.
<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 7th day of May
1997.
REDWOOD MORTGAGE INVESTORS VIII
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 7th day of May 1997.
Signature Title Date
/s/ D. Russell Burwell
- ---------------------------------
D. Russell Burwell General Partner May 7, 1997
/s/ Michael R. Burwell
- ---------------------------------
Michael R. Burwell General Partner May 7, 1997
/s/ D. Russell Burwell
- -------------------------------
D. Russell Burwell President of Gymno Corporation, May 7, 1997
(Principal Executive Officer);
Director of Gymno Corporation
/s/ Michael R. Burwell
- -------------------------------
Michael R. Burwell Secretary/Treasurer of Gymno May 7, 1997
Corporation (Principal Financial
and Accounting Officer);
Director of Gymno Corporation
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 532682
<SECURITIES> 0
<RECEIVABLES> 18760483
<ALLOWANCES> 127797
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20706352
<CURRENT-LIABILITIES> 0
<BONDS> 0
2315000
0
<COMMON> 0
<OTHER-SE> 18391352
<TOTAL-LIABILITY-AND-EQUITY> 20706352
<SALES> 0
<TOTAL-REVENUES> 462915
<CGS> 0
<TOTAL-COSTS> 22773
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9994
<INTEREST-EXPENSE> 13836
<INCOME-PRETAX> 401050
<INCOME-TAX> 0
<INCOME-CONTINUING> 401050
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 401050
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
