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REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
Index to Form 10-K
December 31, 2000
Part I
Page No.
Item 1 -Business 3
Item 2 -Properties 4-5
Item 3 -Legal Proceedings 6
Item 4 -Submission of Matters to a Vote of Security Holders (Partners) 6
Part II
Item 5 - Market for the Registrant's "Limited Partnership Units"
and Related Unitholder Matters 6
Item 6 - Selected Financial Data 6-8
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-12
Item 8 - Financial Statements and Supplementary Data 13-36
Item 9 - Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 37
Part III
Item 10 - Directors and Executive Officers of the Registrant 38
Item 11 - Executive Compensation 39
Item 12 - Security Ownership of Certain Beneficial Owners and management 40
Item 13 - Certain Relationships and Related Transactions 40
Part IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports
on Form 8-K. 40-41
Signatures 42-43
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the year ended December 31, 2000 Commission file number 333-41410
- -------------------------------------------------------------------------------
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 Identification)
incorporation or organization)
650 El Camino Real Suite G, Redwood City, CA 94063
- -------------------------------------------------------------------------------
(address of principal executive offices) (zip code)
Registrant's telephone number including area code (650) 365-5341
- --------------------------------------------------------- ---------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- -------------------------------------------------------------------------------
None None
- -------------------------------------------------------------------------------
Securities registered pursuant to
Section 12(g) of the Act: Limited Partnership Units
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES XXXX NO
- ----------------------- ------------------
As of December 31, 2000, the limited partnership Units purchased by
non-affiliates was 49,983,150 Units computed at $1.00 a unit for $49,983,150.
Documents incorporated by reference:
Portions of the Prospectus effective August 31, 2000, (the "Prospectus") are
incorporated in Parts II, III, and IV. Exhibits filed as part of Form S-11
Registration Statement #333-41410 are incorporated by reference in part IV.
Part I
Item 1 - Business
Redwood Mortgage Investors VIII, a California limited partnership (the
"Partnership"), was organized in 1993 of which D. Russell Burwell, Michael R.
Burwell, Gymno Corporation and Redwood Mortgage Corp., both California
Corporations, are the General Partners. The Partnership is organized to engage
in business as a mortgage lender, for the primary purpose of making loans
secured primarily by first and second deeds of trust on California real estate.
Loans are arranged and serviced by Redwood Mortgage Corp. The Partnership's
objectives are to make loans that will: (i) yield a high rate of return from
mortgage lending; and (ii) preserve and protect the Partnership's capital.
Investors should not expect the Partnership to provide tax benefits of the type
commonly associated with limited partnership tax shelter investments. The
Partnership is intended to serve as an investment alternative for investors
seeking current income. However, unlike other investments which are intended to
provide current income, an investment in the Partnership will be less liquid,
not readily transferable, and not provide a guaranteed return over its
investment life.
Initially, the Partnership offered a minimum of $250,000 and a maximum of
$15,000,000 in Units, of which $14,932,017 were sold. This initial offering
closed on October 31, 1996. Subsequently, the Partnership commenced a second
offering of up to $30,000,000 in Units commencing on December 4, 1996. This
offering sold $29,992,574 in Units and was closed on August 30, 2000. On August
31, 2000 the Partnership commenced this offering for another 30,000,000 Units
($30,000,000). As of December 31, 2000, 5,058,559 Units for $5,050,559 were sold
in this current third offering, bringing the aggregate sale of Units to
$49,983,150. All Units are being offered on a "best efforts" basis, which means
that no one is guaranteeing that any minimum number of Units will be sold,
through broker-dealer member firms of the National Association of Securities
Dealers, Inc. (See "TERMS OF THE OFFERING" and " PLAN OF DISTRIBUTION").
The Partnership began selling Units in February 1993, and began investing in
mortgages in April 1993. At December 31, 2000, the Partnership has investments
in loans with principal balances totaling $68,570,992. Interest rates ranged
from 8.00% to 18.00%. Currently First Trust Deeds comprise 55.13% of the total
amount of the loan portfolio, an increase of 6.41% over 1999 level of 51.81%.
Junior loans (2nd and 3rd Trust Deeds) make up 44.87%, a decrease of 6.89% over
1999 level of 48.19%. Owner-occupied homes, combined with non-owner occupied
loans, total 38.24% of the loan portfolio. Loans secured by multi-family
properties make up 12.34% of the total loans. Commercial loans now comprise
49.42% of the portfolio, an increase of 3.17% from last year. Of the total
loans, 81.02% are in six counties of the San Francisco Bay Area. The County of
Stanislaus makes up 8.21% of the loans. Stanislaus County is an adjacent County
to the San Francisco Bay Area, located approximately 65 miles from San
Francisco. The balance of loans are primarily in Northern California. Loan size
increased this past year, and is now averaging $1,008,397 per loan, up from
$334,941 in 1999. This increase is due to the ability of the Partnership by
virtue of its increasing size to invest in larger loans. The average loan as of
December 31, 2000, represents 1.89% of Limited Partners capital and 1.47% of
outstanding loans, similar to December 31, 1999 average loan size of 1.82% of
Limited Partners capital and 1.89% of outstanding loans. Some of the loans are
fractionalized between affiliated partnerships with objectives similar to those
of the Partnership to further reduce risk. Average equity per loan transaction
stood at 45.12%, an increase in equity of 15.63% from the previous year. This
average equity is generally considered very conservative. Generally, the more
equity, the more protection for the lender. The General Partners believe the
Partnership's loan portfolio is in good condition with no property in
foreclosure as of the end of December 2000.
Item 2 - Properties
A summary of the Partnership's Loan Portfolio as of December 31, 2000, is set
forth below.
Loans as a Percentage of Total Loans
First Trust Deeds $37,806,031.77
Appraised Value of Properties 83,067,888.00
------------------
Total Investment as a % of Appraisal 45.51%
------------------
First Trust Deed Loans 37,806,031.77
Second Trust Deed Loans 29,799,534.92
Third Trust Deed Loans 965,425.42
------------------
Total of Trust Deed Loans 68,570,992.11
------------------
Priority positions:
First Trust Deed Loans due other Lenders 32,389,207.33
Second Trust Deed Loans due other Lenders 5,195,709.00
------------------
Total Debt $106,155,908.44
==================
Appraised Property Value 193,420,663.00
Total Investments as a % of Appraisal 54.88%
Number of Loans Outstanding 68
Average Investment $1,008,396.94
Average Investment as a % of Net Assets 1.89%
Largest Investment Outstanding 4,000,000.00
Largest Investment as a % of Net Assets 7.51%
Loans as a Percentage of Total Loans Percent
- ------------------------------------ -------
First Trust Deed Loans 55.13%
Second Trust Deed Loans 43.46%
Third Trust Deed Loans 1.41%
------------------
Total Trust Deed Loan Percentage 100.00%
==================
Loans by
Type of Property Amount Percent
- ---------------- ------ -------
Owner Occupied Homes $9,753,617.06 14.22%
Non-Owner Occupied Homes 16,471,074.29 24.02%
Apartments 8,458,610.12 12.34%
Commercial 33,887,690.64 49.42%
------------------ ------------------
Total $68,570,992.11 100.00%
================== ==================
The following is a distribution of loans outstanding as of December 31, 2000 by
Counties.
Total
County Loans Percent
- ------ ----- -------
San Francisco $28,606,696.17 41.72%
San Mateo 14,048,621.88 20.49%
Stanislaus 5,629,983.00 8.21%
Santa Clara 5,213,150.30 7.60%
Marin 3,788,705.78 5.52%
Placer 3,453,995.70 5.04%
Los Angeles 3,017,567.51 4.40%
Contra Costa 2,725,976.86 3.98%
Alameda 1,171,860.69 1.71%
Lake 737,500.00 1.08%
Fresno 126,934.22 0.18%
Riverside 50,000.00 0.07%
----------------- -----------
Total $68,570,992.11 100.00%
================= ===========
Statement of Condition of Loans
Number of Loans in Foreclosure 0
Scheduled maturity dates of loans as of December 31, 2000 are as follows:
Year Ending
December 31, Amount
------------------- ---------------
2001 $42,414,963
2002 14,457,279
2003 5,300,000
2004 1,556,762
2005 1,694,680
Thereafter 3,147,308
---------------
$68,570,992
===============
The scheduled maturities for 2000 include approximately twelve loans totaling
$4,706,644 which were past maturity at December 31, 2000. Interest payment on
only three of these loans was delinquent.
In 1995, the Partnership chose to allow a senior lender to foreclose out its
deed of trust on one of its loans. The Partnership commenced a legal action to
collect this debt. A settlement was reached for this debt collection. As of
December 31, 2000, $30,000 of the amount due has been collected. The remaining
balance of $53,838 has been recorded as an accounts receivable in the financial
statements. Additional payments are expected in year 2001.
As of January 01, 1999, the Partnership owned a vacant lot acquired through the
foreclosure of loans. The vacant lot was valued at $66,000 and was subsequently
sold in April 1999 for $85,000. Additionally, the Partnership wholly owned a
limited liability company (LLC) whose sole asset is a partially completed
single-family residence. This partially completed single-family residence was
originally foreclosed upon by the Partnership and subsequently transferred to
the LLC at a cost of $181,139. Additional expenditures over the $181,139 basis,
have been primarily for completion of the construction. The construction was
fully completed in February 2000, and the property was sold in April, 2000, at a
profit. The LLC's final tax return for 2000 has been prepared and filed in March
2001, and the limited liability company is now dissolved.
Item 3 - Legal Proceedings
In the normal course of business, the Partnership may become involved in various
types of legal proceedings such as assignment of rents, bankruptcy proceedings,
appointment of receivers, unlawful detainers, judicial foreclosure, etc., to
enforce the provisions of the deeds of trust, collect the debt owed under the
promissory notes, or to protect/ recoup its investment from the real property
secured by the deeds of trust. None of these actions would typically be of any
material importance. As of the date hereof, the Partnership is not involved in
any legal proceedings other than those that would be considered part of the
normal course of business.
Item 4 - Submission of Matters to Vote of Security Holders (Partners).
No matters have been submitted to a vote of the Partnership.
Part II
Item 5 - Market for the Registrant's "Limited Partnership Units" and
Related Unitholder Partnership Matters.
30,000,000 Units at $1 each (minimum 2,000 Units) are being offered ($45,000,000
in Units were previously offered and sold) through broker-dealer member firms of
the National Association of Securities Dealers on a "best efforts" basis (as
indicated in Part I item 1). Investors have the option of withdrawing earnings
on a monthly, quarterly, or annual basis or reinvesting and compounding the
earnings. Limited Partners may withdraw from the Partnership in accordance with
the terms of the Partnership Agreement subject to possible early withdrawal
penalties. There is no established public trading market.
A description of the Partnership Units, transfer restrictions and withdrawal
provisions is more fully described under the section entitled "Description of
Units" and summary of Limited Partnership Agreement, pages 67 through 75 of the
Prospectus, a part of the referenced Registration Statement, which is
incorporated by reference.
Item 6 - Selected Financial Data
Redwood Mortgage Investors VIII began operations in April 1993. Financial
results for years 1997 through December 31, 1999, for prior partnerships are
incorporated by reference to the Prospectus (S-11) dated August 31, 2000, Table
III, pages 139 through 146.
Financial condition and results of operation for the Partnership for five years
to December 31, 2000 were:
Balance Sheet
Assets
December 31,
-------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------- -------------- --------------- -------------- ---------------
Cash $1,459,725 $1,602,568 $528,688 $663,159 $664,434
Accounts receivable:
Loans secured by deeds of trust 68,570,992 35,693,148 31,905,958 25,304,989 15,642,990
Accrued interest and other fees 1,039,469 711,521 459,418 341,976 196,530
Advances on loans 172,004 33,251 211,145 205,804 8,679
Other receivables - unsecured 53,838 49,090 48,849 62,844 75,334
Less allowance for losses (1,344,938) (834,359) (414,073) (257,500) (117,803)
Investment in LLC 0 373,358 304,139 251,139 191,139
Real estate owned (REO), net 0 0 66,000 70,138 66,991
Prepaid expenses and other assets 13,416 6,332 11,835 15,025 25,406
-------------- -------------- --------------- -------------- ---------------
$69,964,506 $37,634,909 $33,121,959 $26,657,574 $16,753,700
============== ============== =============== ============== ===============
Liabilities and Partners Capital
December 31,
------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------- --------------- --------------- --------------- --------------
Liabilities:
Deferred interest $82,253 $213,529 $124,805 $83,066 $217,480
Note payable - bank 16,400,000 0 5,947,000 5,640,000 1,500,000
Accounts payable 30,000 29,413 2,500 3,355 20,625
Subscriptions to partnership
in applicant status 224,900 330,000 0 0 310,937
-------------- --------------- --------------- --------------- --------------
$16,737,153 $572,942 $6,074,305 $5,726,421 $2,049,042
-------------- --------------- --------------- --------------- --------------
Partners' capital
Limited partners subject to
redemption 53,180,209 37,030,017 27,025,331 20,914,721 14,693,293
General partners subject to
redemption 47,144 31,950 22,323 16,432 11,365
-------------- --------------- --------------- --------------- --------------
Total Partners' capital $53,227,353 $37,061,967 $27,047,654 $20,931,153 $14,704,658
-------------- --------------- --------------- --------------- --------------
$69,964,506 $37,634,909 $33,121,959 $26,657,574 $16,753,700
============== =============== =============== =============== ==============
Statement of Income
December 31,
--------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------- ------------- -------------- ------------- ---------------
Gross revenue $6,348,819 $4,426,245 $3,406,021 $2,629,457 $1,726,635
Expenses 2,056,601 1,482,051 1,127,439 820,937 493,110
-------------- ------------- -------------- ------------- ---------------
Income before interest credited to
partners in applicant status 4,292,218 2,944,194 2,278,582 1,808,520 1,233,525
Interest credited to partners in
applicant status 4,757 1,914 4,454 9,562 2,618
-------------- ------------- -------------- ------------- ---------------
Net income $4,287,461 $2,942,280 $2,274,128 $1,798,958 $1,230,907
============== ============= ============== ============= ===============
Net income to general partners (1%) $42,875 $29,423 $22,741 $17,990 $12,309
============== ============= ============== ============= ===============
Net income to limited partners (99%) $4,244,586 $2,912,857 $2,251,387 $1,780,968 $1,218,598
============== ============= ============== ============= ===============
Net income per $1,000 invested by Limited
Partners for entire period (annualized) -
where income is reinvested and compounded $86 $84 $84 $84 $84
============== ============= ============== ============= ===============
- where partner receives income in
monthly distributions $83 $81 $81 $81 $81
============== ============= ============== ============= ===============
The annualized yield for 1998 was 8.40%, for 1999 was 8.42% and for 2000 it was
8.58%. An average annualized yield since inception through December 31, 2000,
was 8.36%.
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On December 31, 2000, the Partnership was in the offering stage of its third
offering for $30,000,000. Contributed capital totaled $14,932,017 for the first
offering, $29,992,574 for the second offering and $5,058,559 for the third
offering, an aggregate of $49,983,150 (Limited Partners) as of December 31,
2000. Of this amount, $224,900 remained in applicant status. Accordingly,
together with prior two approved offerings of $45,000,000 the Partnership has
approval for an aggregate offering of $75,000,000 in Units.
At December 31, 2000, the Partnership's loans outstanding totaled $68,570,992.
The primary reason for an increase in loans outstanding from $25,304,989 in
1997, to $31,905,958 in 1998 to $35,693,147 in 1999 and to $68,570,992 to
December 31, 2000, was the additional capital admitted to the Partnership
through sale of Limited Partnership Units and reinvestment of Limited Partners
earnings. Additional Limited Partners' Capital contributions have totaled
$5,565,372, $5,100,458, $9,520,806 and $14,872,209 and the reinvestment of
earnings by Limited Partners who have elected to reinvest earnings, have totaled
$1,119,465, $1,440,687, $1,911,554 and $2,751,266, for the years ended December
31, 1997, December 31, 1998, December 31, 1999 and December 31, 2000,
respectively. Loans outstanding have also increased through the utilization of
the Partnership's line of credit. The effect of more outstanding loans raised
the interest earned on loans for the years ended December 31, 1997, 1998, 1999
and 2000, to $2,613,008, $3,376,293, $4,337,427 and $6,261,470 respectively.
Interest rates on loans ranged from 8.00% to 18.00%. The Partnership began
funding loans on April 14, 1993 and as of December 31, 2000, distributed
earnings at an average annualized yield of 8.36%.
Since the fall of 1999, mortgage interest rates have been rising due primarily
to economic forces and by the Federal Reserve raising its core interest rates.
However, in 2001 the Federal Reserve has reversed its policy towards higher
rates and is lowering its core interest rates. This will have the effect of
lowering interest rates in the marketplace. New loans will be originated at then
existing interest rates. 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 2001 over the next 12
months. Based upon the rates payable in connection with the existing loans, the
current and anticipated interest rates to be charged by the Partnership and the
General Partners' experience, the General Partners anticipate that the
annualized yield will range between eight and one half and nine and one half
percent (8.50% - 9.50%).
In 1995, the Partnership established a line of credit with a commercial bank
secured by its loans and since its inception has increased the limit from
$3,000,000 to $20,000,000. For the years ended December 31, 1997, 1998, 1999 and
2000, interest on Note Payable-Bank was $340,633, $513,566, $526,697 and
$887,546, respectively. For 1997, 1998, 1999 and 2000, the increase in interest
on notes payable-Bank has been attributed to a higher overall credit facility
utilization. This facility could again increase as the Partnership's 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 loans are not currently available.
Additionally, the loans made by the Partnership bear interest at a rate in
excess of the rate payable to the bank which extended the line of credit, 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 December
31, 2000, the balance was $16,400,000 and in accordance with the line of credit,
the Partnership paid all accrued interest as of that date. The zero balance, as
of December 31, 1999, was primarily due to a combination of significant loan
repayments and strong Partnership unit sales in the fourth quarter. The
Partnership used these strong cash flows to pay down its line of credit from
$4,452,000, as of September 30, 1999, to $0 on December 31, 1999.
The Partnership's income and expenses, accruals and delinquencies are within the
normal range of the General Partners' expectations, based upon their experience
in managing similar partnerships over the last twenty-three years. Mortgage
servicing fees increased from $189,692, to $295,052 to $359,464 and to $505,823
for the years ended December 31, 1997, 1998, 1999 and 2000. The mortgage
servicing fees increased primarily due to increase in the outstanding loan
portfolio. Asset Management fees increased from $24,966, to $31,651, to $42,215
and to $60,595 for the years ended December 31, 1997, 1998, 1999 and 2000,
respectively. The Asset Management fee increase was due primarily to the
increased Partner's capital, which the General Partners are managing. All other
Partnership expenses fluctuated within a narrow range commonly expected to
occur, except for interest on note payable - bank, which is discussed earlier in
the Management Discussion and Analysis of Financial Condition and Results of
Operations. Borrower's 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 loans. Currently, cash flow
exceeds Partnership expenses and earnings payout requirements. Excess cash flow
will be invested in new loan opportunities when available, used to reduce the
Partnership credit line or in other Partnership business.
The General Partners regularly review the loan portfolio, examining the status
of delinquencies, the underlying collateral securing these loans, borrowers
payment records, etc. Data from the local real estate market and of the national
and local economy are reviewed. Based upon this information and other data, loss
reserves are increased or decreased. In 1997, 1998, 1999 and 2000, the
Partnership made provisions for doubtful accounts of $139,804, $162,969,
$408,890 and $375,579, respectively. These provisions for doubtful accounts were
made primarily as a prudent action to guard against unidentified collection
losses. The provision for doubtful accounts as of December 31, 2000, of
$1,344,938 is considered by the General Partners to be 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.
The much publicized California energy crises has not only affected the hi-tech
and manufacturing industries, the professional and commercial businesses,
transportation and utilities sectors, but every household and individual as a
whole. The crisis, which means higher cost to the consumers, could adversely
affect the economy, employment and the Partnership's lending in its commercial
sector. On the real estate scene, The San Mateo Times February 22, 2001 issue,
reported that despite the energy crises and talk of recession, the median price
of a San Mateo County home soared to near record levels in January. "The median
price of a single-family home jumped 4 percent over December to $651,000,
nearing the record $653,000 of last May, during the spring price-soaring frenzy.
Realtors insist the hysteria of last spring is over and the market has
plateaued. But prices aren't reflecting that yet.
For example, the median price of a home in East Palo Alto soared 25 percent in
January to $736,000. Sure, median prices can be skewed by high-priced homes. But
East Palo Alto's median was well under $200,000 in January 1998, with
fixer-uppers in the low $100,000s. In addition, the January median price nearly
doubled in Half Moon Bay to $850,000.
Popular three-bedroom, two-bath homes settled in between $600,000 and $800,000.
Many two-bedroom, one-bath homes are selling for $500,000 and up.
Sales slowed in January, as usual, to 269 from 362 in December countywide. They
were off from 315 sales in January 2000.
"There are still plenty of buyers wanting to buy, and now there are more people
wanting to sell," said Denise Aquila, a real estate agent at ReMax in San
Carlos. Despite the stock market's recent tanking and many dot-com failures,
Aquila and other realtors see a strong market this year countywide with prices
holding their own. Part of the reason for the resilience is that entry-level
homes are in the $500,000 to $700,000 range countywide, and "they aren't making
any more of them," Aquila said. The County's median price for January climbed 21
percent over the same period last year. Although the article focuses on
single-family residences only, corresponding increase in values had similar
impact on commercial, industrial and apartment buildings in general.
To the Partnership, these sales statistics indicate a strong real estate market
that is beginning to slow down from the rapid appreciation that has occurred
over the last 3 years. The real estate market appears to be coming more into
balance with similar numbers of buyers and sellers which will allow buyers more
opportunity to negotiate and be selective in their real estate purchases.
The California energy crisis is a longer-term problem which the Partnership
cannot affect. Creative and pragmatic solutions will need to be developed by
Industry and Government so as not to stifle the business growth in California.
The crises which means higher cost to the consumers in the near term could
adversely affect the economy, employment and the Partnerships lending in its
residential and commercial loans by lowering the real estate values.
Bank discount rate fell from 6.00% in May 2000 to 4.5% in March 2001. The price
hike in real estate properties means more equity to the homeowners, which in
turn means more borrowing power at stable interest rates. Lower interest rate
means cut in cost of capital, improving profit margins and encouraging
expansion. It also means inducing consumer spending, sparking home sales and
mortgage refinancing. This all translates into more loan activity, which, of
course, is healthy for the Partnership's 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, 1997, December 31, 1998, December 31, 1999 and December 31,
2000, the Partnership made distributions of earnings to Limited Partners after
allocation of syndication costs of $495,480, $614,383, $826,291 and $1,244,959,
respectively. Distribution of Earnings to Limited Partners after allocation of
syndication costs for the years ended December 31, 1997, December 31, 1998,
December 31, 1999 and December 31, 2000, to Limited Partners' capital accounts
and not withdrawn was $1,119,465, $1,440,687, $1,911,554 and $2,751,266,
respectively. As of December 31, 1997, December 31, 1998, December 31, 1999 and
December 31, 2000, Limited Partners electing to withdraw earnings represented
30%, 30%, 31% and 32% respectively of the Limited Partners outstanding capital
accounts. These percentages are remaining relatively stable as new Partnership
unit sales continue to mirror previous sales of compounding and non-compounding
unit sales. Liquidations are not occurring disproportionately to compounding or
non-compounding accounts.
The Partnership also allows the Limited Partners to withdraw their capital
account subject to certain limitations (see liquidation provisions of
Partnership Agreement). Once a Limited Partner's 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 five years after a Limited Partner's investment 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
during the offering period. The General Partners expect to see increasing
numbers of Limited Partner withdrawals during a limited Partner's 5th through
10th anniversary, at which time the bulk of those Limited Partners who have
sought withdrawal have been liquidated. Since the five-year hold period for most
of the investors has yet to expire, as of December 31, 2000, many Limited
Partners may not as yet avail themselves of this provision for liquidation.
Earnings and capital liquidations including early withdrawals since inception,
1993 through December 31, 2000 were:
1993 1994 1995 1996 1997 1998 1999 2000
---------- ----------- ----------- ---------- ----------- ----------- ------------- --------------
Earnings
Liquidation $46,855 $165,814 $303,477 $418,380 $495,480 $614,383 $826,291 $1,244,959
Capital
Liquidation 0 0 $5,640 $146,755 $132,619 $257,344 $592,357 $762,060
---------- ----------- ----------- ---------- ----------- ----------- ------------- --------------
Total $46,855 $165,814 $309,117 $565,135 $628,099 $871,727 $1,418,648 $2,007,019
========== =========== =========== ========== =========== =========== ============= ==============
Additionally, Limited Partners may withdraw over a period of one year subject to
certain limitations and penalties. For the years ended December 31, 1997,
December 31, 1998, December 31, 1999 and December 31, 2000, $132,619, $244,213,
$411,838 and $309,643, respectively were liquidated subject to the 10% penalty
for early withdrawal. This represents 0.63%, 0.90%, 1.11% and .58% of the
Limited Partners ending capital for the years ended December 31, 1997, 1998,
1999 and 2000, respectively. 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 the
Partnership is experiencing in withdrawals by Limited Partners electing a one
year liquidation program represents a small percentage of Limited Partner
capital as of December 31, 1997, December 31, 1998, December 31, 1999 and
December 31, 2000, respectively, and is expected by the General Partners to
commonly occur at these levels.
The Year 2000 was considered by most to be a challenge for the entire world with
respect to the conversion of existing computerized operations. The Partnership
relied on Redwood Mortgage Corp., third parties and various software vendors for
its hardware and software needs. Since year 2000 has come and gone, we have not
experienced any computer hardware breakdowns. We assume that our testing and
upgrading of computer hardware prior to year 2000 identified all hardware areas
of concern. Computer software programs are all operational with only minor
problems being experienced with some programs. These problems have been
addressed by the appropriate software vendors or software programmers. All
annual computerized functions have been run and testing of the operations has
taken place. We did not experience any significant problems.
The costs of updating our computer systems were substantially borne by the
non-affiliated software vendors and the in house system conversion costs to the
partnership were marginal.
Year 2000 issues did not appear to have affected, in any significant manner, any
industries or businesses in the marketplace in which the Partnership places its
loans. We believe that year 2000 issues were a non-event and will have little,
if any, future effect on the Partnership, its affiliates or the people and
businesses with which it associates.
With this report we hereby conclude our discussion on the Y2K issue.
On February 7, 2000, the General Partners, pursuant to Section 12.4 (d) of the
Partnership Agreement, admitted Redwood Mortgage Corp., a California corpora-
tion, as a General Partner of the Partnership. Redwood Mortgage Corp. is an
affiliate of the General Partners. Redwood Mortgage Corp. was incorporated in
1978. Its principal stockholder is the Redwood Group, Ltd., whose principal
stockholder is D. Russell Burwell, a General Partner of the Partnership. Redwood
Mortgage Corp. is a licensed real estate broker and has been engaged primarily
in the business of arranging and servicing the Partnership's loans since its
inception. The General Partners believe that the addition of Redwood Mortgage
Corp as a General Partner strengthen Partnership's management team.
After 25 years of active participation in the mortgage business, D. Russell
Burwell, our founder and a General Partner of the Partnership has decided to
retire effective September 30, 2001. "Russ" has enjoyed a long and successful
career. His original business model, upon which our Partnership has its roots,
has withstood the test of time through varying economic cycles. Collectively,
the various Redwood Mortgage Investors Partnerships (I-VIII) have grown from an
idea to over $110,000,000 in assets and produced excellent results for the
Limited Partners. Through December 31, 2000 and under Russ' stewardship, Redwood
Mortgage Investor's VIII raised $49,983,150 in Limited Partner Capital
contributions and at December 31, 2000 had $53,180,209 in remaining Limited
Partner Capital.
Over the last few years, Russ has been passing along his duties and
responsibilities to the remaining General Partners. The remaining General
Partners are Mr. Michael Burwell, Gymno Corporation and Redwood Mortgage Corp.,
both California Corporations. Mr. Michael Burwell has been a General Partner of
Redwood Mortgage Investors VIII since its inception and has been employed by
Redwood Mortgage Corp, an affiliate of the Partnership, since 1979. The
Partnership through the remaining General Partners and the employees of its
affiliate Redwood Mortgage Corp., are well prepared for Russ' departure and look
forward to emulating the steady consistent returns that the Limited Partners
have enjoyed during Russ' tenure.
Mr. D. Russell Burwell is providing this notification pursuant to Article 8
Section 8.02 of the Limited Partnership Agreement. The remaining General
Partners have elected to continue the business of the Partnership as described
in Article 9 Section 9.01(d) of the Limited Partnership Agreement.
The General Partners have determined that for purposes of establishing a value
for reporting purposes, including brokerage and trustee account statements, the
estimated value of the limited partnership interests on a per unit basis is
equal to the capital account balance of each investor in the Partnership. Each
investor's capital account balance is set forth periodically on the Partnership
account statement provided to investors. The amount of Partnership earnings each
investor is entitled to receive is determined by the ratio that each investor's
capital account bears to the total amount of all investor capital accounts then
outstanding. The capital account balance of each investor should be included on
any NASD member client account statement in providing a per unit estimated value
of the client's investment in the Partnership in accordance with NASD Rule 2340.
While the General Partners have set an estimated value for the Partnership
units, such determination may not be representative of the ultimate price
realized by an Investor for such units upon sale. No public trading market
exists for the Partnership's units and none is likely to develop. Thus, the
ability of an investor to liquidate his or her investment is limited subject to
certain liquidation rights provided by the Partnership which may include early
withdrawal penalties (See the section of the Prospectus entitled "Risk Factors -
Purchase of Units is a long term investment").
Item 8 - Financial Statements and Supplementary Data
Redwood Mortgage Investors VIII, a California Limited Partnership's list of
Financial Statements and Financial Statement schedules:
A-Financial Statements
The following financial statements of Redwood Mortgage Investors VIII are
included in Item 8:
- Independent Auditors' Report
- Balance Sheets - December 31, 2000, and December 31, 1999 -
Statements of Income for the three years ended December 31, 2000 -
Statements of Partners' Capital for the three years ended December
31, 2000 - Statements of Cash Flows for the three years ended
December 31, 2000 - Notes to Financial Statements
B-Financial Statement Schedules
The following financial statement schedules of Redwood Mortgage Inventors VIII
are included in Item 8.
- Schedule II - Valuation and Qualifying Accounts
- Schedule IV - Loans on Real Estate
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
FINANCIAL STATEMENTS
DECEMBER 31, 2000
(With Auditors' Report Thereon)
ARMANINO McKENNA LLP
CERTIFIED PUBLIC ACCOUNTANTS
1855 Olympic Boulevard, Suite 225
Walnut Creek, CA 94596
(925) 939-8500
INDEPENDENT AUDITORS' REPORT
THE PARTNERS
REDWOOD MORTGAGE INVESTORS VIII
REDWOOD CITY, CALIFORNIA
We have audited the accompanying balance sheet of REDWOOD MORTGAGE INVESTORS
VIII (A California Limited Partnership) and the related statements of income,
changes in partners' capital and cash flows for the year ended December 31,
2000. Our audit also included the financial statement schedule listed in the
Index at Item 8. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements as of December 31, 1999
and the two years then ended, were audited by other auditors whose report dated
March 15, 2000 expressed an unqualified opinion on those financial statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of REDWOOD MORTGAGE INVESTORS VIII
as of December 31, 2000, and the results of its operations and cash flows for
the year ended December 31, 2000 in conformity with accounting principals
generally accepted in the United States of America. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein..
/s/ ARMANINO McKENNA LLP
Walnut Creek, California
February 23, 2001
Caporicci, Cropper & Larson, LLP
CERTIFIED PUBLIC ACCOUNTANTS
1575 Treat Blvd, Suite 208
Walnut Creek, CA 94598
(925) 932-3860
INDEPENDENT AUDITOR'S REPORT
THE PARTNERS
REDWOOD MORTGAGE INVESTORS VIII
We have audited the financial statements and related schedules of REDWOOD
MORTGAGE INVESTORS VIII (A California Limited Partnership) listed in Item 8 on
form 10-K including balance sheets as of December 31, 1999 and 1998 and the
statements of income, changes in partners' capital and cash flows for the three
years ended December 31, 1999. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of REDWOOD MORTGAGE INVESTORS VIII
as of December 31, 1999 and 1998, and the results of its operations and cash
flows for the three years ended December 31, 1999, in conformity with generally
accepted accounting principles. Further, it is our opinion that the schedules
referred to above present fairly the information set forth therein in compliance
with the applicable accounting regulations of the Securities and Exchange
Commission.
/s/ A. Bruce Cropper
Caporicci, Cropper & Larson, LLP
Walnut Creek, California
March 15, 2000
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
2000 1999
--------------- --------------
Cash $1,459,725 $1,602,568
--------------- --------------
Accounts receivable:
Loans, secured by deeds of trust 68,570,992 35,693,148
Accrued Interest on Loans 1,039,469 711,521
Advances on Loans 172,004 33,251
Accounts receivable, unsecured 53,838 49,090
--------------- --------------
69,836,303 36,487,010
Less allowance for doubtful accounts 1,344,938 834,359
-------------- --------------
68,491,365 35,652,651
--------------- --------------
Investment in limited liability corporation, at cost
which approximates market 0 373,358
Prepaid expense-deferred loan fee 13,416 6,332
-------------- --------------
Total assets $69,964,506 $37,634,909
=============== ==============
The accompanying notes are an integral part of the financial statements
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
LIABILITIES AND PARTNERS' CAPITAL
2000 1999
------------- -------------
Liabilities:
Accounts payable and accrued expenses $30,000 $29,413
Note payable - bank line of credit 16,400,000 0
Deferred interest income 82,253 213,529
-------------- -------------
Total liabilities 16,512,253 242,942
-------------- -------------
Investors in applicant status 224,900 330,000
-------------- -------------
Partners' capital:
Limited partners' capital, subject to
redemption Net of unallocated syndication
costs of $310,438 and $342,334 for 2000
and 1999, respectively: and formation loan
receivable of $3,010,871 and $2,158,674
for 2000 and 1999, respectively 53,180,209 37,030,017
General partners' capital, net of unallocated
syndication costs of $3,136 and $3,458 for
2000 and 1999, respectively 47,144 31,950
-------------- ------------
Total partners' capital 53,227,353 37,061,967
-------------- ------------
Total liabilities and partners' capital $69,964,506 $37,634,909
============== ============
The accompanying notes are an integral part of the financial statements.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
YEARS ENDED DECEMBER 31,
----------------------------------------------------
2000 1999 1998
Revenues:
Interest on Loans $6,261,470 $4,337,427 $3,376,293
Interest on bank deposits 11,154 8,197 8,946
Late charges 65,520 27,859 19,384
Miscellaneous 10,675 52,762 1,398
-------------- -------------- ---------------
6,348,819 4,426,245 3,406,021
-------------- -------------- ---------------
Expenses:
Mortgage servicing fees 505,823 359,464 295,052
Interest on note payable - bank 887,546 526,697 513,566
Amortization of loan origination fees 11,667 10,503 11,415
Provision for doubtful accounts and losses on
real estate acquired through foreclosure 375,579 408,890 162,969
Asset management fee - General Partner 60,595 42,215 31,651
Amortization of organization costs 0 0 1,875
Clerical costs through Redwood Mortgage Corp. 113,580 85,171 67,453
Professional services 64,356 31,814 27,462
Printing, supplies and postage 18,249 7,102 7,089
Other 19,206 10,195 8,907
-------------- -------------- ---------------
2,056,601 1,482,051 1,127,439
-------------- -------------- ---------------
Income before interest credited to partners
in applicant status 4,292,218 2,944,194 2,278,582
Interest credited to partners in applicant status 4,757 1,914 4,454
-------------- -------------- ---------------
Net income $4,287,461 $2,942,280 $2,274,128
============== ============== ===============
Net income: To General Partners (1%) $42,875 $29,423 $22,741
To Limited Partners (99%) 4,244,586 2,912,857 2,251,387
-------------- -------------- ---------------
Total - net income $4,287,461 $2,942,280 $2,274,128
============== ============== ===============
Net income per $1,000 invested by Limited Partners for entire period:
- -where income is reinvested and compounded $86 $84 $84
============== ============== ===============
- -where partner receives income in monthly distributions $83 $81 $81
============== ============== ===============
The accompanying notes are an integral part of the financial statements.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
PARTNERS' CAPITAL
--------------------------------------------------------------------
LIMITED PARTNERS' CAPITAL
--------------------------------------------------------------------
Capital
Partners In Account Unallocated Formation
Applicant Limited Syndication Loan
Status Partners Costs Receivable Total
------------- --------------- --------------- --------------- --------------
Balances at January 1, 1998 $0 $22,733,408 $(431,994) $(1,386,693) $20,914,721
Contributions on application 5,105,559 0 0 0 0
Formation loan increases 0 0 0 (403,518) (403,518)
Formation loan payments 0 0 0 133,580 133,580
Interest credited to partners
in applicant status 4,454 0 0 0 0
Upon admission to partnership:
Interest withdrawn (1,553) 0 0 0 0
Transfers to partners' capital (5,108,460) 5,103,359 0 0 5,103,359
Net income 0 2,251,387 0 0 2,251,387
Syndication costs incurred 0 0 (126,453) 0 (126,453)
Allocation of syndication costs 0 (196,317) 196,317 0 0
Partners' withdrawals 0 (847,661) 0 0 (847,661)
Early withdrawal penalties 0 (24,066) 8,255 15,727 (84)
------------- --------------- --------------- --------------- --------------
Balances at December 31, 1998 0 29,020,110 (353,875) (1,640,904) 27,025,331
Contributions on application 9,530,318 0 0 0 0
Formation loan increases 0 0 0 (708,461) (708,461)
Formation loan payments 0 0 0 164,731 164,731
Interest credited to partners
in applicant status 1,914 0 0 0 0
Upon admission to partnership:
Interest withdrawn (1,002) 0 0 0 0
Transfers to partners' capital (9,201,230) 9,191,719 0 0 9,191,719
Net Income 0 2,912,857 0 0 2,912,857
Syndication costs incurred 0 0 (177,099) 0 (177,099)
Allocation of syndication costs 0 (175,012) 175,012 0 0
Partners' withdrawals 0 (1,378,924) 0 0 (1,378,924)
Early withdrawal penalties 0 (39,725) 13,628 25,960 (137)
------------- --------------- --------------- --------------- --------------
Balances at December 31, 1999 330,000 39,531,025 (342,334) (2,158,674) 37,030,017
Contributions on application 14,887,081 0 0 0 0
Formation loan increases 0 0 0 (1,102,196) (1,102,196)
Formation loan payments 0 0 0 230,116 230,116
Interest credited to partners
in applicant status 4,757 0 0 0 0
Upon admission to partnership:
Interest withdrawn (779) 0 0 0 0
Transfers to partners' capital (14,996,159) 14,981,287 0 0 14,981,287
Net income 0 4,244,586 0 0 4,244,586
Syndication costs incurred 0 0 (266,903) 0 (226,903)
Allocation of syndication costs 0 (248,361) 248,361 0 0
Partners' withdrawals 0 (1,976,594) 0 0 (1,976,594)
Early withdrawal penalties 0 (30,425) 10,438 19,883 (104)
------------- --------------- --------------- --------------- --------------
Balances at December 31, 2000 $224,900 $56,501,518 $(310,438) $(3,010,871) $53,180,209
============= =============== =============== =============== ==============
The accompanying notes are an integral part of the financial statements
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
PARTNERS' CAPITAL
-------------------------------------------------------------------------
GENERAL PARTNERS' CAPITAL
-------------------------------------------------------------------------
Capital Unallocated Total
Account Syndication Total Partners'
General Costs Capital
Partners
---------------- -------------- ------------- ----------------
Balances at January 11, 1998 $20,796 $(4,364) $16,432 $20,931,153
Contributions on application 0 0 0 0
Formation loan increases 0 0 0 (403,518)
Formation loan payments 0 0 0 133,580
Interest credited to partners in applicant 0 0 0 0
status
Upon admission to partnership:
Interest withdrawn 0 0 0 0
Transfers to partners' capital 5,101 0 5,101 5,108,460
Net income 22,741 0 22,741 2,274,128
Syndication costs incurred 0 (1,277) (1,277) (127,730)
Allocation of syndication costs (1,983) 1,983 0 0
Partners' withdrawals (20,758) 0 (20,758) (868,419)
Early withdrawal penalties 0 84 84 0
---------------- -------------- ------------- ----------------
Balances at December 31, 1998 25,897 (3,574) 22,323 27,047,654
Contributions on application 0 0 0 0
Formation loan increases 0 0 0 (708,461)
Formation loan payments 0 0 0 164,731
Interest credited to partners in applicant 0 0 0 0
status
Upon admission to partnership:
Interest withdrawn 0 0 0 0
Transfers to partners' capital 9,511 0 9,511 9,201,230
Net income 29,423 0 29,423 2,942,280
Syndication costs incurred 0 (1,789) (1,789) (178,888)
Allocation of syndication costs (1,768) 1,768 0 0
Partners' withdrawals (27,655) 0 (27,655) (1,406,579)
Early withdrawal penalties 0 137 137 0
---------------- -------------- ------------- ----------------
Balances at December 31, 1999 35,408 (3,458) 31,950 37,061,967
Contributions on application 0 0 0 0
Formation loan increases 0 0 0 (1,102,196)
Formation loan payments 0 0 0 230,116
Interest credited to partners in applicant 0 0 0 0
status
Upon admission to partnership:
Interest withdrawn 0 0 0 0
Transfers to partners' capital 14,872 0 14,872 14,996,159
Net income 42,875 0 42,875 4,287,461
Syndication costs incurred 0 (2,291) (2,291) (229,194)
Allocation of syndication costs (2,509) 2,509 0 0
Partners' withdrawals (40,366) 0 (40,366) (2,016,960)
Early withdrawal penalties 0 104 104 0
---------------- -------------- ------------- ----------------
Balances at December 31, 2000 $50,280 $(3,136) $47,144 $53,227,353
================ ============== ============= ================
The accompanying notes are an integral part of the financial statements
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
2000 1999 1998
--------------- --------------- --------------
Cash flows from operating activities:
Net income $4,287,461 $2,942,280 $2,274,128
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of organization costs 0 0 1,875
Provision for doubtful accounts. 510,579 420,286 156,573
Provision for losses (gains) on real estate held for sale 0 (11,396) 6,396
Change in operating asset and liabilities:
Accounts payable 587 26,913 (855)
Accrued interest & advances (466,701) (74,209) (122,783)
Amount due from related companies (4,748) (241) 2,999
Deferred loan fee 6,332 5,503 (1,684)
Deferred interest income (131,276) 88,724 41,739
--------------- --------------- --------------
Net cash provided by operating activities 4,202,234 3,397,860 2,358,388
--------------- --------------- --------------
Cash flows from investing activities:
Principal collected on Loans 16,411,445 20,243,729 14,262,838
Loans made (49,289,289) (24,030,919) (20,863,807)
Proceeds from real estate held for sale 0 79,282 0
Payments for real estate held for sale 0 (1,886) (2,258)
Dispositions of (Additions to) Limited Liability Corporation 359,942 (69,219) (53,000)
Accounts receivables, unsecured - (disbursements) receipts 0 0 13,995
--------------- --------------- --------------
Net cash used in investing activities: (32,517,902) (3,779,013) (6,642,232)
--------------- --------------- --------------
Cash flows from financing activities
Increase (decrease) in note payable-bank, net 16,400,000 (5,947,000) 307,000
Contributions by partner applicants 14,887,081 9,530,318 5,105,559
Interest credited to partners in applicant status 4,757 1,914 4,454
Interest withdrawn by partners in applicant status (779) (1,002) (1,553)
Partners withdrawals (2,016,960) (1,406,579) (868,419)
Syndication costs incurred (229,194) (178,888) (127,730)
Formation loan increases (1,102,196) (708,461) (403,518)
Formation loan collections 230,116 164,731 133,580
--------------- --------------- --------------
Net cash used in financing activities 28,172,825 1,455,033 4,149,373
--------------- --------------- --------------
Net increase (decrease) in cash and cash equivalents (142,843) 1,073,880 (134,471)
Cash - beginning of period 1,602,568 528,688 663,159
--------------- --------------- --------------
Cash - end of period 1,459,725 $1,602,568 $528,688
=============== =============== ==============
Cash paid for interest $887,546 $526,697 $513,566
The accompanying notes are an integral part of these financial statements.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE 1 - ORGANIZATION AND GENERAL
Redwood Mortgage Investors VIII, a California Limited Partnership (the
"Partnership"), was organized in 1993 of which D. Russell Burwell, Michael R.
Burwell, Gymno Corporation and Redwood Mortgage Corp., both California
Corporations, are the 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. Loans are being arranged and
serviced by Redwood Mortgage Corp., an affiliate of the General Partners. At
December 31, 2000, the Partnership was in the offering stage, wherein
contributed capital totaled $49,758,250 in limited partner contributions of an
approved aggregate offering of $75,000,000, in Units. As of December 31, 2000,
$224,900 remained in applicant status, and total Units sold were in the
aggregate of $49,983,150.
A minimum of $250,000 and a maximum of $15,000,000 in Units were initially
offered through qualified broker-dealers. This initial offering was closed in
October 1997. In December 1996, the Partnership commenced a second offering of
an additional $30,000,000 in Units. This offering was closed on August 30, 2000
and on August 31, 2000, the partnership commenced a third offering for an
additional 30,000,000 Units ($30,000,000). As loans are identified, partners are
transferred from applicant status to admitted partners participating in loan
operations. Each month's income is distributed to partners based upon their
proportionate share of partners' capital. Some partners have elected to withdraw
income on a monthly, quarterly or annual basis.
A. Sales Commissions - Formation Loan
Sales commissions are not paid directly by the Partnership out of the offering
proceeds. Instead, the Partnership loans to Redwood Mortgage Corp., 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 totaled
$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 commenced on
January 1, 1997, following the year the initial offering closed, which was in
1996.
The Formation Loan relating to the second offering ($30,000,000) totaled
$2,271,916 at December 31, 2000, which was 6.7% of the limited partners
contributions of $29,992,574. 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 elect to reinvest earnings, thus generating 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 Corp., 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 beginning December
31, 1997. Upon completion of the offering, the balance will be repaid in ten
equal annual installments.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
The following summarizes Formation Loan transactions to December 31, 2000:
Initial Subsequent Current
Offering of Offering of Offering of
$15,000,000 $30,000,000 $30,000,000 Total
--------------- -------------- -------------- ----------------
Limited Partner contributions $14,932,017 $29,992,574 $4,833,659 $49,758,250
=============== ============== ============== ================
Formation Loan made $1,074,840 $2,271,916 $378,154 $3,724,910
Payments to date (369,342) (267,043) 0 (636,385)
Early withdrawal penalties applied (77,654) 0 0 (77,654)
--------------- -------------- -------------- ----------------
Balance December 31, 2000 $627,844 $2,004,873 $378,154 $3,010,871
=============== ============== ============== ================
Percent loaned of Partners'
Contributions 7.2% 7.6% 7.8% 7.5%
=============== ============== ============== ================
The Formation Loan, which is receivable from Redwood Mortgage Corp., an
affiliate of the General Partners, has been deducted from Limited Partners'
Capital in the balance sheet. As amounts are collected from Redwood Mortgage
Corp., the deduction from capital will be reduced.
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 December 31, 2000, organization costs of $12,500 and syndication costs
of $1,396,843 had been incurred by the Partnership with the following
distribution:
Syndication Organization
Costs Costs Total
------------ ----------- ----------
Costs incurred 1,396,843 $12,500 $1,409,343
Early withdrawal
penalties applied (42,097) 0 (42,097)
Allocated and
amortized to date (1,041,172) (12,500) (1,053,672)
------------ ----------- -----------
December 31, 2000 balance $313,574 $0 $313,574
============ =========== ===========
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 totaled $582,365 ($569,865
syndication costs plus $12,500 organization expense) or 3.90%.
As of December 31, 1999 syndication costs attributable to the subsequent
offering #2 ($30,000,000) totaled $597,784, (2.0% of contributions), with the
costs of the offering being greater at the initial stages due to professional
and filing fees related to formulating the offering documents.
In August 2000 the current offering #3 began incurring syndication costs. As of
December 31, 2000 the offering had incurred $229,195 (4.5% of contributions),
with the costs of the offering being greater at the initial stages due to
professional and filing fees related to formulating the offering documents. 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.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
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 loans, and
the valuation of real estate acquired through foreclosure. Actual results could
differ significantly from these estimates.
C. Loans, Secured by Deeds of Trust
The Partnership has both the intent and ability to hold the loans to maturity,
i.e., held for long-term investment. Therefore they are 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 loan, 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 December 31, 2000, 1999, and 1998, there were no loans 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 loan to
appraised value of security at the time the losses were consummated was 54.88%.
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 property's estimated fair
value, less estimated costs to sell. At December 31, 2000, there were no
properties acquired by the Partnership as real estate owned (REO).
F. 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.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
G. 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 were 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.
H. Allowance for Doubtful Accounts
Loans and the related accrued interest, fees, and advances are analyzed on a
continuous basis for recoverability. Delinquencies are identified and followed
as part of the loan system. A provision is made for bad debt 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 loans, other loans,
accrued interest and advances on loans, and other accounts receivable
(unsecured). The composition of the allowance for doubtful accounts as of
December 31, 2000, and 1999 was as follows:
December 31,
-----------------------------------
2000 1999
---------------- --------------
Impaired loans $0 $0
Unspecified loans 1,291,151 795,268
Amounts receivable, unsecured 53,787 39,091
---------------- --------------
$1,344,938 $834,359
================ ==============
I. 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 held 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.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
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 loans in an amount to 12% of the loans until 6 months
after the termination date of the offering. Thereafter, loan brokerage
commissions will be limited to an amount not to exceed 4% of the total
Partnership assets per year. The loan brokerage commissions are paid by the
borrowers, and thus, are not an expense of the Partnership. In 2000 and 1999,
loan brokerage commissions paid by the borrowers were $1,877,921 and $682,118,
respectively.
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 Corp., 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 $505,823, $359,464 and $295,052
were incurred for the year ended December 31, 2000, 1999 and 1998, respectively.
C. Asset Management Fee
The General Partners receive monthly fees for managing the Partnership's loan
portfolio and operations up to 1/32 of 1% of the "net asset value" (3/8 of 1%
annual). Management fees of $60,595, $42,215 and $31,651 were incurred for years
2000, 1999 and 1998, respectively.
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 and losses are 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 Corp.) are reimbursed
by the Partnership for all operating expenses actually incurred by them on
behalf of the Partnership, including without limitation, out-of-pocket general
and administration expenses of the Partnership, 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, 2000 a General Partner, Gymno Corporation, had
contributed $49,971, as capital in accordance with Section 4.02(a) of the
Partnership Agreement.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
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 Partnership's loan portfolio.
During the periods ending December 31, 2000, 1999 and 1998, interest totaling
$4,757, $1,914 and $4,454, respectively, was credited to partners in applicant
status. As loans were made and partners were transferred to regular status to
begin sharing in income from loans secured by deeds of trust, the interest
credited was either paid to the investors or transferred to partners' capital
along with the original investment.
B. Term of the Partnership
The term of the Partnership is approximately 40 years, unless sooner terminated
as provided. The provisions provide for no capital withdrawal for the first five
years, 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
At subscription, investors elect either to receive monthly, quarterly or annual
distributions of earnings allocations, or to allow earnings to compound. Subject
to certain limitations, a compounding investor may subsequently change his
election, but an investor's election to have cash distributions is irrevocable.
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.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
E. Liquidity, Capital Withdrawals and Early Withdrawals
There are substantial restrictions on transferability of Units and accordingly
an investment in the Partnership is non-liquid. 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.
After five years from the date of purchase of the Units, Limited Partners have
the right to withdraw from the Partnership on an installment basis. Generally
this is done over a five-year period in twenty (20) quarterly installments. Once
a Limited Partner has been in the Partnership for the minimum five-year period,
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 may liquidate all or part of a Limited Partner's
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. This withdrawal is subject to a 10% early withdrawal penalty applicable
to any sums withdrawn prior to the time when such sums could have been withdrawn
without penalty.
The Partnership will not establish a reserve from which to fund withdrawals and,
accordingly, the Partnership's capacity to return a Limited Partner's capital 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 expiring June 30, 2002, of up to
$20,000,000 at .25% over prime secured by its Loan portfolio. The note payable
balances were $16,400,000 and $0 at December 31, 2000, and 1999, respectively.
The interest rate was 9.75% at December 31, 2000, (9.50% prime plus .25%).
NOTE 7 - INVESTMENT IN LIMITED LIABILITY CORPORATION
As a result of acquiring real property through foreclosure, the Partnership
contributed its interest (principally land) to a Limited Liability Corporation
(LLC), which was owned 100% by the Partnership. During the year ended December
31, 2000, the LLC completed construction and sold the property for a gain of
$140,895.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE 8 - INCOME TAXES
The following reflects reconciliation from net assets (Partners' Capital)
reflected in the financial statements to the tax basis of those net assets:
December 31,
----------------------------------
2000 1999
--------------- ---------------
Net Assets - partners' capital
per financial statements $53,227,353 $37,061,967
Non-amortized syndication costs 313,574 345,792
Allowance for doubtful accounts 1,344,938 834,359
Formation loans receivable 3,010,871 2,158,674
--------------- ---------------
Net assets tax basis $57,896,736 $40,400,792
=============== ===============
In 2000 and 1999, approximately 54% and 58% of taxable income was allocated to
tax exempt organizations, i.e., retirement plans, respectively. Such plans do
not have to file income tax returns unless their "unrelated business income"
exceeds $1,000. Applicable amounts become taxable when distribution is made to
participants.
NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
financial instruments:
(a) Cash and Cash Equivalents. The carrying amount equals fair value. All
amounts, including interest bearing, are subject to immediate withdrawal.
(b) Loans (see note 2(c)) carrying value was $68,570,992 at December 31, 2000.
The fair value of these investments of $69,150,298 was 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.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE 10- ASSET CONCENTRATIONS AND CHARACTERISTICS
The loans are secured by recorded deeds of trust. At December 31, 2000, there
were 68 loans outstanding with the following characteristics:
Number of loans outstanding 68
Total loans outstanding $68,570,992
Average loan outstanding $1,008,397
Average loan as percent of total 1.47%
Average loan as percent of Partners' Capital 1.89%
Largest loan outstanding 4,000,000
Largest loan as percent of total 5.83%
Largest loan as percent of Partners' Capital 7.51%
Number of counties where security is located (all California) 12
Largest percentage of loans in one county 41.72%
Average loan to appraised value of security
at time loan was consummated 54.88%
Number of loans in foreclosure status 0
Amount of loans in foreclosure 0
The following loan categories were held at December 31, 2000 and 1999:
2000 1999
-------------- -------------
First Trust Deeds $37,806,032 $19,388,394
Second Trust Deeds 29,799,535 16,082,803
Third Trust Deeds 965,425 221,951
-------------- -------------
Total loans 68,570,992 35,693,148
Prior liens due other lenders 37,584,916 23,719,420
-------------- -------------
Total debt $106,155,908 $59,412,568
============== =============
Appraised property value at time of loan $193,420,663 $97,556,330
============== =============
Total investments as a percent of appraisals 54.88% 60.90%
============== =============
Investments by Type of Property
Owner occupied homes $9,753,617 $7,336,276
Non-Owner occupied homes 16,471,074 10,957,622
Apartments 8,458,610 302,797
Commercial 33,887,691 17,096,453
------------- -------------
$68,570,992 $35,693,148
============= =============
The interest rates on the loans range from 8.00% to 18.00% at December 31, 2000.
REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
Scheduled maturity dates of loans as of December 31, 2000 are as follows:
Year Ending
December 31, Amount
---------------- -- -----------------
2001 $42,414,963
2002 14,457,279
2003 5,300,000
2004 1,556,762
2005 1,694,680
Thereafter 3,147,308
-----------------
$68,570,992
=================
The scheduled maturities for 2001 include approximately $4,706,644 (6.7%) in
loans, which are past maturity at December 31, 2000. Interest payment on only
three of these loans was delinquent.
The cash balance at December 31, 2000 of $1,459,725 (2.1%) was in one bank with
interest bearing balances totaling $1,204,161. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $1,359,725. This bank is the same
financial institution that has provided the Partnership with the $20,000,000
limit line of credit (LOC). At December 31, 2000, the LOC had a balance of
$16,400,000. As and when deposits in the Partnership's bank accounts increase
significantly beyond the insured limit, the funds are either placed on new loans
or used to pay-down the line of credit balance.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
REDWOOD MORTGAGE INVESTORS VIII
Column A Column B Column C Column D Column E
Description Balance Additions Deductions Balance at
--------------------------------------
beginning of (1) (2) Describe End of Period
of period Charged to Charged
(credited) to
Costs & Expenses Other accounts -
Describe
Year Ended
12/31/00
Deducted from
Asset accounts:
Allowance for
Doubtful accts $834,359 $510,579 0 0 $1,344,938
Cumulative
write-down of
Real Estate
held for sale
(REO) 0 0 0 0 0
----------------- -------------------- ------------------ ---------------- ----------------
Totals $834,359 $510,579 0 0 $1,344,938
================= ==================== ================== ================ ================
SCHEDULE IV
LOANS ON REAL ESTATE.
RULE 12-29 MORTGAGE LOANS ON REAL ESTATE
Col. A Col. B Col. C Col. D Col. E Col. F Col. G Col. H Col.I Col. J
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Descp. Int. Final Periodic Prior Liens Face Amt. of Carrying Principal Type Geographic
Rate Maturity Payment Terms Loans (original amount of Loans amount of of County
% Date amount) Loans subject Lien Location
to Delinquency,
Principal or
Interest
=========== ========= =========== ============== ================ ================= ================ =============== ====== ========
Comm 10.00 12/01/98 $1,689.33 $0.00 $192,500.00 $189,318.30 $38,854.59 1st Alameda
Comm 12.00 02/01/99 $5,131.14 $0.00 $503,457.45 $503,457.45 $99,201.76 1st S Clara
Comm 12.00 07/01/00 $1,387.44 $0.00 $130,000.00 $126,934.22 $0.00 1st Fresno
Comm 12.00 03/01/01 $789.92 $0.00 $75,000.00 $71,805.07 $0.00 1st Sn Mateo
Res 11.00 04/01/06 $1,039.81 $0.00 $105,000.00 $101,841.61 $0.00 1st San Fran
Comm 12.00 03/01/01 $684.60 $74,754.00 $65,000.00 $62,603.42 $0.00 2nd Sn Mateo
Comm 12.00 02/01/99 $186.00 $468,000 $18,000.00 $18,000.00 $5,169.25 2nd S Clara
Comm 14.00 04/01/06 $12,160.05 $0.00 $700,000.00 $546,163.65 $0.00 1st San Fran
Comm 10.75 04/01/00 $447.92 $121,264.00 $50,000.00 $50,000.00 $0.00 2nd Rivrside
Comm 11.75 05/01/02 $3,828.76 $0.00 $370,000.00 $246,127.91 $0.00 1st Sn Mateo
Res 12.00 06/01/99 $500.00 $262,342.00 $50,000.00 $50,000.00 $0.00 2nd Alameda
Res 10.00 07/01/00 $5,068.88 $0.00 $579,300.00 $579,300.00 $0.00 1st San Fran
Comm 12.00 10/01/02 $1,562.50 $0.00 $150,000.00 $96,397.88 $0.00 1st San Fran
Res 11.00 04/01/99 $11,661.04 $579,300.00 $1,320,000.00 $1,320,000.00 $0.00 2nd San Fran
Comm 11.00 10/01/07 $6,190.11 $0.00 $650,000.00 $639,520.54 $0.00 1st San Fran
Res 8.00 11/01/27 $1,834.42 $0.00 $250,000.00 $242,349.29 $0.00 1st Sn Mateo
Land 11.00 09/01/99 $3,354.17 $0.00 $350,000.00 $350,000.00 $0.00 1st Stanisls
Land 11.00 12/01/00 $10,273.34 $0.00 $1,072,000.00 $573,927.16 $0.00 1st Stanisls
Res 11.00 03/01/00 $1,126.59 $579,300.00 $950,700.00 $702,243.35 $0.00 2nd San Fran
Res 11.00 05/01/00 $8,720.83 $0.00 $910,000.00 $910,000.00 $0.00 1st San Fran
Res 11.00 05/01/00 $9,132.92 $910,000.00 $953,000.00 $2,330,575.84 $0.00 2nd San Fran
Comm 11.00 12/01/00 $16,500.00 $0.00 $1,800,000.00 $1,800,000.00 $0.00 1st S Clara
Res 12.00 03/01/01 $12,336.18 $0.00 $1,210,000.00 $1,198,968.08 $161,061.42 1st Marin
Comm 10.50 03/01/01 $17,937.50 $3,753,523.00 $2,050,000.00 $2,800,000.00 $0.00 2nd Sn Mateo
Comm 12.00 06/01/01 $8,500.00 $0.00 $850,000.00 $850,000.00 $0.00 1st San Fran
Land 11.00 01/01/01 $16,500.00 $363,035.00 $1,800,000.00 $1,440,202.18 $0.00 2nd Stanisls
Land 11.00 07/01/01 $23,833.33 $358,116.00 $2,600,000.00 $2,600,000.00 $0.00 2nd Stanisls
Res 10.875 02/01/01 $2,670.05 $264,025.00 $950,000.00 $950,000.00 $0.00 2nd Sn Mateo
Comm 12.00 06/01/01 $6,742.08 $850,000.00 $1,028,095.22 $1,027,918.23 $0.00 2nd San Fran
Res 10.50 09/01/01 $6,453.13 $454,885.00 $737,500.00 $737,500.00 $0.00 2nd Lake
Res. 10.25 09/01/09 $7,616.86 $668,433.00 $850,000.00 $844,321.50 $0.00 2nd S Clara
Comm 13.75 11/01/99 $2,044.77 $156,750.00 $175,500.00 $164,542.39 $0.00 2nd Alameda
Apts 12.5 03/14/00 $435.55 $5,733.00 $38,727.14 $37,976.86 $0.00 2nd Con Cost
Res 12.00 05/01/01 $11,469.28 $2,968,393.00 $3,297,500.00 $3,044,045.72 $0.00 1st Placer
Land 11.00 11/01/01 $2,034.55 0 $221,951.22 $190,243.90 $0.00 3rd Stanisls
Comm 10.25 12/01/01 $13,158.44 $0.00 $1,185,000.00 $1,540,500.00 $0.00 1st Con Cost
Comm 11.00 01/01/02 $5,041.67 $495,031.00 $550,000.00 $549,081.32 $0.00 2nd San Fran
Comm 11.50 02/01/05 $4,065.88 $492,978.13 $400,000.00 $397,308.35 $0.00 2nd San Fran
Res 11.50 09/01/01 $7,272.16 $539,843.20 $1,292,800.00 $828,526.35 $0.00 2nd Sn Mateo
Comm 11.50 03/01/02 $12,496.45 $0.00 $1,303,977.27 $1,303,977.27 $0.00 1st San Fran
SCHEDULE IV CONT'D
LOANS ON REAL ESTATE.
RULE 12-29 MORTGAGE LOANS ON REAL ESTATE
Col. A Col. B Col. C Col. D Col. E Col. F Col. G Col. H Col.I Col. J
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Descp. Int. Final Periodic Prior Liens Face Amt. of Carrying Principal Type Geographic
Rate Maturity Payment Loans (original amount of Loans amt of of County
% Date Terms amount) Loans Lien Location
subject to
Delinquency
Principal or
Interest
=========== ======== =========== ============= ================= ================= ================ ============= ======= ==========
Comm 11.50 03/01/02 $12,468.09 $1,303,977.00 $1,696,022.72 $1,325,982.85 $0.00 2nd San Fran
Land 11.50 07/01/01 $4,557.93 $2,600,000.00 $475,609.76 $475,609.76 $0.00 2nd Stanisls
Comm 12.50 04/01/02 $30,208.33 $0.00 $2,900,000.00 $2,900,000.00 $0.00 1st Sn Mateo
Res 12.00 05/01/01 $4,099.50 $3,297,500.00 $409,949.98 $409,949.98 $0.00 2nd Placer
Res 12.00 11/01/01 $7,012.55 $0.00 $800,000.00 $208,267.68 $0.00 1st San Fran
Comm 11.50 04/01/02 $21,083.33 $0.00 $2,200,000.00 $2,200,000.00 $0.00 2nd San Fran
Apts 12.00 05/01/01 $38,558.51 $0.00 $3,939,310.37 $3,909,456.52 $0.00 1st San Fran
Res 12.00 11/01/01 $7,850.52 $823,674.00 $912,000.00 $839,556.18 $0.00 2nd Marin
Apts 11.50 06/01/02 $3,354.17 $2,218,285.00 $350,000.00 $350,000.00 $0.00 3rd San Fran
Comm 12.00 12/01/01 $28,031.03 $0.00 $4,970,000.00 $3,017,567.51 $0.00 1st L Angels
Comm 12.00 12/01/01 $25,500.00 $0.00 $2,550,000.00 $1,147,500.00 $0.00 1st Con Cost
Comm 10.50 06/01/06 $7,089.23 $0.00 $775,000.00 $773,111.23 $0.00 1st Sn Mateo
Res 10.50 07/01/05 $11,891.61 $771,550.00 $1,300,000.00 $1,297,371.35 $0.00 2nd S Clara
Comm 11.00 07/01/01 $5,500.00 $0.00 $600,000.00 $600,000.00 $0.00 1st San Fran
Res 11.00 02/01/02 $7,376.67 $730,284.00 $1,661,035.00 $927,603.93 $0.00 2nd Sn Mateo
Apts 12.00 08/01/03 $40,000.00 $0.00 $4,000,000.00 $4,000,000.00 $0.00 1st San Fran
Comm 12.00 04/01/02 $18,966.90 $2,200,000.00 $3,300,000.00 $2,129,931.40 $0.00 2nd San Fran
Res 11.00 09/01/04 $12,799.48 $0.00 $2,175,000.00 $1,497,494.68 $0.00 1st Sn Mateo
Res 11.50 09/01/02 $13,886.25 $260,792.00 $1,449,000.00 $1,449,000.00 $0.00 2nd Sn Mateo
Res 12.00 03/01/01 $13,250.00 $0.00 $1,325,000.00 $1,325,000.00 $0.00 1st Marin
Land 12.00 09/01/01 $7,500.00 $0.00 $750,000.00 $750,000.00 $0.00 1st S Clara
Res 12.00 11/01/01 $20,950.64 $1,320,000.00 $3,680,000.00 $2,308,285.94 $0.00 2nd San Fran
Res 12.00 10/01/03 $13,000.00 $785,819.00 $1,300,000.00 $1,300,000.00 $0.00 2nd Sn Mateo
Apts 12.50 04/01/02 $1,089.38 $4,000,000.00 $289,855.07 $161,176.74 $0.00 2nd San Fran
Comm 13.00 11/01/02 $2,220.84 $310,381.00 $205,000.00 $205,000.00 $0.00 2nd Alameda
Comm 12.50 01/01/04 $246.95 $845,350.00 $692,000.00 $59,267.00 $0.00 2nd San Fran
Res 12.50 11/01/01 $5,447.92 $1,751,599.00 $523,000.00 $425,181.52 $0.00 3rd Marin
Land 14.00 01/01/02 $875.78 $0.00 $5,000,000.00 $563,000.00 $0.00 1st Alameda
------------- ----------------- ----------------- ---------------- ------------- ------ ----------
TOTALS 628,693.26 37,584,916.33 82,012,791.20 68,570,992.11 304,287.02
============= ================= ================= ================ =============
Notes:
o None of the above loans are considered "impaired". Therefore, none
of them have been written down. The allowance for doubtful
accounts includes $1,291,151 relating to the above loans and
accrued interest receivable and advances related thereto.
o Amounts reflected in column G (carrying amount of loans) represents
both cost and the tax basis of the loans.
Schedule IV CONT'D
Reconciliation of carrying amount (cost) of loans at close of periods
Year ended December 31,
----------------------------------------------------
2000 1999 1998
---------- --------- ----------
Balance at beginning of year $35,693,148 $31,905,958 $25,304,989
--------------- ------------ ------------
Additions during period:
New loans 49,289,289 24,030,920 20,863,807
Other 0 0 0
--------------- ------------ ------------
Total Addi 49,289,28 24,030,920 20,863,807
--------------- ------------ ------------
Deductions during period:
Collections of principal 16,411,445 20,243,730 14,262,838
Foreclosures 0 0 0
Cost of loans sold 0 0 0
Amortization of Premium 0 0 0
Other 0 0 0
--------------- ------------- ------------
Total Deductions 16,411,445 20,243,730 14,262,838
--------------- ------------- ------------
Balance at close o $68,570,992 $35,693,14 $31,905,958
=============== ========== ============
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Bruce and/or John Cropper (the Croppers) have been performing audit and
accounting services to the General Partners of the Partnership and their
affiliates for over 16 years through the following CPA firms: 1993-1998 - Parodi
& Cropper, CPA's; 1999 - Caporicci, Cropper & Larson, LLP and 2000 - Armanino
McKenna LLP.
Bruce and John Cropper were shareholders in Cropper Accountancy Corp. through
December 31, 2000.
Cropper Accountancy was a partner in the firm of Parodi & Cropper from 1993
until April of 1998. In May of 1998, Cropper Accountancy Corp., formed a
partnership with Caporicci & Larson creating a new firm, Caporicci, Cropper &
Larson, LLP with offices in Irvine and Walnut Creek, California. The Parodi &
Cropper firm was dissolved.
Effective January 1, 2001, Cropper Accountancy Corp., withdrew from Caporicci,
Cropper & Larson, LLP partnership. John Cropper joined the larger regional firm
of Armanino McKenna LLP as a partner and Bruce Cropper continues to provide
services through Cropper Accountancy. The Croppers continue to perform audit and
accounting services to the General Partners of the partnership and their
affiliates.
As a result, the Partnership has retained the firm of Armanino McKenna LLP, to
provide its audit and financial services. Thus, although there has been a change
in accounting firms, there has not been a change in accountants and there have
not been any disagreements on any matter of accounting principals, practices or
financial status disclosures.
Part III
Item 10 - Directors and Executive Officers of the Registrant
The Partnership has no Officers or Directors. Rather, the activities of the
Partnership are managed by four General Partners of which two individuals are D.
Russell Burwell and Michael R. Burwell. The other two General Partners are Gymno
Corporation and Redwood Mortgage Corp. Both are California corporations, formed
in 1986 and 1978, respectively. The Burwell's are the two shareholders of Gymno
Corporation, a California corporation, on an equal (50-50) basis. Redwood
Mortgage Corp. is a subsidiary of the Redwood Group Ltd., whose principal
stockholder is D. Russell Burwell, a General Partner of the Partnership.
Effective February 7, 2000, Redwood Mortgage Corp., an affiliate of the General
Partners has been admitted, pursuant to Paragraph 12.4 (d) of the Limited
Partnership agreement, as an additional General Partner of the Partnership.
Redwood Mortgage Corp is a licensed real estate broker incorporated in 1978
under the laws of the State of California, and is engaged primarily in the bus-
iness of arranging and servicing mortgage loans.
After 25 years of active participation in the mortgage business, D. Russell
Burwell, our founder and a General Partner of the Partnership has decided to
retire effective September 30, 2001. "Russ" has enjoyed a long and successful
career. His original business model, upon which our Partnership has its roots,
has withstood the test of time through varying economic cycles. Collectively,
the various Redwood Mortgage Investors Partnerships (I-VIII) have grown from an
idea to over $110,000,000 in assets and produced excellent results for the
Limited Partners. Through December 31, 2000 and under Russ' stewardship, Redwood
Mortgage Investor's VIII raised $49,983,150 in Limited Partner Capital
contributions and at December 31, 2000 had $53,180,209 in remaining Limited
Partner Capital.
Over the last few years, Russ has been passing along his duties and
responsibilities to the remaining General Partners. The remaining General
Partners are Mr. Michael Burwell, Gymno Corporation and Redwood Mortgage Corp.,
both California Corporations. Mr. Michael Burwell has been a General Partner of
Redwood Mortgage Investors VIII since its inception and has been employed by
Redwood Mortgage Corp, an affiliate of the Partnership, since 1979. The
Partnership through the remaining General Partners and the employees of its
affiliate Redwood Mortgage Corp., are well prepared for Russ' departure and look
forward to emulating the steady consistent returns that the Limited Partners
have enjoyed during Russ' tenure.
Mr. D. Russell Burwell is providing this notification pursuant to Article 8
Section 8.02 of the Limited Partnership Agreement. The remaining General
Partners have elected to continue the business of the Partnership as described
in Article 9 Section 9.01(d) of the Limited Partnership Agreement.
Item 11 - Executive Compensation
COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP
As indicated above in Item 10, the Partnership has no officers or directors. The
Partnership is managed by the General Partners. There are certain fees and other
items paid to management and related parties.
A more complete description of management compensation is found in the
Prospectus, pages 6-7, under the section "Compensation of the General Partners
and the Affiliates", which is incorporated by reference. Such compensation is
summarized below.
The following compensation has been paid to the General Partners and Affiliates
for services rendered during the year ended December 31, 2000. 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
- ----------------------- ------------------------------- --------------
I. Redwood Mortgage Mortgage Servicing Fee for
Corp. servicing loans $505,823
General Partners Asset Management Fee
&/or Affiliates for managing assets $60,595
General Partners 1% interest in profits $42,875
Less allocation of syndication costs $2,509
-------------
$40,366
General Partners Portion of early withdrawal penalties
&/or Affiliates applied to reduce Formation Loan $19,883
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)
Redwood Mortgage Mortgage Brokerage Commissions for services in
Corp. connection with the review, selection, evaluation,
negotiation, and extension of the loans paid by the
borrowers and not by the Partnership $1,877,921
Redwood Mortgage Processing and Escrow Fees for services in connection
Corp. with notary, document preparation,credit investigation,
and escrow fees payable by the borrowers and not
by the Partnership $28,452
Gymno Corporation, Reconveyance Fee $1,011
Inc.
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. $113,580
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The General Partners are to own a combined total of 1% of the Partnership
including a 1% portion of income and losses.
Item 13 - Certain Relationships and Related Transactions
Refer to footnote 3 of the notes to financial statements in Part II item 8,
which describes related party fees and data.
Also refer to the Prospectus dated August 31, 2000, (incorporated herein by
reference) on page 2 "Compensation of General Partners and Affiliates" and page
2 "Conflicts of Interest".
Part IV
Item 14 - Exhibits, Financial Statements Schedules, and Reports on Form 8-K.
A. Documents filed as part of this report are incorporated:
1. In Part II, Item 8 under A - Financial Statements.
2. The Financial Statement Schedules are listed in Part II - Item 8
under B - Financial Statement Schedules.
B. No reports on From 8-K were filed during the last quarter of the
period for which this report is filed.
3. Exhibits.
Exhibit No. Description of Exhibits
- ------------------ -------------------------
3.1 Limited Partnership Agreement
3.2 Form of Certificate of Limited Partnership Interest
3.3 Certificate of Limited Partnership
10.1 Escrow Agreement
10.2 Servicing Agreement
10.3 (a) Form of Note secured by Deed of Trust for
Construction Loans, which provides for principal and
interest payments. (b) Form of Note secured by Deed of
Trust for Commercial and Multi-Family loans which
provides for principal and interest payments (c) Form
of Note secured by Deed of Trust for Commercial and
Multi-Family loans which provides for interest only
payments (d) Form of Note secured by Deed of Trust for
Single Family Residential Loans, which provides for
interest and principal payments. (e) Form of Note
secured by Deed of Trust for Single Family Residential
loans, which provides for interest only payments.
10.4 (a) Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing to accompany
Exhibits 10.3 (a), and (c).
(b) Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing to accompany
Exhibit 10.3 (b).
(c) Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing to accompany
Exhibit 10.3 (c).
10.5 Promissory Note for Formation Loan
10.6 Agreement to Seek a Lender
24.1 Consent of Armanino McKenna, LLP
24.3 Consent of McCutchen, Doyle, Brown & Enersen, LLP
All of these exhibits were previously filed as the exhibits to Registrant's
Statement on Form S-11 (Registration No. 333-41410 and incorporated by reference
herein).
B. Reports of Form 8-K.
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report. A Form 8-K was filed on February 7, 2000
relating to a change in accounting firms and the admittance of an
additional General Partner. Another Form 8-K was filed on February 13,
2001, relating to the subsequent change in accounting firms. (see Item
9 and 10 above, respectively)
C. See A (3) above.
D. See A (2) above. Additional reference is made to the Prospectus
(filed as part of the S-11)dated August 31, 2000 for financial data
related to Gymno Corporation, and Redwood Mortgage Corp., The GeneraL
Partners.
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 26th day of March,
2001.
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
By: Redwood Mortgage Corp.
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 persons on behalf of the registrant and
in the capacity indicated on the 26th day of March, 2001.
Signature Title Date
/S/ D. Russell Burwell
- ----------------------
D. Russell Burwell General Partner March 26, 2001
/S/ Michael R. Burwell
- ----------------------
Michael R. Burwell General Partner March 26, 2001
/S/ D. Russell Burwell
- ----------------------
D. Russell Burwell President of Gymno Corporation, March 26, 2001
(Principal Executive Officer);
Director of Gymno Corporation
/S/ Michael R. Burwell
- ----------------------
Michael R. Burwell Secretary/Treasurer of Gymno March 26, 2001
Corporation (Principal Financial
and Accounting Officer);
Director of Gymno Corporation
/S/ D. Russell Burwell
- ----------------------
D. Russell Burwell President of Redwood Mortgage March 26, 2001
Corp., (Principal Executive
Officer); Director of Redwood
Mortgage Corp.
/S/ Michael R. Burwell
- ----------------------
Michael R. Burwell Secretary/Treasurer of Redwood March 26, 2001
Mortgage Corp. (Principal
Financial and Accounting
Officer);
Director of Redwood Mortgage Corp.