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 September 30, 1997
- --------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------
(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
SEPTEMBER 30, 1997 (unaudited)
ASSETS
<CAPTION>
Sept 30, 1997 Dec 31, 1996
(unaudited) (audited)
---------------- ----------------
Cash $279,833 $664,434
---------------- ----------------
Accounts receivable:
<S> <C> <C>
Mortgage Investments, secured by deeds of trust 24,987,302 15,642,990
Accrued Interest on Mortgage Investments 196,616 196,530
Advances on Mortgage Investments 94,366 8,679
Accounts receivables, unsecured 76,327 75,334
---------------- ----------------
25,354,611 15,923,533
Less allowance for doubtful accounts 172,958 117,803
----------------
----------------
25,181,653 15,805,730
----------------
----------------
Real Estate owned, acquired through foreclosure,
held for sale 69,479 66,991
Investment in limited liability corporation, at cost which
approximates market 241,139 191,139
Organization costs, less accumulated amortization of $10,000
and $8,125, respectively 2,500 4,375
Due from related companies 311
Prepaid expense-deferred loan fee 12,502 20,720
---------------- ----------------
$25,787,106 $16,753,700
================ ================
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1996 (audited) and
SEPTEMBER 30, 1997 (unaudited)
LIABILITIES AND PARTNERS CAPITAL
<CAPTION>
Sept 30, Dec 31,
1997 1996
--------------- ---------------
Liabilities:
<S> <C> <C>
Accounts payable and accrued expenses $0 $20,625
Note payable - bank line of credit 6,000,000 1,500,000
Deferred interest income 0 217,480
Subscriptions to partnership in applicant status 0 310,937
--------------- ---------------
6,000,000 2,049,042
--------------- ---------------
Partners Capital:
Limited partners capital, subject to redemption (note 4E):
Net of unallocated syndication costs of $444,186 and
$414,190 for 1997 and 1996, respectively:
and formation loan receivable of $1,337,993 and
$1,073,706
for 1997 and 1996, respectively 19,776,082 14,693,293
General Partners Capital, net of unallocated syndication
costs
of $4,526 and $4,184 for 1997 and 1996, respectively 11,024 11,365
--------------- ---------------
Total Partners Capital 19,787,106 14,704,658
--------------- ---------------
Total Liabilities and Partners Capital $25,787,106 $16,753,700
=============== ===============
<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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (unaudited)
9 mos. 9 mos. ended 3 mos. ended 3 mos. ended
ended
Sept 30, Sept 30, 1996 Sept 30, Sept 30, 1996
1997 1997
(unaudited) (unaudited) (unaudited) (unaudited)
<CAPTION>
Revenues:
<S> <C> <C> <C> <C>
Interest on Mortgage Investments $1,809,833 $1,260,156 $675,062 $452,253
Interest on bank deposits 6,630 2,819 1,257 1,402
Late Charges 4,223 3,592 1,302 1,533
Miscellaneous 305 412 180 112
----------- ----------- ----------- -----------
1,820,991 1,266,979 677,801 455,300
----------- ----------- ----------- -----------
Expenses:
Mortgage Servicing Fees 137,864 105,595 59,165 38,205
Interest on note payable - bank 208,114 172,292 89,203 61,654
Amortization of loan origination fees 14,468 7,593 5,031 2,531
Provision for doubtful accounts 55,262 44,261 24,248 25,176
Asset Management Fees - General 18,081 12,081 6,586 4,321
Partners
Amortization of organization costs 1,875 1,875 625 625
Clerical costs thru Redwood Mortgage 39,694 27,574 14,141 9,927
Professional Fees 24,627 16,686 2,775 472
Printing, Supplies & Postage 1,128 993 224 0
Other 8,563 3,937 3,891 27
----------- ----------- ----------- -----------
509,676 392,887 205,889 142,938
----------- ----------- ----------- -----------
Income before interest credited to
partners
in applicant status 1,311,315 874,092 471,912 312,362
Interest credited to partners in 6,943 1,854 1,038 758
applicant status
----------- ----------- ----------- -----------
Net Income 1,304,372 872,238 470,874 311,604
=========== =========== =========== ===========
Net income: to General Partners (1%) 13,044 8,722 4,709 3,116
Net income: to Limited Partners (99%) 1,291,328 863,516 466,165 308,488
=========== =========== =========== ===========
$1,304,372 $872,238 $470,874 $311,604
=========== =========== =========== ===========
Net income per $1,000 invested by
Limited
Partners for entire period:
-Where income is reinvested and $62.33 $62.32 $20.37 $20.37
compounded
----------- ----------- ----------- -----------
-Where partner receives income in
monthly distributions $60.67 $60.66 $20.24 $20.23
----------- ----------- ----------- -----------
<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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (unaudited)
Sept. 30, 1997 Sept. 30, 1996
(unaudited) (unaudited)
----------------- -----------------
<CAPTION>
Cash flows from operating activities:
<S> <C> <C>
Net income: $1,304,372 $872,238
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of organization costs 1,875 1,875
Provision for doubtful accounts 55,262 35,848
Increase (decrease) in account payable (20,625) (4,010)
(Increase) in accrued interest and advances (85,880) (13,123)
(Increase) decrease in amount due from related companies 311 3,049
(Increase) decrease in prepaid expenses and other assets 8,218 7,592
Increase (decrease) in deferred interest income (217,480) 0
-------------- --------------
Net cash provided by operating activities 1,046,053 903,469
-------------- --------------
Cash flows from investing activities:
Principal collected on Mortgage Investments 6,578,254 8,056,897
Mortgage Investments made (15,922,566) (10,122,346)
Additions to real estate held for sale (2,488) (5,219)
Additions to investment in limited liability corporation (50,000) 0
Accounts receivable -unsecured (993) (3,672)
-------------- --------------
Net cash used in investing activities (9,397,793) (2,074,340)
-------------- --------------
Cash flows from financing activities:
Increase (decrease) in note payable - Bank 4,500,000 (500,000)
Contributions by partner applicants 4,365,188 3,108,444
Interest credited to partners in applicant status 6,943 1,854
Interest withdrawn by partners in applicant status (1,327) (818)
Partners withdrawals (478,568) (398,932)
Syndication costs incurred (153,913) (136,811)
Formation loan increases (352,552) (237,777)
Formation loan collections 81,368 0
-------------- --------------
Net cash provided by financing activities 7,967,139 1,835,960
-------------- --------------
Net increase (decrease) in cash and cash equivalents (384,601) 665,089
Cash-beginning of period 664,434 380,318
============== ==============
Cash-end of period 279,833 1,045,407
============== ==============
<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
NINE MONTHS ENDED SEPTEMBER 30, 1997 (unaudited)
PARTNERS CAPITAL
--------------------------------------------------------------
LIMITED PARTNERS CAPITAL
--------------------------------------------------------------
Capital
Partners In Account Unallocated Formation
Applicant Limited Syndication Loan
Status Partners Costs Receivable Total
-------------- ------------ ------------- ------------ ------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1993 $128,772 $2,809,535 $(188,439) $(205,954) $2,415,142
Contributions of Application 4,560,683 0 0 0 0
Formation loan increases 0 0 0 (319,302) (319,302)
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) 4,504,282 0 0 4,504,282
Net Income 0 405,770 0 0 405,770
Syndication costs incurred 0 0 (80,213) 0 (80,213)
Allocation of syndication costs 0 (34,349) 34,349 0 0
Partners withdrawals 0 (165,814) 0 0 (165,814)
-------------- ------------ ------------- ------------ ------------
Balances at December 31, 1994 189,300 7,519,424 (234,303) (525,256) 6,759,865
Contributions of Application 3,634,264 0 0 (250,373) (250,373)
Formation loan increases 0 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) 3,831,211 0 0 3,831,211
Net Income 0 828,465 0 0 828,465
Syndication costs incurred 0 0 (173,581) 0 (173,581)
Allocation of syndication costs 0 (85,045) 85,045 0 0
Partners withdrawals 0 (308,554) 0 0 (308,554)
Early withdrawal penalties 0 (564) 162 400 (2)
-------------- ------------ ------------- ------------ ------------
Balances at December 31, 1995 0 11,784,937 (322,677) (775,229) 10,687,031
Contributions on Application 4,172,718 0 0 0 0
Formation loan increases 0 0 0 (314,996) (314,996)
Formation loan payments 0 0 0 8,961 8,961
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) 3,859,312 0 0 3,859,312
Net Income 0 1,218,598 0 0 1,218,598
Syndication costs incurred 0 0 (212,542) 0 (212,542)
Allocation of syndication costs 0 (116,523) 116,523 0 0
Partners withdrawals 0 (553,027) 0 0 (553,027)
Early withdrawal penalties 0 (12,108) 4,506 7,558 (44)
-------------- ------------ ------------- ------------ ------------
Balances at December 31, 1996 $310,937 $16,181,189 $(414,190) $(1,073,706) $14,693,293
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
(continued on next page)
<PAGE>
<TABLE>
(continued from previous page)
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1996 (audited)and
NINE MONTHS ENDED SEPTEMBER 30, 1997 (unaudited)
<CAPTION>
PARTNERS CAPITAL
--------------------------------------------------------------
LIMITED PARTNERS CAPITAL
--------------------------------------------------------------
Capital
Partners In Account Unallocated Formation
Applicant Limited Syndication Loan
Status Partners Costs Receivable Total
-------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Contributions on Application 4,365,188 0 0 0 0
Formation loan increases 0 0 0 (352,552) (352,552)
Formation loan payments 0 0 0 81,368 81,368
Interest credited to partners in 6,943 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn (1,327) 0 0 0 0
Transfers to Partners capital (4,681,741) 4,681,741 0 0 4,681,741
Net Income 0 1,291,328 0 0 1,291,328
Syndication costs incurred 0 0 (152,374) 0 (152,374)
Allocation of syndication costs 0 (118,503) 118,503 0 0
Partners withdrawals 0 (466,722) 0 0 (466,722)
Early withdrawal penalties 0 (10,772) 3,875 6,897 0
-------------- ------------ ------------- ------------ ------------
Balances at September 30, 1997 $0 $21,558,261 $(444,186) $(1,337,993) $19,776,082
============== ============ ============= ============ ============
<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
NINE MONTHS ENDED SEPTEMBER 30, 1997 (unaudited)
PARTNERS CAPITAL
------------------------------------------------------------------------------
GENERAL PARTNERS CAPITAL
----------------------------------------------------------
Capital Unallocated Total
Account Syndication Total Partners
General Costs Capital
Partners
---------------- ----------------- ----------------- ---------------
<CAPTION>
<S> <C> <C> <C> <C>
Balances at December 31, 1993 $2,887 $(1,903) $984 $2,416,126
Contributions of Application 0 0 0 0
Formation loan increases 0 0 0 (319,302)
Interest credited to partners in 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn 0 0 0 0
Transfers to Partners capital 4,542 0 4,542 4,508,824
Net Income 4,099 0 4,099 409,869
Syndication costs incurred 0 (810) (810) (81,023)
Allocation of syndication costs (347) 347 0 0
Partners withdrawals (3,444) 0 (3,444) (169,258)
---------------- ----------------- ----------------- ---------------
Balances at December 31, 1994 7,737 (2,366) 5,371 6,765,236
Contributions of Application 0 0 0 0
Formation loan increases 0 0 0 (250,373)
Interest credited to partners in 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn 0 0 0 0
Transfers to Partners capital 3,588 0 3,588 3,834,799
Net Income 8,368 0 8,368 836,833
Syndication costs incurred 0 (1,753) (1,753) (175,334)
Allocation of syndication costs (859) 859 0 0
Partners withdrawals (7,509) 0 (7,509) (316,063)
Early withdrawal penalties 0 2 2 0
---------------- ----------------- ----------------- ---------------
Balances at December 31, 1995 11,325 (3,258) 8,067 10,695,098
Contributions on Application 0 0 0 0
Formation loan increases 0 0 0 (314,996)
Formation loan payments 8,961
Interest credited to partners in 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn 0 0 0 0
Transfers to Partners capital 4,224 0 4,224 3,863,536
Net Income 12,309 0 12,309 1,230,907
Syndication costs incurred 0 (2,147) (2,147) (214,689)
Allocation of syndication costs (1,177) 1,177 0 0
Partners withdrawals (11,132) 0 (11,132) (564,159)
Early withdrawal penalties 0 44 44 0
---------------- ----------------- ----------------- ---------------
Balances at December 31, 1996 $15,549 $(4,184) $11,365 $14,704,658
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
(continued on next page)
<PAGE>
<TABLE>
(continued from previous page)
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1996 (audited)and
NINE MONTHS ENDED SEPTEMBER 30, 1997 (unaudited)
PARTNERS CAPITAL
------------------------------------------------------------------------------
GENERAL PARTNERS CAPITAL
----------------------------------------------------------
Capital Unallocated Total
Account Syndication Total Partners
General Costs Capital
Partners
<CAPTION>
<S> <C> <C> <C> <C>
Contributions on Application 0 0 0 0
Formation loan increases 0 0 0 (352,552)
Formation loan payments 81,368
Interest credited to partners in 0 0 0 0
applicant status
Upon admission to partnership:
Interest withdrawn 0 0 0 0
Transfers to Partners capital 0 0 0 4,681,741
Net Income 13,044 0 13,044 1,304,372
Syndication costs incurred 0 (1,539) (1,539) (153,913)
Allocation of syndication costs (1,197) 1,197 0 0
Partners withdrawals (11,846) 0 (11,846) (478,568
Early withdrawal penalties 0 0 0 0
---------------- ----------------- ----------------- ---------------
Balances at September 30, 1997 $15,550 $(4,526) $11,024 $19,787,106
================ ================= ================= ===============
<FN>
See accompanying notes to financial statetments
</FN>
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
SEPTEMBER 30, 1997 (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 September 30, 1997, the Partnership was in
the offering stage, wherein contributed capital totalled $19,608,142 in limited
partner contributions of an approved aggregate offering of $45,000,000, in units
of $100 each (196,081). Of this amount, $0 remained in applicant status.
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 the total of $0 was in applicant status at September 30, 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
$367,937 at September 30, 1997, which was 7.9% of the limited partners
contributions of $4,676,125. 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. 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>
The following summarizes Formation Loan transactions to September 30, 1997:
<CAPTION>
Initial Subsequent Total
Offering of Offering of
$15,000,000 $30,000,000
--------------- --------------- ---------------
<S> <C> <C> <C>
Limited Partner contributions $14,932,017 $4,676,125 $19,608,142
=============== =============== ===============
Formation Loan made $1,074,840 367,937 1,442,777
Payments to date (90,329) 0 (90,329)
Early withdrawal penalties applied (14,455) 0 (14,455)
--------------- --------------- ---------------
Balance September 30, 1997 $970,056 $367,937 $1,337,993
=============== =============== ===============
Percent loaned of Partners contributions 7.2% 7.9% 7.4%
=============== =============== ===============
</TABLE>
The formation loan, which is receivable from Redwood Mortgage, an affiliate
of the General Partners, has been deducted from Limited Partners Capital in the
balance sheet. As amounts are collected from Redwood Mortgage, the deduction
from capital will be reduced (see note 11).
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 September 30, 1997, organization costs of $12,500 and syndication
costs of $824,523 had been incurred by the Partnership with the following
distribution:
<TABLE>
Syndication Costs
--------------------------------------------
Offering
----------------------------
Initial Subsequent Organization
15,000,000 30,000,000 Total Costs Total
----------- ----------- ----------- --------- ----------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Costs incurred $569,865 254,658 824,523 12,500 837,023
Early withdrawal penalties (8,589) 0 (8,589) 0 (8,589)
applied
Allocated and amortized to (366,772) (450) (367,222) (10,000) (377,222)
date
----------- ---- ----------- --- ----------- ---- --------- ---- ----------
September 30, 1997 balance $194,504 254,208 448,712 2,500 451,212
=========== ==== =========== === =========== ==== ========= ==== ==========
</TABLE>
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 September 30, 1997, syndication costs attributable to the subsequent
offering ($30,000,000) totalled $254,658, 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.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
SEPTEMBER 30, 1997 (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A Accrual Basis
Revenues and expenses are accounted for on the accrual basis of accounting
wherein income is recognized as earned and expenses are recognized as incurred.
Once a loan is categorized as impaired, interest is no longer accrued thereon.
B. Management Estimates
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, including the valuation of impaired
mortgage investments, and the valuation of real estate acquired through
foreclosure. Actual results could differ significantly from these estimates.
C. Mortgage Investments, Secured by Deeds of Trust
The Partnership has both the intent and ability to hold the mortgage
investments to maturity, i.e., held for long-term investment. They are therefore
valued at cost for financial statement purposes with interest thereon being
accrued by the simple interest method.
Financial Accounting Standards Board Statements (SFAS) 114 and 118
(effective January 1, 1995) provide that if the probable ultimate recovery of
the carrying amount of a mortgage investment, with due consideration for the
fair value of collateral, is less than the recorded investment and related
amounts due and the impairment is considered to be other than temporary, the
carrying amount of the investment (cost) shall be reduced to the present value
of future cash flows. The adoption of these statements did not have a material
effect on the financial statements of the Partnership because that was the
valuation method previously used on impaired loans.
At September 30, 1997, and December 31, 1996, 1995, and 1994, there were no
mortgage investments categorized as impaired by the Partnership. Had there been
a computed amount for the reduction in carrying values of impaired loans, the
reduction would have been included in the allowance for doubtful accounts.
As presented in Note 10 to the financial statements, the average mortgage
investment to appraised value of security at the time the losses were
consummated was 55.48%. When a loan is valued for impairment purposes, an
updating is made in the valuation of collateral security. However, such a low
loan to value ratio has the tendency to minimize reductions for impairment.
D. Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents
include interest bearing and non-interest bearing bank deposits.
E. Real Estate Owned, Held for Sale
Real Estate owned, held for sale, includes real estate acquired through
foreclosure and is stated at the lower of the recorded investment in the
property, net of any senior indebtedness, or at the propertys estimated fair
value, less estimated costs to sell. At September 30, 1997, there was one such
piece of property with costs totaling $74,479 less a reduction of $5,000 to
arrive at the net fair value of $69,479.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
SEPTEMBER 30, 1997 (unaudited)
Effective January 1, 1996, the Partnership adopted the provisions of
Statement No 121 (SFAS 121) of the Financial Accounting Standards Board,
Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to
be disposed of. The adoption of SFAS 121 did not have a material impact on the
Partnerships financial position because the methods indicated were essentially
those previously used by the Partnership.
F. Investment in Limited Liability Corporation (see Note 7)
The Partnership carries its investment in limited liability Corporation as
investment in real estate, which is at the lower of costs or fair value, less
estimated costs to sell.
G. Income Taxes
No provision for Federal and State income taxes is made in the financial
statements since income taxes are the obligation of the partners if and when
income taxes apply.
H. Organization and Syndication Costs
The Partnership bears its own organization and syndication costs (other
than certain sales commissions and fees described above) including legal and
accounting expenses, printing costs, selling expenses, 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.
I. Allowance for Doubtful Accounts
Mortgage Investments and the related accrued interest, fees, and advances
are analyzed on a continuous basis for recoverability. Delinquencies are
identified and followed as part of the Mortgage Investment system. A provision
is made for doubtful accounts to adjust the allowance for doubtful accounts to
an amount considered by management to be adequate, with due consideration to
collateral values, to provide for unrecoverable accounts receivable, including
impaired mortgage investments, unspecified mortgage investments, accrued
interest and advances on mortgage investments, and other accounts receivable
(unsecured). The composition of the allowance for doubtful accounts as of
September 30, 1997, December 31, 1996 and 1995 were as follows:
<TABLE>
Sept. 30, Dec. 31, Dec. 31
1997 1996 1995
--------------- ------------- -------------
<CAPTION>
<S> <C> <C> <C>
Impaired mortgage investments $0 $0 $0
Unspecified mortgage investments 127,958 72,803 9,152
Accounts receivable, unsecured 45,000 45,000 30,000
-------------
=============== =============
$172,958 $117,803 $39,152
=============== ============= =============
</TABLE>
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
SEPTEMBER 30, 1997 (unaudited)
J. Net Income Per $1,000 Invested
Amounts reflected in the statements of income as net income per $1,000
invested by Limited Partners for the entire period are actual amounts allocated
to Limited Partners who have their investment throughout the period and have
elected to either leave their earnings to compound or have elected to receive
monthly distributions of their net income. Individual income is allocated each
month based on the Limited Partners pro rata share of Partners Capital.
Because the net income percentage varies from month to month, amounts per $1,000
will vary for those individuals who made or withdrew investments during the
period, or 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.
K. Reclassifications and Changes in Presentation
Certain reclassifications not affecting net income have been made to prior
year amounts to conform to the current year presentation. In addition, the
formation loan previously categorized as an asset has been deducted from Limited
Partners Capital until collected from Redwood Mortgage, an affiliate of the
General Partners (see note 11).
NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES
The following are commissions and/or fees which are paid to the General
Partners and/or related parties.
A. Mortgage Brokerage Commissions
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, is 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. Mortgage servicing fees of $155,912, $85,456 and $29,127
were incurred for years 1996, 1995 and 1994 respectively. For nine months
through September 30, 1997, mortgage servicing fee paid was $137,864.
C. Asset Management Fee
The General Partners receive monthly fees 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). Management fees of $17,053, $11,587 and $5,906
were incurred for years 1996, 1995 and 1994, respectively. For the nine months
period under review, management fee of $18,081 was paid to the General Partners.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
SEPTEMBER 30, 1997 (unaudited)
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 December 31, 1996 a General Partner, GYMNO Corporation,
had contributed $15,241, as capital in accordance with Section 4.02(a) of the
Partnership Agreement.
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 periods ending September 30, 1997, and December 31, 1996, 1995,
and 1994, interest totalling $6,943, $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.
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
SEPTEMBER 30, 1997 (unaudited)
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.
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 $6,000,000 at .5% over
prime secured by its Mortgage Investment portfolio. The note payable balances
were $1,500,000 and $1,910,000 at December 31, 1996, and 1995, respectively, and
the interest rate was 8.75% at December 31, 1996, (8.25% prime plus .50%). At
September 30, 1997, the note payable balance was $6,000,000 and the interest
rate was 9% (8.50% prime plus .50%).
<PAGE>
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (audited) and
SEPTEMBER 30, 1997 (unaudited)
NOTE 7 - INVESTMENT IN LIMITED LIABILITY CORPORATION
As a result of acquiring real property through foreclosure, the Partnership
has contributed its interest to a Limited Liability Corporation which will
complete the construction and sell the property. The Partnership expects to
realize a profit from the venture.
NOTE 8 - INCOME TAXES
The following reflects a reconciliation from net assets (Partners Capital)
reflected in the financial statements to the tax basis of those net assets:
<TABLE>
9 mos thru Dec. 31, Dec. 31,
Sept 30, 1997 1996 1995
---------------- -------------- --------------
<CAPTION>
<S> <C> <C> <C>
Net Assets - Partners Capital per financial statements $19,787,106 $14,704,658 $10,695,098
Unamortized syndication costs 448,712 418,374 325,935
Allowance for doubtful accounts 172,958 117,803 39,152
Formation loans receivable 1,337,993 1,073,706 775,229
-------------- --------------
===============
Net assets tax basis $21,746,769 $16,314,541 $11,835,414
=============== ============== ==============
</TABLE>
In 1996, approximately 55% of taxable income was allocated to tax exempt
organizations, i.e., retirement plans. Such plans do not have to file income tax
returns unless their unrelated business income exceeds $1,000. Applicable
amounts become taxable when distribution is made to participants.
NOTE 9 - FAIR VALUE OF FINANCIAL INVESTMENTS
The following methods and assumptions were used to estimate the fair value
of financial instruments:
(a) Cash and Cash Equivalents The carrying amount equals fair value. All
amounts, including interest bearing, are subject to immediate withdrawal.
(b) The carrying value of mortgage investments (see note 2(c) is
$24,987,302. The fair value of these investments of $25,440,322 is estimated
based upon projected cash flows discounted at the estimated current interest
rates at which similar loans would be made. The applicable amount of the
allowance for doubtful accounts along with accrued interest and advances related
thereto should also be considered in evaluating the fair value versus the
carrying value.
<PAGE>
NOTE 10- ASSET CONCENTRATIONS AND CHARACTERISTICS
The Mortgage Investments are secured by recorded deeds of trust. At
September 30, 1997, there were 56 Mortgage Investments outstanding with the
following characteristics:
Number of Mortgage Investments outstanding 56
Total Mortgage Investments outstanding $24,987,302
Average Mortgage Investment outstanding $446,202
Average Mortgage Investment as percent of total 1.79%
Average Mortgage Investment as percent of Partners Capital 2.26%
Largest Mortgage Investment outstanding $2,100,000
Largest Mortgage Investment as percent of total 8.40%
Largest Mortgage Investment as percent of Partners Capital 10.61%
Number of counties where security is located (all California) 15
Largest percentage of Mortgage Investments in one county 24.43%
Average Mortgage Investment to appraised value of security at time
loan was consummated 55.48%
Number of Mortgage Investments in foreclosure status 1
Amount of Mortgage Investments in foreclosure $118,811
The following categories of mortgage investments are pertinent at September
30, 1997, December 31, 1996 and 1995:
<TABLE>
Sept. 30, Dec. 31, Dec. 31,
1997 1996 1995
--------------- -------------- ---------------
<CAPTION>
<S> <C> <C> <C>
First Trust Deeds $13,682,592 $6,545,779 $4,996,887
Second Trust Deeds 11,267,210 8,797,211 7,050,365
Third Trust Deeds 37,500 300,000 0
--------------- -------------- ---------------
Total mortgage investments 24,987,302 15,642,990 12,047,252
Prior liens due other lenders 34,314,197 25,161,374 26,965,234
--------------- -------------- ---------------
Total debt $59,301,499 $40,804,364 $39,012,486
=============== ============== ===============
Appraised property value at time of loan $106,883,679 $70,100,408 $61,347,449
=============== ============== ===============
Total investments as a percent of appraisals 55.48% 58.21% 63.59%
=============== ============== ===============
Investments by Type of Property
Owner occupied homes $2,436,623 $1,808,921 $2,300,576
Non-Owner occupied homes 2,770,043 2,288,036 1,844,507
Apartments 6,375,923 2,521,515 2,664,963
Commercial 13,404,713 9,024,518 5,237,206
=============== ============== ===============
$24,987,302 $15,642,990 $12,047,252
=============== ============== ===============
<FN>
The interest rates on the mortgage investments range from 10.00% to 14.50% at September 30, 1997.
</FN>
</TABLE>
<PAGE>
Scheduled maturity dates of mortgage investments as of September 30, 1997
are as follows:
Period Ending
September 30,
-------------------
1997 $1,212,683
1998 4,563,673
1999 6,939,538
2000 4,328,391
2001 1,888,710
Thereafter 6,054,307
================
$24,987,302
================
The scheduled maturities for 1997 include approximately $230,000 in loans
which are past maturity at September 30, 1997. Interest payment on these loans
are current.
One mortgage investment in the principal amount of $118,811 had interest
paid through September 1, 1996, and is in foreclosure. That mortgage investment
which is the only loan categorized as delinquent, is not considered impaired
because the underlying security is sufficient to cover amount due.
The cash balance at September 30, 1997 of $279,833 was in one bank with
interest bearing balances totalling $177,656. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $179,833.
NOTE 11 - CHANGE IN PRESENTATION
The formation loan receivable from Redwood Mortgage, an affiliate of the
General Partners, has been categorized as a reduction in Limited Partners
Capital, the source of the funds. It was previously reflected as an asset. As
payments are received, or early withdrawal penalties realized, the formation
loan balance will be reduced and restored to Limited Partners Capital. The
total of the formation loan outstanding was $1,337,993, $1,073,706 and $775,229
at September 30, 1997, December 31, 1996 and 1995, respectively.
In addition, Limited Partners Capital and General Partners Capital are
reflected separately in the Balance Sheet, whereas they were previously
reflected separately in the Statement of Changes in Partners Capital.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
On September 30, 1997, the Partnership was in the offering stage of its
second offering, and contributed capital totalled $19,608,142 (Limited
Partners). Of this amount, $0 remained in applicant status. The Partnership
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 has approval for an
aggregate offering of $45,000,000 in Units of $100 each.
At September 30, 1997, the Partnerships Mortgage Investments outstanding
totalled $24,987,302. The primary reason for an increase in Mortgage Investments
Outstanding to $6,484,707, $12,047,252, $15,642,990 and $24,987,302 was the
additional capital admitted to the Partnership through sale of Limited
Partnership Units and subsequent admittance of Partners Capital of $4,508,824,
$3,834,799, $3,863,536 and $4,681,741 and through the reinvestment of earnings
by partners who have elected to reinvest earnings of $205,607, $439,492,
$683,695 and $932,325 for the years ended December 31, 1994, December 31, 1995,
December 31, 1996 and nine month period ended September 30, 1997, respectively
and to a lesser extent, from the line of credit. The effect of more outstanding
Mortgage Investments raised the interest earned on Mortgage Investments for the
years ended 1994, 1995, 1996 and nine months to September 30, 1997, to $480,110,
$1,031,029, $1,718,208 and $1,809,833 respectively. Interest rates on Mortgage
Investments ranged from 10.00% to 14.50%. The Partnership began funding Mortgage
Investments on April 14, 1993 and as of September 30, 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%).
During 1994, the Partnership did not have a credit line; therefore Interest
on Note Payable-Bank was -0-. 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 $6,000,000. For the years ended 1995, 1996 and nine
months to September 30, 1997, interest on Note Payable-Bank was $25,889,
$188,635 and $208,114 respectively. The primary reason for this increase during
1996, was that the Partnership did not have access to the credit facility until
September, 1995. For 1997, the increase in interest on notes payable-Bank has
been attributed to a higher overall credit facility utilization. Currently, it
has borrowed $6,000,000 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 and 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, the amount to be retained by the
Partnership, after payment of the line of credit cost, will be greater than
without the use of the line of credit. As of September 30, 1997, the balance
remained at $6,000,000 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 $172,958 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.
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.
At the time of subscription to the Partnership, Limited Partners make an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound earnings in their capital account. For the years
ended December 31, 1995, December 31, 1996, and nine months period ended
September 30, 1997, the Partnership made distributions of earnings to Limited
Partners after allocation of syndication costs of, $303,477, $418,380 and
$359,003 respectively. Distribution of Earnings to Limited Partners after
allocation of syndication costs for the years ended December 31, 1995, December
31, 1996 and nine month period ended September 30, 1997, to Limited Partners
capital accounts and not withdrawn was $524,988, $800,218 and $932,325
respectively. As of December 31, 1995, December 31, 1996 and September 30, 1997,
Limited Partners electing to withdraw earnings represented 40%, 34% and 30% of
the Limited Partners outstanding capital accounts.
The Partnership also allows the Limited Partners to withdraw their capital
account subject to certain limitations (see liquidation provisions of
Partnership Agreement). For the years ended December 31, 1995, December 31,
1996, and nine months ended September 30, 1997, $5,640, $146,755 and $107,718
were liquidated subject to the 10% penalty for early withdrawal. These
withdrawals are within the normally anticipated range that the General Partners
would expect in their experience in this and other Partnerships. The General
Partners expect that a small percentage of Limited Partners will elect to
liquidate their capital accounts over one year with a 10% early withdrawal
penalty. In originally conceiving the Partnership, the General Partners wanted
to provide Limited Partners needing their capital returned a degree of
liquidity. Generally, Limited Partners electing to withdraw over one year need
to liquidate investment to raise cash. The trend we are experiencing in
withdrawals by Limited Partners electing a one year liquidation program
represents a small percentage of Limited Partner capital as of December 31,
1995, December 31, 1996 and September 30, 1997, respectively and is expected by
the General Partners to commonly occur at these levels.
Additionally, for the years ended December 31, 1995, December 31, 1996 and
nine months through September 30, 1997, $0, $0 and $0 were liquidated by Limited
Partners who have elected a liquidation program over a period of five years or
longer. Once the initial five year hold period has passed the General Partners
expect to see an increase in liquidations due to the ability of Limited Partners
to withdraw without penalty. This ability to withdraw after five years by
Limited Partners has the effect of providing Limited Partner liquidity which the
General Partners then expect a portion of the Limited Partners to avail
themselves of. This has the anticipated effect of the partnership growing,
primarily through reinvestment of earnings in years one through five. The
General Partners expect to see increasing numbers of Limited Partner withdrawals
in years five through eleven, at which time the bulk of those Limited Partners
who have sought withdrawal have been liquidated. After year eleven, the gross
figures generally should subside and the Partnership capital again tends to
increase.
<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 September 30, 1997. 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
- ---------------------- ---------------------------- ----------
Redwood Mortgage Mortgage Servicing Fee for
servicing mortgage investments $137,864
General Partners Asset management Fee for managing assets $18,081
&/or Affiliate
General Partners 1% interest in profits, losses and distributions
of cash available for distribution $13,044
Less allocation for Syndication Costs $1,197
-------------
$11,847
II. FEES PAID BY BORROWERS ON MORTGAGE INVESTMENTS PLACED BY COMPANIES
RELATED TO THE GENERAL PARTNERS WITH THE PARTNERSHIP (EXPENSES OF BORROWERS NOT
OF THE PARTNERSHIP):
Redwood Mortgage Mortgage Brokerage Commissions for services in
connection with the review, selection, evaluation,
negotiation, and extension of the Partnerships
Mortgage Investments, paid by the borrower and not
by the Partnership $585,449
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 $14,048
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 SEPTEMBER 30,1997
Partnership Highlights
First Trust Deeds $13,682,592.26
Appraised Value of Properties* 31,116,434.00
Total Investment as a % of Appraisal 43.97%
First Trust Deed Mortgage Investments 13,682,592.26
Second Trust Deed Mortgage Investments 11,267,209.30
Third Trust Deed Mortgage Investments 37,500.00
--------------------
$24,987,301.56
First Trust Deeds due other Lenders 33,794,549.00
Second Trust Deeds due other Lenders 519,648.00
--------------------
Total Debt $59,301,498.56
Appraised Property Value* $106,883,679.00
Total Investment as a % of Appraisal 55.48%
Number of Mortgage Investments Outstanding 56
Average Investment $446,201.81
Average Investment as a % of Net Partners Capital 2.26%
Largest Investment Outstanding 2,100,000.00
Largest Investment as a % of Net Partners Capital 10.61%
Mortgage Investments as a Percentage of Total Mortgage Investments
First Trust Deed Mortgage Investments 54.76%
Second Trust Deed Mortgage Investments 45.09%
Third Trust Deed Mortgage Investments 0.15%
--------------
Total 100.00%
Mortgage Investments by Type of Amount Percent
Property
Owner Occupied Homes $2,436,623.19 9.75%
Non Owner Occupied Homes 2,770,042.57 11.08%
Apartments 6,375,922.44 25.52%
Commercial 13,404,713.36 53.65%
----------------- --------------
Total $24,987,301.56 100.00%
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 Total Percent
Mortgage
Investments
San Mateo $6,104,087.49 24.43%
San Francisco 5,087,629.93 20.36%
Alameda 4,514,292.35 18.07%
Santa Clara 3,390,730.38 13.57%
Stanislaus 1,450,000.00 5.80%
San Joaquin 1,199,046.92 4.80%
Marin 982,682.74 3.93%
Contra Costa 659,635.58 2.64%
Solano 480,000.00 1.92%
Santa Barbara 413,944.33 1.66%
Monterey 278,563.00 1.11%
Fresno 129,012.28 0.52%
Mendocino 125,000.00 0.50%
El Dorado 118,810.72 0.48%
Sacramento 53,865.84 0.21%
------------------ -----------
Total $24,987,301.56 100.00%
<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
September 30, 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 5th day of
November 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 12th day of November 1997.
Signature Title Date
/s/ D. Russell Burwell
- ------------------------
D. Russell Burwell General Partner November 5, 1997
/s/ Michael R. Burwell
- ------------------------
Michael R. Burwell General Partner November 5, 1997
/s/ D. Russell Burwell
- ------------------------
D. Russell Burwell President of Gymno Corporation, November 5, 1997
(Principal Executive Officer);
Director of Gymno Corporation
/s/ Michael R. Burwell
- -----------------------
Michael R. Burwell Secretary/Treasurer of Gymno November 5, 1997
Corporation (Principal Financial
and Accounting Officer);
Director of Gymno Corporation
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