-----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, Uf2ebsk/ilVCshOwmIjPSIpkqpb6NXELTToR7QySQcAwFKGRSLdN+gstY2QPCRbe vKpoQkIUTLVL7DRSQSk4Hg== 0000811592-98-000005.txt : 19980515 0000811592-98-000005.hdr.sgml : 19980515 ACCESSION NUMBER: 0000811592-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 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: SEC FILE NUMBER: 000-17573 FILM NUMBER: 98619072 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 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 March 31, 1998 - -------------------------------------------------------------------------------- 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) (650) 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 REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) BALANCE SHEETS DECEMBER 31, 1997 (audited) AND MARCH 31, 1998 (unaudited) ASSETS Mar 31, 1998 Dec 31, 1997 (unaudited) (audited) ------------------ ----------------
Cash $168,920 $331,143 ------------------ ---------------- Accounts receivable: Mortgage Investments, secured by deeds of trust 8,452,382 8,104,984 Accrued Interest on Mortgage Investments 654,260 617,456 Advances on Mortgage Investments 141,783 127,519 Accounts receivables, unsecured 23,775 161,414 ------------------ ---------------- 9,272,200 9,011,373 Less allowance for doubtful accounts 50,425 28,614 ------------------ ---------------- 9,221,775 8,982,759 ------------------ ---------------- Real estate owned, held for sale, acquired through foreclosure 228,180 309,319 Investment in Partnership 722,751 708,141 ------------------ ---------------- Total Assets $10,341,626 $10,331,362 ================== ================ LIABILITIES AND PARTNERS CAPITAL Liabilities: Deferred Interest $0 $898 Note payable - bank line of credit 1,068,000 899,011 --------------- --------------- Total Liabilities 1,068,000 899,909 --------------- --------------- Partners Capital: Limited Partners capital, subject to redemption, (note 4D): net of Formation Loan receivable of $42,208 and $59,521, for 1998 and 1997, respectively 9,263,860 9,421,687 General Partners Capital: 9,766 9,766 --------------- --------------- Total Partners capital 9,273,626 9,431,453 --------------- --------------- Total Liabilities and Partners capital $10,341,626 $10,331,362 =============== =============== See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (unaudited) 3 mos. ended 3 mos. ended Mar 31, 1998 Mar 31, 1997 (unaudited) (unaudited)
Revenues: Interest on Mortgage Investments $198,443 $250,645 Interest on Bank Deposits 2,657 1,939 Late charges, prepayment penalties and 1,953 2,217 fees ----------- ----------- 203,053 254,801 ----------- ----------- Expenses: Mortgage Servicing fees 8,325 9,247 Clerical costs through Redwood Mortgage 6,319 7,341 Interest and line of credit cost 20,296 34,860 Provision for losses on real estate acquired through foreclosure and doubtful 21,811 50,200 accounts Professional Services 11,288 11,067 Other 6,024 5,268 ----------- ----------- 74,063 117,983 ----------- ----------- Net Income $128,990 $136,818 =========== =========== Net Income: to General Partners (1%) $1,290 $1,368 to Limited Partners $127,700 $135,450 (99%) =========== =========== $128,990 $136,818 =========== =========== Net income for $1,000 invested by Limited Partners for entire period - where income is reinvested and $13.48 $12.90 compounded =========== =========== - where Partner received income in monthly distributions $13.42 $12.85 =========== =========== 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, 1997 (audited) AND THE THREE MONTHS ENDED MARCH 31, 1998 (unaudited) PARTNERS CAPITAL ------------------------------------------------------------------------------------- LIMITED PARTNERS CAPITAL -------------------------------------------------- Capital Account Formation General Limited Loan Partners Partners Receivable Total Capital Total -------------- ------------- --------------- ------------ --------------
Balances at December 31, 1994 $11,974,419 $(246,505) $11,727,914 $9,766 $11,737,680 Formation Loan collections 0 59,581 59,581 0 59,581 Net income 612,165 0 612,165 6,183 618,348 Early withdrawal penalties (4,336) 2,747 (1,589) 0 (1,589) Partners withdrawals (1,185,532) 0 (1,185,532) (6,183) (1,191,715) -------------- ------------- --------------- ------------ -------------- Balances at December 31, 1995 11,396,716 (184,177) 11,212,539 $9,766 11,222,305 Formation Loan collections 0 56,803 56,803 0 56,803 Net income 582,280 0 582,280 5,882 588,162 Early withdrawal penalties (8,721) 5,525 (3,196) 0 (3,196) Partners withdrawals (1,463,174) 0 (1,463,174) (5,882) (1,469,056) -------------- ------------- --------------- ------------ -------------- Balances at December 31, 1996 10,507,101 (121,849) 10,385,252 9,766 10,395,018 Formation Loan collections 0 53,833 53,833 0 53,833 Net Income 523,895 0 523,895 5,292 529,187 Early withdrawal penalties (13,409) 8,495 (4,914) 0 (4,914) Partners withdrawals (1,536,379) 0 (1,536,379) (5,292) (1,541,671) -------------- ------------- -------------- ------------- -------------- Balances at December 31, 1997 $9,481,208 ($59,521) $9,421,687 $9,766 $9,431,453 Formation Loan collections 0 15,582 15,582 0 15,582 Net Income 127,700 0 127,700 1,290 128,990 Early withdrawal penalties (2,733) 1,731 (1,002) 0 (1,002) Partners withdrawals (300,107) 0 (300,107) (1,290) (301,397) -------------- ------------- -------------- ------------- -------------- Balances at March 31, 1998 $9,306,068 $(42,208) $9,263,860 $9,766 $9,273,626 ============== ============= ============== ============= ============== See accompanying notes to financial statements
REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998 and MARCH 31, 1997 (unaudited) Mar 31, 1998 Mar 31, 1997 (unaudited) (unaudited)
---------------- ---------------- Cash flows from operating activities: Net income $128,990 $136,818 Adjustments to reconcile net income to net cash provided by operating activities: Provision for doubtful accounts 21,625 36,766 Provision for Losses on real estate held for sale 186 13,434 Early withdrawal penalty credited to income (1,002) (1,172) (Increase) decrease in assets: Accrued interest & advances (51,068) (118,683) Prepaid expenses and other assets 0 0 Increase (decrease) in liabilities: Accounts payable and accrued expenses 0 0 Deferred Interest on Mortgage Investments (898) (18,522) ---------------- ---------------- Net cash provided by operating activities 97,833 48,641 ---------------- ---------------- Cash flows from investing activities: Principal collected on Mortgage Investments 146,395 95,942 Mortgage Investments made (493,793) (31,063) Additions to real estate held for sale (4,346) (26,726) Dispositions of real estate held for sale 223,124 320,121 Investment in Partnership (14,610) (44,695) ---------------- ---------------- Net cash provided by (used in) investing activities (143,230) 313,579 ---------------- ---------------- Cash flows from financing activities: Net increase (decrease) in note payable-bank 168,989 (55,500) Partners withdrawals (301,397) (383,418) Formation Loan collections 15,582 15,582 ---------------- ---------------- Net cash provided by (used in) financing activities (116,826) (423,336) ---------------- ---------------- Net increase (decrease) in cash (162,223) (61,116) Cash - beginning of period 331,143 180,597 ---------------- ---------------- Cash - end of period $168,920 $119,481 ================ ================ See accompanying notes to financial statements.
REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 (audited) AND MARCH 31, 1998 (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 Mortgage Investments secured by Deeds of Trust on California real estate. Mortgage Investments are being arranged and serviced by Redwood Home Loan Co. (RHL Co.), dba Redwood Mortgage, an affiliate of the General Partners. 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 by Redwood Mortgage., 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 (the Formation Loan) relating to contributed capital of $9,781,366. The Formation Loan is unsecured, and is being repaid, without interest, over ten years, commencing December 31, 1989. The following reflects transactions in the Formation Loan account through March 31, 1998: Amount loaned during 1987,1988 and 1989 $623,255 Less: Cash repayments $528,877 Allocation of early withdrawal penalties 52,170 581,047 ============ ----------- Balance March 31, 1998 $42,208 ===========
The Formation Loan, which is receivable from Redwood Mortgage, an affiliate of the General Partners, has been deducted from Limited Partners capital in the balance sheet. As amounts are collected from Redwood Mortgage, the deduction from capital will be reduced. 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. Such costs have been fully amortized and allocated to the Partners. 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 Mortgage Investment is categorized as impaired, interest is no longer accrued thereon. REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 (audited) AND MARCH 31, 1998 (unaudited) B. Management Estimates In preparing the financial statements, management is required to make estimates based on the information available that affects the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the related periods. Such estimates relate principally to the determination of the allowance for doubtful accounts, including the valuation of impaired mortgage investments, and the valuation of real estate acquired through foreclosure. Actual results could differ significantly from these estimates. C. Mortgage Investments, Secured by Deeds of Trust The Partnership has both the intent and ability to hold the Mortgage Investments to maturity, i.e., held for long-term investment. They are therefore valued at cost for financial statement purposes with interest thereon being accrued by the simple interest method. Financial Accounting Standards Board Statements (SFAS) 114 and 118 (effective January 1, 1995) provide that if the probable ultimate recovery of the carrying amount of a Mortgage Investment, with due consideration for the fair value of collateral, is less than the recorded investment and related amounts due and the impairment is considered to be other than temporary, the carrying amount of the investment (cost) shall be reduced to the present value of future cash flows. The adoption of these statements did not have a material effect on the financial statements of the Partnership because that was the valuation method previously used on impaired loans. At March 31, 1998, December, 31, 1997, 1996 and 1995, reductions in the cost of Mortgage Investments categorized as impaired by the Partnership totalled $0, $0, $13,006 and $45,933, respectively. The reduction in stated value was accomplished by increasing the allowance for doubtful accounts. As presented in Note 10 to the financial statements as of March 31, 1998, the average mortgage investment to appraised value of security at the time the loans were consummated was 68.96%. When a loan is valued for impairment purposes, an updating is made in the valuation of collateral security. However, a low loan to value ratio tends to minimize reductions for impairment. D. Cash and Cash Equivalents For purposes of the statements of cash flows, cash and cash equivalents include interest bearing and non-interest bearing bank deposits. E. Real Estate Owned, Held for Sale Real estate owned, held for sale, includes real estate acquired through foreclosure and is stated at the lower of the recorded investment in the property, net of any senior indebtedness, or at the propertys estimated fair value, less estimated costs to sell. REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 (audited) AND MARCH 31, 1998 (unaudited) The following schedule reflects the costs of real estate acquired through foreclosure and the recorded reductions to estimated fair values, less estimated costs to sell as of March 31, 1998 and December 31, 1997 and 1996: March 31, December 31, December 31, 1998 1997 1996 ---------------- ---------------- ----------------
Costs of properties $368,031 $449,319 $1,743,382 Reduction in value 139,851 140,000 302,375 ---------------- ---------------- ---------------- Fair value reflected in financial statements $228,180 $309,319 $1,441,007 ================ ================ ================
Effective January 1, 1996, the Partnership adopted the provisions of statement No 121 (SFAS 121) of the Financial Accounting Standards Board, Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be disposed of. The adoption of SFAS 121 did not have a material impact on the Partnerships financial position because the methods indicated were essentially those previously used by the Partnership. F. Investment in Partnership (see note 5) The Partnership accounts for its investment in a partnership as an investment in real estate, which is at the lower of costs or fair value, less estimated costs to sell. At March 31, 1998, cost is considered less than fair value and the investment is stated at cost in the financial statements. G. Income Taxes No provision for Federal and State income taxes is made in the financial statements since income taxes are the obligation of the partners if and when income taxes apply. H. Organization and Syndication Costs The Partnership bears its own organization and syndication costs (other than certain sales commissions and fees described above) including legal and accounting expenses, printing costs, selling expenses, 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. I. Allowance for Doubtful Accounts Mortgage Investments and the related accrued interest, fees and advances are analyzed on a continuous basis for recoverability. Delinquencies are identified and followed as part of the Mortgage Investment system. A provision is made for doubtful accounts to adjust the allowance for doubtful accounts to an amount considered by management to be adequate with due consideration to collateral value to provide for unrecoverable accounts receivable, including impaired Mortgage Investments, unspecified mortgage investments, accrued interest and advances on Mortgage Investments, and other accounts receivable (unsecured). The composition of the allowance for doubtful accounts as of March 31, 1998, December 31, 1997 and 1996 was a follows: REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 (audited) AND MARCH 31, 1998 (unaudited) March 31, December 31, December 31, 1998 1997 1996 ---------------- ---------------- ----------------
Impaired Mortgage Investments $0 $0 $13,006 Unspecified Mortgage Investments 26,650 13,432 59,844 Accounts receivable, unsecured 23,775 15,182 180,000 ================ ================ ================ $50,425 $28,614 $252,850 ================ ================ ================
J. Net Income Per $1,000 Invested Amounts reflected in the statements of income as net income per $1,000 invested by Limited Partners for the entire period are actual amounts allocated to Limited Partners who have their investment throughout the period and have elected to either leave their earnings to compound or have elected to receive monthly distributions of their net income. Individual income is allocated each month based on the Limited partners pro rata share of Partners Capital. Because the net income percentage varies from month to month, amounts per $1,000 will vary for those individuals who made or withdrew investments during the period, or select other options. However, the net income per $1,000 average invested has approximated those reflected for those whose investments and options have remained constant. 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 Mortgage 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 loans 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. Mortgage Servicing Fees Monthly mortgage servicing fees are paid to Redwood Mortgage 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 Mortgage Investment is located. Mortgage servicing fees of $8,325, $39,918, and $44,565, were incurred for three months ended March 31, 1998, and for years 1997 and 1996. 6 C. Asset Management Fee The General Partners are authorized to receive monthly fees for managing the Partnerships Mortgage Investment portfolio and operations of up to 1/32 of 19 (3/8 of 1% annual). There were no management fees incurred for the three months ended March 31, 1998, and for years 1997 and 1996 respectively. D. Other Fees The Partnership Agreement provides for other fees such as reconveyance, mortgage assumption and mortgage 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 1996, 1997, and three months period ended March 31, 1998, clerical costs totaling $31,838 $27,786 and $6,319, respectively, were reimbursed to Redwood Mortgage and are included in expenses in the Statements of Income. 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 had occurred by March 31, 1998. 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. REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 (audited) AND MARCH 31, 1998 (unaudited) 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 Mortgage. 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 Partnership's 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, CA, with costs totalling $722,751 has been invested with that of two other Partnerships (total cost to date, primarily land, of $1,488,817) in a partnership which is in the process of constructing approximately 63 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 - NOTE PAYABLE BANK - LINE OF CREDIT The Partnership originally had a bank line of credit secured by its Mortgage Investment portfolio up to $2,500,000 at 1% over prime. The balances were $1,530,511 and $899,011 at December 31, 1996 and 1997, respectively, and the interest rate at December 31, 1997 was 9.5% (8.50% prime + 1%). Commencing January 1, 1998, the Partnership had reduced its borrowing limit to $2,000,000 with same conditions as previously stipulated. Balance at March 31, 1998, was $1,068,000 and the Partnership was current in its interest payment. The line of credit expires December 31, 1998. 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 $23,775. 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. REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 (audited) AND MARCH 31, 1998 (unaudited) NOTE 8 - INCOME TAXES The following reflects a reconciliation from net assets (Partners Capital) reflected in the financial statements to the tax basis of those net assets: March 31, Dec. 31 Dec. 31 1998 1997 1996
--------------- -------------- -------------- Net assets - Partners Capital per financial $9,273,626 $9,431,453 $10,395,018 statements Formation Loan receivable 42,208 59,521 121,849 Allowance for doubtful accounts 50,425 28,614 252,850 =============== ============== ============== Net assets tax basis $9,366,259 $9,519,588 $10,769,717 =============== ============== ============== In 1997, approximately 72% of taxable income was allocated to tax exempt organizations i.e., retirement plans. Such plans do not have to file income tax returns unless their unrelated business income exceeds $1,000. Applicable amounts become taxable when distribution is made to participants.
NOTE 9 - FAIR VALUE OF FINANCIAL 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) The Carrying Value of Mortgage Investments - (see note 2 (c)) is $8,452,382. The March 31, 1998 fair value of these investments of $8,475,037 is estimated based upon projected cash flows discounted at the estimated current interest rates at which similar loans would be made. The applicable amount of the allowance for doubtful accounts along with accrued interest and advances related thereto should also be considered in evaluating the fair value versus the carrying value. REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 (audited) AND MARCH 31, 1998 (unaudited) NOTE 10- ASSET CONCENTRATIONS AND CHARACTERISTICS The Mortgage Investments are secured by recorded deeds of trust. At March 31, 1998, there were 59 Mortgage Investments outstanding with the following characteristics:
Number of Mortgage Investments outstanding 59 Total Mortgage Investments outstanding $8,452,382 Average Mortgage Investment outstanding $143,261 Average Mortgage Investment as percent of total 1.69% Average Mortgage Investment as percent of Partners Capital 1.54% Largest Mortgage Investment outstanding $1,376,117 Largest Mortgage Investment as percent of total 16.28% Largest Mortgage Investment as percent of Partners Capital 14.84% Number of counties where security is located (all California) 14 Largest percentage of Mortgage Investments in one county 28.86% Average Mortgage Investment to appraised value of security at time Mortgage Investment was consummated 68.96% Number of Mortgage Investments in foreclosure 4 The following categories of mortgage investments are pertinent at March 31, 1998, and December 31, 1997 and 1996:
March 31 December 31 December 31 1998 1997 1996 --------------- ---------------- -----------------
First Trust Deeds $4,474,974 $4,588,169 $4,928,794 Second Trust Deeds 3,330,953 2,869,543 3,729,581 Third Trust Deeds 396,455 397,273 405,567 Fourth Trust Deeds 250,000 249,999 249,982 --------------- ---------------- ----------------- Total mortgage investments 8,452,382 8,104,984 9,313,924 Prior liens due other lenders 16,241,184 11,075,429 17,200,385 ---------------- ----------------- =============== Total debt $24,693,566 $19,180,413 $26,514,309 =============== ================ ================= Appraised property value at time of loan $35,810,217 $28,422,684 $40,225,303 =============== ================ ================= Total investments as a percent of appraisals 68.96% 67.48% 65.91% =============== ================ ================= Investments by Type of Property Owner occupied homes $943,166 $1,057,067 $1,443,835 Non-Owner occupied homes 379,153 380,142 973,498 Apartments 1,261,995 791,755 786,362 Commercial 5,868,068 5,876,020 6,110,229 =============== ================ ================= $8,452,382 $8,104,984 $9,313,924 =============== ================ =================
REDWOOD MORTGAGE INVESTORS VI (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 (audited) AND MARCH 31, 1998 (unaudited) Scheduled maturity dates of mortgage investments as of March 31, 1998 are as follows: Year Ending December 31, ------------------- 1998 $3,776,304 1999 1,898,255 2000 407,601 2001 504,729 2002 424,225 Thereafter 1,441,268 ================ $8,452,382 ================ The scheduled maturities for 1998 include $2,267,032 in Mortgage Investments which are past maturity at March 31, 1998. $54,493 of those Mortgage Investments were categorized as delinquent over 90 days. Six Mortgage Investments with principal outstanding of $498,207 had interest payments overdue in excess of 90 days. The cash balance at March 31, 1998 of $168,920 was in one bank with interest bearing balances totalling $146,234. The balances exceeded FDIC insurance limits (up to $100,000 per bank) by $68,920. As and when deposits in the Partnerships bank accounts increase significantly beyond the insured limit, the funds are either placed in new Mortgage Investments or used to pay down on the line of credit balance. Managements Discussion and Analysis of Financial Condition and Results of Operations On September 2, 1989, the Partnership had sold 97,725.94 Units and its contributed capital totalled $9,772,594 of the approved $12,000,000 issue, in Units of $100 each. As of that date the offering was formally closed. On March 31, 1998, the Partnerships net capital totalled $9,273,626. The Partnership began funding Mortgage Investments in October 1987. The Partnerships Mortgage Investments outstanding for the years ended December 31, 1995, 1996, 1997 and the three months through March 31, 1998, were $10,402,491, $9,313,924, $8,104,984, and $8,452,382 respectively. The decrease in Mortgage Investments outstanding of $1,088,567 from December 31, 1995 to December 31, 1996, was due primarily to the Partnership utilizing Mortgage Investment payoffs to meet Limited Partner capital liquidations. The decrease in Mortgage Investments outstanding of $861,542 from December 31, 1996 to March 31, 1998, was again due primarily to the Partnership utilizing Mortgage Investment payoffs to meet Limited Partner capital liquidations. During the years 1996, 1997, and three months period to March 31, 1998, Mortgage Investment principal collections exceeded Limited Partner liquidations. Currently, mortgage interest rates are lower than those prevalent at the inception of the Partnership. New Mortgage Investments will be originated at these lower interest rates. The result is to reduce the average return across the entire Mortgage Investment portfolio held by the Partnership. In the future, interest rates likely will change from their current levels. The General Partners cannot at this time predict at what levels interest rates will be in the future. Although the rates charged by the Partnership are influenced by the level of interest rates in the market, the General Partners do not anticipate that rates charged by the Partnership to its borrowers will change significantly from the beginning of 1998 over the next 12 months. Based upon the rates payable in connection with the existing Mortgage Investments, the current and anticipated interest rates to be charged by the Partnership and the General Partners experience, the General Partners anticipate that the annualized yield this year will range only slightly higher from the past year. Each year, the Partnership negotiates a line of credit with a commercial bank which is secured by its Mortgage Investment portfolio. The outstanding balance of the bank line of credit was $2,041,011, $1,530,511, $899,011 and $1,068,000 for the years ended December 1995, 1996, 1997 and three months through March 31, 1998, respectively. The interest rate on the bank line of credit has remained at Prime plus one percent for the preceding three years. For the three months ended March 31, 1998, and the years ended December 31, 1997, 1996 and 1995, interest on Note Payable-Bank was $20,296, $133,577, $158,175 and $212,915 respectively. The primary reason for this decrease was that the Partnership had a lower overall credit facility utilization from 1995 to 1996 and from 1996 to March 31, 1998. As of March 31, 1998, the Partnership has borrowed $1,068,000 at an interest rate of Prime plus one percent. This added source of funds will help in maximizing the Partnership yield by allowing the Partnership to minimize the amount of funds in lower yield investment accounts when appropriate Mortgage Investments are not currently available and because the Mortgage Investments made by the Partnership usually 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. The Partnership's operating results and delinquencies are within the normal range of the General Partners expectations, based upon their experience in managing similar Partnerships over the last twenty- one years. Foreclosures are a normal aspect of partnership operations and the General Partners anticipate that they will not have a material effect on liquidity. As of March 31, 1998, there were four properties in foreclosure. Cash is continually being generated from interest earnings, late charges, prepayment penalties, amortization of notes and pay-off of notes. Currently, this amount exceeds Partnership expenses and earnings and principal payout requirements. As Mortgage Investment opportunities become available, excess cash and available funds are invested in new Mortgage 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. Management provided $344,807, $312,684, $268,101 and $21,811 as provision for doubtful accounts for the years ended December 31, 1995, December 31, 1996, December 31, 1997, and for the three months through March 31, 1998, respectively. The decrease in the provision reflects the decrease in the amount of REO, unsecured receivables and the decreasing levels of delinquency within the portfolio. Additionally, the General Partners felt that the bottom of the real estate cycle had been reached, reflecting a decreasing need to set aside reserves for the continuously declining real estate values as had been the case in the early 1990s in the California real estate market. As of March 31, 1998, the Partnership reduced the REO balance from $1,501,712 as of December 31, 1995, to $228,180 through March 31, 1998. This reduction will assist the Partnership in increasing yields in 1998, as assets previously lying idle, may now produce current income. 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 1997, and the State is well - positioned for fast growth. This improvement is reflective in increasing property values, in job growth, personal income growth, etc., which should translate into more loan activity. Which of course, is healthy for the Partnerships lending activity. The Partnerships interest in land, acquired through foreclosure, located in East Palo Alto, CA, with costs totalling $722,751, $708,141 and $496,040 for the three months ended March 31, 1998 and for the years ended December 31, 1997 and 1996, respectively has been invested with that of two other Partnerships in a partnership which is in the process of obtaining approval for constructing approximately 63 single family homes for sale. (The Development). The proposed Development has gained significant public awareness. Incorporated into the proposed Development are various mitigation measures not limited to, mitigation of hazardous materials existing on the property, endangered species, and proximity to the San Francisco Baylands. The preceding issues and others have sparked significant public controversy. Opposition both for and against the proposed Development exists. Notwithstanding the above, the General Partners believe that pursuit of the proposed Development approval to be in the interest of the Partnership. This investment has been classified in the financial statements as Investment in Partnership. At the time of subscription to the Partnership, Limited Partners made an irrevocable decision to either take distributions of earnings monthly, quarterly or annually or to compound earnings in their capital account. For the years ended December 31, 1995, December 31, 1996, 1997, and three months through March 31, 1998, the Partnership made distributions of earnings to Limited Partners after allocation of syndication costs of, $296,915, $288,796, $252,378 and $57,159 respectively. Distribution of Earnings to Limited Partners after allocation of syndication costs for the years ended December 31, 1995, December 31, 1996, December 31, 1997, and three months to March 31, 1998 to Limited Partners capital accounts and not withdrawn was $315,250, $293,484, $271,517 and $70,541 respectively. As of December 31, 1995, December 31, 1996 and December 31, 1997, Limited Partners electing to withdraw earnings represented 50 %, 49 % and 46% of the Limited Partners outstanding capital accounts. The Partnership also allows the Limited Partners to withdraw their capital account subject to certain limitations (see liquidation provisions of Partnership Agreement). For the years ended December 31, 1995, December 31, 1996, December 31, 1997, and for the three months ended March 31, 1998, $43,364, $96,362, $159,732 and $33,301 respectively, were liquidated subject to the 10% and/or 8% penalty for early withdrawal. These withdrawals are within the normally anticipated range that the General Partners would expect in their experience in this and other Partnerships. The General Partners expect that a small percentage of Limited Partners will elect to liquidate their capital accounts over one year with a 10% and/or 8% 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, 1995, December 31, 1996, December 31, 1997, and three months through March 31, 1998, respectively and is expected by the General Partners to commonly occur at these levels. Additionally, for the years ended December 31, 1995, December 31, 1996, December 31, 1997, and the three months through March 31, 1998, $849,589, $1,086,737, $1,137,677 and $212,380 respectively, were liquidated by Limited Partners who have elected a liquidation program over a period of five years or longer. Once the initial five year hold period has passed (which has), the General Partners expect to see an increase in liquidations due to the ability of Limited Partners to withdraw without penalty. This ability to withdraw after five years by Limited Partners has the effect of providing Limited Partner liquidity which the General Partners then expect a portion of the Limited Partners to avail themselves of. This has the anticipated effect of the partnership growing, primarily through reinvestment of earnings in years one through five. The General Partners expect to see increasing numbers of Limited Partner withdrawals in years five through eleven, at which time the bulk of those Limited Partners who have sought withdrawal will have been liquidated. After year eleven, liquidation generally subsides and the Partnership capital again tends to increase. Actual liquidation of both capital and earnings from year five (1992) through year ten (1997) is shown hereunder: Years ended December 31, 1992 1993 1994 1995 1996 1997 ----------- ---------- ------------ ------------- ------------ -------------
Earnings $323,037 377,712 303,014 303,098 294,678 257,670 Capital *$232,370 528,737 729,449 892,953 1,183,099 1,297,410 =========== ========== ============ ============= ============ ============= Total $555,407 $906,449 $1,032,463 $1,196,051 $1,477,777 $1,555,080 =========== ========== ============ ============= ============ ============= *These amounts represent gross of early withdrawal penalties.
COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP 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 11-12, 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 three months ended march 31, 1998. All such compensation is in compliance with the guidelines and limitations set forth in the Prospectus. Entity Receiving Description of Compensation and Services Rendered Amount Compensation - ---------------------- ---------------------------------------------- ---------- I. Redwood Mortgage Mortgage Servicing Fee for servicing Mortgage Investments $8,325 General Partners &/or Affiliates Asset Management Fee for managing assets $0 General Partners 1% interest in profits $1,290 II. FEES PAID BY BORROWERS ON MORTGAGE INVESTMENTS PLACED BY COMPANIES RELATED TO THE GENERAL PARTNERS WITH THE PARTNERSHIP (EXPENSES OF BORROWERS NOT OF THE PARTNERSHIP): Redwood Mortgage Mortgage Brokerage Commissions for services in connection with the review, selection, evaluation, negotiation, and extension of the Mortgage Investments paid by the borrowers and not by the Partnership $0 Redwood Mortgage Processing and Escrow Fees for services in connection with notary, document preparation, credit investigation, and escrow fees payable by the borrowers and not by the Partnership $0 III. IN ADDITION, THE GENERAL PARTNER AND/OR RELATED COMPANIES PAY CERTAIN EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE STATEMENT OF INCOME.......................................$6,319 As of March 31, 1998, a summary of the Partnership's Mortgage Investment portfolio is set forth below. Mortgage Investments as a Percentage of Total Mortgage Investments First Trust Deeds $4,474,974.18 Appraised Value of Properties 6,709,856.00 Total Investment as a % of Appraisal 66.69% First Trust Deeds $4,474,974.18 Second Trust Deed Mortgage Investments 3,330,953.10 Third Trust Deed Mortgage Investments 396,455.27 Fourth Trust Deed Mortgage Investments* 249,999.40 -------------------- 8,452,381.95 First Trust Deeds due other Lenders 15,072,549.00 Second Trust Deeds due other Lenders 990,064.00 Third Trust Deeds due other Lenders 178,571.00 Total Debt $24,693,565.95 Appraised Property Value $35,810,217.00 Total Investments as a % of Appraisal 68.96% Number of Mortgage Investments Outstanding 59 Average Investment 143,260.71 Average Investment as a % of Net Assets 1.54% Largest Investment Outstanding 1,376,117.03 Largest Investment as a % of Net Assets 14.84% Mortgage Investments as a Percentage of Total Mortgage Investments First Trust Deeds 52.94% Second Trust Deeds 39.41% Third Trust Deeds 4.69% Fourth Trust Deeds 2.96% -------------------- 100.00% Total Mortgage Investments by Type Amount Percent of Property Owner Occupied Homes $943,165.71 11.16% Non-Owner Occupied Homes 379,153.72 4.49% Apartments 1,261,994.66 14.93% Commercial 5,868,067.86 69.42% ----------------- ----------- Total $8,452,381.95 100.00% *Footnote on following page The following is a distribution of Mortgage Investments outstanding as of March 31, 1998 by Counties. Santa Clara $2,439,676.92 28.86% Alameda 1,888,579.28 22.34% San Mateo 1,138,979.19 13.48% Contra Costa 768,939.59 9.10% Sacramento 634,125.81 7.50% San Francisco 394,843.33 4.67% Stanislaus 371,788.36 4.40% Sonoma 300,871.11 3.56% El Dorado 214,773.21 2.54% Ventura 91,000.00 1.08% Shasta 81,577.76 0.97% Monterey 71,354.46 0.84% Santa Cruz 35,620.44 0.42% Solano 20,252.49 0.24% ------------------- ----------- Total $8,452,381.95 1.00% * Redwood Mortgage Investors VI, together with other Redwood partnerships hold 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%. In addition to the borrower paying an interest rate of 12.25%, the Partnership and other lenders will also participate in profits. The General Partners have had previous loan activity with this borrower which had been concluded successfully, with extra earnings earned for the other partnerships involved. Statement of Condition of Mortgage Investments: Number of Mortgage Investments in Foreclosure 4 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 three month period ending March 31, 1998. 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 12th day of May, 1998. REDWOOD MORTGAGE INVESTORS VI By: /s/ D. Russell Burwell --------------------------------------------- D. Russell Burwell, General Partner By: /s/ Michael R. Burwell --------------------------------------------- Michael R. Burwell, General Partner By: Gymno Corporation, General Partner By: /s/ D. Russell Burwell --------------------------------------------- D. Russell Burwell, President By: /s/ Michael R. Burwell --------------------------------------------- Michael R. Burwell, Secretary/Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacity indicated on the 12th day of May, 1998. Signature Title Date /s/ D. Russell Burwell - ----------------------- D. Russell Burwell General Partner May 12, 1998 /s/ Michael R. Burwell - ----------------------- Michael R. Burwell General Partner May 12, 1998 /s/ D. Russell Burwell - ----------------------- D. Russell Burwell President of Gymno Corporation, May 12, 1998 (Principal Executive Officer); Director of Gymno Corporation /s/ Michael R. Burwell - ----------------------- Michael R. Burwell Secretary/Treasurer of Gymno May 12, 1998 Corporation (Principal Financial and Accounting Officer); Director of Gymno Corporation EX-27 2 FDS --
5 3-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 168920 0 9272200 50425 0 0 0 0 10341626 0 0 1068000 0 0 9273626 10341626 0 203053 0 31956 0 21811 20296 128990 0 128990 0 0 0 128990 .00 .00
-----END PRIVACY-ENHANCED MESSAGE-----