-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KwqNLPfsLGLEVGl2kwJr1o+LkhwFDPnpTxQpFY1YzMgEzV5atJydpd5M/2uAgKA1 Y5X3nInYgLLG6VcZla1ARA== 0000811592-96-000013.txt : 19961118 0000811592-96-000013.hdr.sgml : 19961118 ACCESSION NUMBER: 0000811592-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: REDWOOD MORTGAGE INVESTORS VI CENTRAL INDEX KEY: 0000811592 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 943031211 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17573 FILM NUMBER: 96664055 BUSINESS ADDRESS: STREET 1: 650 EL CAMINO REAL STE K CITY: REDWOOD CITY STATE: CA ZIP: 94063 BUSINESS PHONE: 4153655341 MAIL ADDRESS: STREET 1: 650 EL CAMINO REAL SUITE K CITY: REDWWOD CITY STATE: CA ZIP: 94063 10-Q 1 FORM 10Q FORM 10-Q SECURITIES & EXCHANGE COMMISSION WASHINGTON DC 20549 Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Period Ended September 30,1996. - ------------------------------------------------------------------------------- Commission file number 33-12519 - ------------------------------------------------------------------------------- REDWOOD MORTGAGE INVESTORS VI - ------------------------------------------------------------------------------- (exact name of registrant as specified in its charter) California 94-3031211 - ------------------------------------------------------------------------------- (State or other jurisdiction of I.R.S. Employer incorporation or organization) Identification No. 650 El Camino Real, Suite G, Redwood City, CA. 94063 - -------------------------------------------------------------------------------- (address of principal executive office) (415) 365-5341 - -------------------------------------------------------------------------------- (Registrants telephone number, including area code) NOT APPLICABLE - ------------------------------------------------------------------------------- Former name, former address and former fiscal year,if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES XX__________ NO___________ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES________ NO________ NOT APPLICABLE ____XX___ APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuers class of common stock, as of the latest date. NOT APPLICABLE Part I Item 1 REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) Balance Sheets December 31, 1995 (audited) and September 30, 1996 (unaudited) ASSETS Sept. 30, 1996 Dec. 31, 1995 (unaudited) (audited)
================= ================ cash ............................................................................. $ 862,968 $ 283,976 Accounts receivable: Mortgage Investments, secured by deeds of trust ............................ 9,319,813 10,402,491 Accrued interest on mortgage investments ................................... 351,505 445,816 Advances on mortgage investments ........................................... 93,427 131,936 Accounts receivable-unsecured .............................................. 251,531 322,913 ----------- ----------- 10,016,276 11,303,156 Less allowance for doubtful accounts ....................................... 228,000 283,284 ----------- ----------- $ 9,788,276 $11,019,872 ----------- ----------- Real Estate Owned, acquired through foreclosure, at estimated net realizable value ............................................. 1,261,322 1,501,712 Partnership Interest ............................................................. 458,206 456,821 Formation loan due from Redwood Home Loan Co. .................................... 135,402 184,177 Prepaid expenses and other assets ................................................ 0.00 935 ----------- ----------- $12,506,174 $13,447,493 =========== =========== LIABILITIES AND PARTNERS CAPITAL Liabilities: Note payable - bank line of credit ......................................... $ 1,715,011 $ 2,041,011 ----------- ----------- 1,715,011 2,041,011 Partners capital ................................................................. 10,791,163 11,406,482 ----------- ----------- $12,506,174 $13,447,493 =========== =========== See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (unaudited)
9 mos. 9 mos. ended 3 mos. ended 3 mos. ended ended Sept. 30, Sept. 30, Sept. 30, Sept 30, 1995 1996 1995 1996 (unaudited) (unaudited) (unaudited) (unaudited) ============= ============== ============= ============= Revenues: Interest on mortgage investments ....................... $836,853 933,809 280,793 286,241 Interest on bank deposits .............................. 3,565 4,813 2,238 1,305 Late charges & other ................................... 13,471 8,339 4,176 3,792 Miscellaneous .......................................... 10,461 2,953 9,001 784 -------- -------- -------- -------- 864,350 949,914 296,208 292,122 -------- -------- -------- -------- Expenses: Interest on bank loan ................................... 130,233 162,160 40,027 54,338 General Partner management fees ......................... 0.00 0.00 0.00 0.00 Clerical costs through Redwood Home Loan Co.............. 24,156 16,221 8,055 6,941 Professional fees ....................................... 16,800 18,292 521 1,546 Other ................................................... 11,999 13,718 2,162 2,695 Provision for loss on real estate acquired through foreclosure and doubtful accounts............... 234,909 274,073 99,321 71,647 -------- -------- -------- -------- 418,097 484,464 150,086 137,167 -------- -------- -------- -------- Net Income ............................................... $446,253 465,450 146,122 154,955 ======== ======== ======== ======== Net Income: to General Partners (1%) ..................... $ 4,463 4,654 1,462 1,549 to Limited Partners (99%...................... 441,790 460,796 144,660 153,406 ======== ======== ======== ======== $446,253 465,450 146,122 154,955 ======== ======== ======== ======== Net income for $1,000 invested by Limited Partners for entire period: - where income is reinvested and compounded............. $ 39.94 $ 39.42 $ 13.12 $ 13.40 ======== ======== ======== ======== - where Partner received income in monthly distributions ..................................... $ 39.25 $ 38.75 $ 13.07 $ 13.04 ======== ======== ======== ======== See accompanying notes to financial statements
REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (unaudited)
Sept. 30, 1996 Sept. 30, 1995 (unaudited) (unaudited) ================== ================= Cash flows from operating activities: Net Income ......................................................................... $ 446,253 $ 465,450 Adjustments to reconcile net income to net cash provided by operating activities: Increase (decrease) in allowance for doubtful accounts ......................... (55,284) 78,502 (Increase) decrease in accrued interest and advances ........................... 132,820 (135,289) (Increase) decrease in prepaid expenses and other assets ...................... 935 0.00 ----------- ----------- Net cash provided by operating activities .......................................... 524,724 408,663 ----------- ----------- Cash flows from investing activities: Net (increase) decrease in: Real estate acquired through foreclosure .......................................... 240,390 656,191 Mortgage Investments .............................................................. 1,082,678 143,729 Formation loan .................................................................... 48,775 (24,892) Partnership Interest .............................................................. (1,385) 33,717 Accounts receivable -unsecured .................................................... 71,382 (456,821) ----------- ----------- Net cash provided by investing activities .................................... 1,441,840 351,924 ----------- ----------- Cash flows from financing activities: Net increase (decrease) in note payable - bank ..................................... (326,000) (305,000) Partners withdrawals ............................................................... (1,058,039) (863,715) Early withdrawal penalties, net .................................................... (3,533) (4,029) ----------- ----------- Net cash provided by or (used in) financing activities ...................... (1,387,572) (1,172,744) ----------- ----------- Net increase (decrease) in cash and cash equivalents ................................. 578,992 (412,157) Cash and cash equivalents at the beginning of period ................................. 283,976 447,804 =========== =========== Cash and cash equivalents at the end of period ....................................... $ 862,968 $ 35,647 =========== =========== See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS CAPITAL FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (audited) AND NINE MONTHS ENDED SEPTEMBER 30, 1996 (unaudited)
PARTNERS CAPITAL --------------------------------------------------------------------- UNALLOCATED GENERAL LIMITED SYNDICATION PARTNERS PARTNERS COSTS TOTAL -------------- ------------- ----------------- ------------ Balances at December 31, 1992 .................... $ 9,773 $ 12,374,013 $ (26,879) $ 12,356,907 Net Income ....................................... 8,978 888,810 0.00 897,788 Allocation of Syndication Costs .................. (232) (22,947) 23,179 0.00 Early withdrawal penalties ....................... 0.00 (10,365) 3,700 (6,665) Partners withdrawals ............................. (8,746) (887,338) 0.00 (896,084) ------------ ------------ ---------- ------------ Balances at December 31, 1993 .................... 9,773 12,342,173 0.00 12,351,946 Net Income ....................................... 6,647 658,055 0.00 664,702 Early withdrawal penalties ....................... 0.00 (12,790) 0.00 (12,790) Partners withdrawals ............................. (6,654) (1,013,019) 0.00 (1,019,673) ------------ ------------ ---------- ------------ Balances at December 31, 1994 .................... 9,766 11,974,419 0.00 11,984,185 Net Income ....................................... 6,183 612,165 0.00 618,348 Early withdrawal penalties ....................... 0.00 (4,336) 0.00 (4,336) Partners withdrawals ............................. (6,183) (1,185,532) 0.00 (1,191,715) ------------ ------------ ---------- ------------ Balances at December 31, 1995 .................... 9,766 11,396,716 0.00 11,406,482 Net Income ....................................... 4,463 441,790 0.00 446,253 Early withdrawal penalties ....................... 0.00 (3,533) 0.00 (3,533) Partners withdrawals ............................. (4,463) (1,053,576) 0.00 (1,058,039) ------------ ------------ ---------- ------------ Balances at September 30, 1996 ................... $ 9,766 $ 10,781,397 0.00 $ 10,791,163 ============ ============ ========== ============ See accompanying notes to financial statements
REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 (audited) and SEPTEMBER 30, 1996 (unaudited) NOTE 1 ORGANIZATION AND GENERAL Redwood Mortgage Investors VI, (the Partnership) is a California Limited partnership, of which the General Partners are D. Russell Burwell, Michael R. Burwell and Gymno Corporation, a California corporation owned and operated by the individual General Partners. The partnership was organized to engage in business as a mortgage lender for the primary purpose of making loans secured by Deeds of Trust on California real estate. Mortgage Investments are being arranged and serviced by Redwood Home Loan Co., dba Redwood Mortgage, an affiliate of the General Partners. At December 31, 1989, the offering was closed with contributed capital totaling $9,781,366. Each months income is distributed to partners based upon their proportionate share of partners capital. Some partners have elected to withdraw income on a monthly, quarterly or annual basis. A. Sales Commissions - Formation Loan Sales commissions ranging from 0% (units sold by General Partners) to 10% of gross proceeds were paid to RHL Co., an affiliate of the General Partners that arranges and services the mortgage investments. To finance the sales commissions, the Partnership loaned to Redwood Mortgage $623,255 relating to contributed capital of $9,781,366. The formation loan is unsecured, and is being repaid, without interest, in ten annual installments of principal, commencing December 31, 1989. The following reflects transactions in the Formation Loan account through September 30, 1996: Amount loaned during 1987,1988 and 1989 $623,255 Less: Cash repayments $447,901 Allocation of early withdrawal penalties 39,952 487,853 =========== ----------- Balance September 30, 1996 $135,402 =========== B. Other Organizational and Offering Expenses Organizational and offering expenses, other than sales commissions, (including printing costs, attorney and accountant fees, and other costs), paid by the Partnership from the offering proceeds totaled $360,885 or 3.69% of the gross proceeds contributed by the Partners. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenues and expenses are accounted for on the accrual basis of accounting. The Partnership bears its own organization and syndication costs (other than certain sales commissions and fees described above) including legal and accounting expenses, printing costs, selling expenses, a 1% wholesale brokerage fee and filing fees. Organizational costs of $14,750 were capitalized and were amortized over a five year period. Syndication costs of $346,135 were charged against partners capital and were allocated to individual partners consistent with the partnership agreement over a five year period. Property acquired through foreclosure will be held for sale at its estimated narket value. Such property is recorded at cost which includes the principal balance of the former mortgage investment made by the Partnership plus accrued interest, payments made to keep the senior loans current, costs of obtaining title and possession, less rental income or at estimated net realizable value, if less. The difference between such costs and estimated net realizable value is deducted from cost in the Balance Sheet to arrive at the carrying value of such property. In preparing the financial statements, management is required to make estimates based on the information available that affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the related periods. Such estimates relate principally to the determination of the allowance for doubtful accounts and the valuation of real estate acquired through foreclosure. Actual results could differ significantly from these estimates. Mortgage investments and the related accrued interest, fees and advances are analyzed on a continuous basis for recoverability. Delinquencies are identified and followed as part of the mortgage investment system. A provision is made for doubtful accounts to adjust the allowance for doubtful accounts to an amount considered by management to be adequate to provide for unrecoverable accounts receivable. Amounts reflected in the statements of income as net income per $1,000 invested by Limited Partners for the entire period are actual amounts allocated to Limited Partners who have their investment throughout the period and have elected to either leave their earnings to compound or have elected to receive monthly distributions of their net income. Individual limited partner income is allocated each month based on the limited partners pro rata share of partnership capital. Because the net income percentage varies from month to month, amounts per $1,000 will vary for those individuals who make or withdraw investments during the period, or select other options. However, the net income per $1,000 average invested has approximated those reflected for those whose investments and options have remained constant. 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. The interim financial statements dated September 30, 1996 are unaudited, but in the opinion of the General Partners all adjustments (consisting solely of normal recurring adjustments) necessary to a fair presentation of the financial statements at September 30, 1996 have been made. 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. Loan Brokerage Commissions Loan brokerage commissions for services in connection with the review, selection, evaluation, negotiation and extension of the mortgage investments were limited up to 12% of the principal amount of the mortgage investments through the period ending 6 months after the termination date of the offering. Thereafter, commissions are limited to an amount not to exceed 4% of the total Partnership assets per year. Such commissions are paid by the borrowers, thus, not an expense of the Partnership. B. Loan Servicing Fees Monthly loan servicing fees are paid to Redwood Home Loan Co. up to 1/8 of 1% (1.5% annual) of the unpaid principal, or such lesser amount as is reasonable and customary in the geographic area where the property securing the loan is located (currently at 1/12 of 1% or 1% annual). The amount remitted to the partnership and recorded as interest on mortgage investments is net of such fees. In 1993, $27,532 of the total loan servicing fee of $121,838; in 1994 $123,758 of the total loan service fees of $123,758; in 1995 $50,741 of the total loan service fees of $92,797 and for the nine months through September 30, 1996, $26,075 of the total loan servicing fee of $70,423, were waived by Redwood Mortgage. C. Asset Management Fee Pursuant to the partnership agreement, the General Partners receive a monthly fee for managing the Partnerships mortgage investment portfolio and operations equal to 1/32 of 1% (3/8 of 1% annual) of the net asset value. Such fees were reduced from $46,569 to $15,523 in 1993; $45,974 to $8,942 in 1994, and $44,336 to $-0- in 1995 with the difference being waived by the General Partners. For the nine months through September 30 1996, all of the management fee totalling $31,660 also waived by the General Partners. D. Other Fees The Partnership Agreement provides for other fees such as reconveyance, loan assumption and loan extension fees. These fees are paid by the borrowers to parties related to the General Partners. E. Income and Losses All income is credited or charged to partners in relation to their respective partnership interests. The partnership interest of the General Partners (combined) is a total of 1%. F. Operating Expenses The General Partners or their affiliate (Redwood Mortgage.) are reimbursed by the Partnership for all operating expenses actually incurred by them on behalf of the Partnership, including without limitation, out-of-pocket general and administration expenses of the Partnership, accounting and audit fees, legal fees and expenses, postage and preparation of reports to Limited Partners. In 1993, 1994 and 1995 clerical costs totaling $31,642, $-0- and $23,341, respectively, were reimbursed to Redwood Mortgage and are included in expenses in the Statements of Income. The 1994 expenses were absorbed by the Redwood Mortgage. For the nine months through September 30, 1996, $24,156 was reimbursed to Redwood Mortgage. NOTE 4 OTHER PARTNERSHIP PROVISIONS A. Term of the Partnership The term of the Partnership is approximately 40 years, unless sooner terminated as provided. The provisions provided for no capital withdrawal for the first five years, subject to the penalty provision set forth in (D) below. Thereafter, investors have the right to withdraw over a five-year period, or longer. B. Election to Receive Monthly, Quarterly or Annual Distributions Upon subscriptions, investors elected either to receive monthly, quarterly or annual distributions of earnings allocations, or to allow earnings to compound for at least a period of 5 years. C. Profits and Losses Profits and losses are allocated monthly among the Limited Partners according to their respective capital accounts after 1% is allocated to the General Partners. D. Withdrawal From Partnership A Limited Partner had no right to withdraw from the Partnership or to obtain the return of his capital account for at least five years after such units are purchased which in all instances has occurred by September 30, 1996. After that time, at the election of the Partner, capital accounts can be returned over a five year period in 20 equal quarterly installments or such longer period as is requested. Notwithstanding the above, in order to provide a certain degree of liquidity to the Limited Partners, the General Partners will liquidate a Limited Partners entire 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. Such liquidations shall, however, be subject to a 10% early withdrawal penalty applicable to any sums withdrawn prior to the time when such sums otherwise could have been withdrawn pursuant to the liquidation procedure set forth above. The 10% early withdrawal penalty will be received by the Partnership, and a portion of the sums collected as such penalty will be applied toward the next installment(s) of principal under the Formation Loan owed to the Partnership by Redwood Home Loan Co. Such portion shall be determined by the ratio between the initial amount of Formation Loan and the total amount of other organization and syndication costs incurred by the Partnership in this offering. The balance of any such early withdrawal penalties shall be retained by the Partnership for its own account and applied against syndication costs. Since the syndication costs have been fully amortized as of December 31, 1993, the early withdrawal penalties gained in the future will be applied on the same basis as before with the amount otherwise being credited to the syndication costs being credited to income for the period. The Partnership will not establish a reserve from which to fund withdrawals and, accordingly, the Partnerships capacity to return a Limited Partners capital account is restricted to the availability of Partnership cash flow. Furthermore, no more than 20% of the total Limited Partners capital accounts outstanding at the beginning of any year shall be liquidated during any calendar year. NOTE 5 - INVESTMENT IN PARTNERSHIP. The Partnerships interest in land acquired through foreclosure, located in East Palo Alto, California with costs totalling $458,206 has been invested with that of two other Partnerships (total cost $945,554) in a partnership which is in the preliminary process of getting approval to construct approximately 72 single family homes for sale. Redwood Mortgage Investors V, VI, and VII have first priority on return of investment plus interest thereon, in addition to a share of profits realized. NOTE 6 - NOTES PAYABLE - BANK LINE OF CREDIT The Partnership has a bank line of credit secured by its mortgage investment portfolio up to $2,500,000 at 1% over prime. The balances were $2,041,011 and $1,715,011 at December 31, 1995 and September 30, 1996, respectively, and the interest rate at September 30, 1996 was 9.25% (8.25% prime + 1%). NOTE 7 - LEGAL PROCEEDINGS The Partnership is not a defendant in any legal actions. However, legal actions against borrowers and other involved parties have been initiated by the Partnership to help assure payments against unsecured accounts receivable totaling $251,531. Management anticipates that the ultimate outcome of the legal matters will not have a material adverse effect on the net assets of the Partnership, with due consideration having been given in arriving at the allowance for doubtful accounts. NOTE 8 - ASSET CONCENTRATIONS AND CHARACTERISTICS The mortgage investments are secured by recorded deeds of trust. At September 30, 1996, there were 63 mortgage investmensts outstanding with the following characteristics: Number of mortgage invesments outstanding 63 Total mortgage investments outstanding $9,319,813 Average mortgage investment outstanding $147,934 Average mortgage investment as percent of total 1.59% Average mortgage investment as percent of Partners Capital 1.37% Largest mortgage investment outstanding $1,376,117 Largest mortgage investment as percent of total 14.77% Largest mortgage investment as percent of Partners Capital 12.75% Number of counties where security is located (all California) 13 Largest percentage of mortgage investments in one county 29.89% Average mortgage investment to appraised value of security at time mortgage investment was consummated 65.60% Number of mortgage investments in foreclosure status 2 Amount of mortgage investments in foreclosure $169,952 The cash balance at September 30, 1996 of $862,968 was in one bank with interest bearing balance totalling $823,391. The balance exceeded the FDIC insurance limit (up to $100,000 per bank) by $762,968. Item 7 - Managements Discussion and Analysis of Financial Condition and Results of Operations On September 30, 1996, the Partnerships net capital totalled $10,791,163. The Partnership began funding mortgage investments in October 1987, and as of September 30, 1996 had distributed income at an average annualized (compounded) yield of 8.01%. Current earnings are lower than those prevalent at the outset, primarily because interest rates generally have dropped dramatically since 1988. The Partnership does not anticipate a significant increase or decrease in mortgage rates in the foreseeable future and expects the prevailing interest rates to fluctuate in a narrow range in the near future. Management expects the yield, net of provision for losses, to increase slightly in 1996. Currently, mortgage interest rates are lower than those prevalent at the inception of the Partnership. New Mortgage investments are being originated at these lower interest rates. The result is a reduction of the average return across the entire mortgage investment portfolio held by the Partnership. In the future, interest rates likely will change from their current levels. The General Partners cannot at this time predict at what levels interest rates will be in the future. The General Partners believe the rates charged by the Partnership to its borrowers will not change significantly in the immediate future. Based upon the rates payable in connection with the existing mortgage investments, the current and anticipated interest rates to be charged by the Partnerships, and current reserve requirements, the General Partners anticipate that the annualized yield next year will range only slightly higher from its current rate. Each year, the Partnership negotiates a line of credit with a commercial bank which is secured by its mortgage investment portfolio. Currently, it has the capacity to borrow up to $2,500,000 at Prime plus 1%, (9.25%). Current borrowings of $1,715,011 have the effect of leveraging the portfolio about 20%. The Partnership relies upon the line of credit, amortization of notes, pay-off of notes, and the re-investment of earnings, after paying Partnership distributions and operating costs, for the creation of new capital for mortgage (loan) investments. The General Partners regularly review the mortgage investment portfolio, examining the status of delinquencies, the underlying collateral securing these mortgage investments, REO expenses, sales activities, and borrowers payment records and other data relating to the mortgage investment portfolio. Data on the local real estate market, and on the national and local economy are studied. Based upon this information and more, mortgage investment loss reserves and allowance for doubtful accounts are increased or decreased. Because of the number of variables involved, the magnitude of possible swings and the General Partners inability to control many of these factors, actual results may and do sometimes differ significantly from estimates made by the General Partners. Its now clear the Northern California recession reached bottom in 1993. Since then, the California economy has been improving, slowly at first, but now, more vigorously. A wide variety of indicators suggest that the economy in California was strong in the first half of 1996, and the State is well - positioned for fast growth in the second half of the year. This improvement is reflective in increasing property values, in job growth, personal income growth, etc., which all translates into more loan activity. Which of course, is healthy for our lending activity. I. COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP The following compensation has been paid to the General Partners and Affiliates for services rendered during the nine months ending September 30, 1996. All such compensation is in compliance with the guidelines and limitations set forth in the Prospectus and Partnership Agreement. 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. Entity Receiving Description of Compensation Amount Compensation and Services Rendered ====================== ============================================ ============ Redwood Mortgage Loan Servicing Fee for servicing loans $44,348 ($26,075 waived by RHL Co.) - ------------------------- ----------------------------------------- ----------- General Partners Asset Management Fee for managing &/or Affiliates assets ($31,660 waived by the General Partners) $ 0.00 - ------------------------- ----------------------------------------- ------------ General Partners 1% interest in profits,losses and distributions of cash available for distribution $ 4,463 - ------------------------- ----------------------------------------- ------------ 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 Loan Brokerage Commissions for services in connection with the review, selection, evaluation, negotiation, and extension of the Mortgage Investments paid by the borrowers and not by the Partnership $ 20,150 - ------------------------- ------------------------------------------------------ Redwood Mortgage Processing and Escrow Fees for services in connection with notary, document preparation, credit investigation, and escrow fees payable by the borrower and not by the Partnership $ 732 - ------------------------- ------------------------------------------------------ MORTGAGE INVESTMENT SUMMARY AS OF SEPTEMBER 30, 1996 Partnership Highlights Mortgage Investment to Value ratio First Trust Deed Mortgage Investments $4,854,836.73 Appraised Value of Properties * 7,388,667.00 Total Investment as a % of Appraisal 65.71% First Trust Deed Mortgage Investments $4,854,836,.73 Second Trust Deed Mortgage Investments 3,812,281.73 Third Trust Deed Mortgage Investments 405,763.34 Fourth Trust Deed Mortgage Investments ** 246,931.03 --------------------- $9,319,812.83 First Trust Deeds due other Lenders $14,610,509.00 Second Trust Deeds due other Lenders 1,174,343.00 Third Trust Deeds due other Lenders 178,571.00 --------------------- Total Debt $25,283,235.83 Appraised Property Value $38,542,563.00 Total Investment as a % of Appraisal 65.60% Number of Mortgage Investments Outstanding 63 Average Investment $147,933.54 Average Investment as a % of Net Partners Capital 1.37% Largest Investment Outstanding $1,376,117.03 Largest Investment as a % of Net Partners Capital 12.75% * Amounts shown reflect the aggregate appraisal values utilized at the time the mortgage investments were consummated. ** This consists of a mortgage investment in which Redwood Mortgage Investors VI, together with other Redwood partnerships, holds a second and a fourth trust deed against the secured property. In addition, the principals behind the borrower corporation have given personal guarantees as collateral. The overall loan to value ratio on this loan is 76.52%. Besides the borrower paying an interest rate of 12.25%, the partnership and other lenders will participate in profits. The General Partners and its affiliates have previously entered into loan transactions with this borrower, all of which have been concluded successfully, with extra earnings earned for the other lenders. Mortgage Investments as a Percentage of Total Mortgage Investments First Trust Deed Mortgage Investments 52.09% Second Trust Deed Mortgage Investments 40.91% Third Trust Deed Mortgage Investments 4.35% Fourth Trust Deed Mortgage Investments 2.65% ----------- Total 100.00% Mortgage Investments by Type of Property Owner Occupied Homes $1,558,100.26 16.72% Non Owner Occupied Homes 777,492.45 8.34% Apartments 809,567.12 8.69% Commercial 6,174,653.00 66.25% ----------------- ----------- Total $9,319,812.83 100.00% Statement of Conditions of Mortgage Investments Number of Mortgage Investments in Foreclosure 2 Diversification by County County Santa Clara $2,785,661.72 29.89% Alameda 1,804,678.07 19.36% San Mateo 1,436,632.43 15.42% Contra Costa 766,899.18 8.23% Stanislaus 765,516.84 8.21% Sacramento 475,590.39 5.10% San Francisco 474,043.57 5.09% Sonoma 378,318.28 4.06% El Dorado 214,773.21 2.30% Shasta 82,562.52 0.89% Monterey 72,380.95 0.78% Santa Cruz 38,619.50 0.41% Solano 24,136.17 0.26% ----------------- ----------- Total $9,319,812.83 100.00% PART 2 OTHER INFORMATION Item 1. Legal Proceedings No legal action has been initiated against the Partnership. The Partnership had filed a legal action for collection against borrowers, which is routine litigation incidental to its business. Please refer to note (7) of financial statements. Item 2. Changes in the Securities Not Applicable Item 3. Defaults upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Not Applicable (b) Form 8-K The registrant has not filed any reports on Form 8-K during the nine month period ending September 30, 1996. 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 4th day of November, 1996. REDWOOD MORTGAGE INVESTORS VI By: --------------------------------------------- D. Russell Burwell, General Partner By: --------------------------------------------- Michael R. Burwell, General Partner By: Gymno Corporation, General Partner By: --------------------------------------------- D. Russell Burwell, President By: --------------------------------------------- Michael R. Burwell, Secretary/Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacity indicated on the 4th day of November, 1996. Signature Title Date - --------------------------- D. Russell Burwell General Partner November 4, 1996 - --------------------------- Michael R. Burwell General Partner November 4, 1996 - --------------------------- D. Russell Burwell President of Gymno Corporation, November 4, 1996 (Principal Executive Officer); Director of Gymno Corporation - -------------------------- Michael R. Burwell Secretary/Treasurer of Gymno November 4, 1996 Corporation (Principal Financial and Accounting Officer); Director of Gymno Corporation EX-27 2 FDS --
5 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 862968 0 10016276 22800 0 0 0 0 12506174 0 0 1715011 0 0 10791163 12506174 0 864350 0 52955 0 234909 130233 446253 0 446253 0 0 0 446253 .00 .00
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