Note 3 - General Partners and Other Related Parties

12 Months Ended

Dec. 31, 2011

Related Party Transactions Disclosure [Text Block]

NOTE 3 – GENERAL PARTNERS AND OTHER RELATED PARTIES

The following commissions and fees are paid by borrowers to the general partners.

Mortgage brokerage commissions

For fees in connection with the review, selection, evaluation, negotiation and extension of loans, the general partners may collect loan brokerage commissions (points) 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 2011 and 2010, loan brokerage commissions paid to the general partners by the borrowers were $0 and $25,000, respectively.

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 the general partners.  In 2011 and 2010, these fees totaled $2,980 and $8,654, respectively.

The following commissions and fees are paid by the partnership to RMC.

Mortgage servicing fees

RMC may earn mortgage servicing fees of up to 1.5% annually of the unpaid principal of the loan portfolio or such lesser amount as is reasonable and customary in the geographic area where the property securing the mortgage is located from RMI VIII. Historically, RMC charged one percent annually, and at times waived additional amounts to improve the partnership’s earnings. Such fee waivers were not made for the purpose of providing the partnership with sufficient funds to satisfy withdrawal requests, nor were such waivers made in order to meet any required level of distributions, as the partnership has no such required level of distributions. RMC does not use any specific criteria in determining the amount of fees, if any, to be waived. The decision to waive fees and the amount, if any, to be waived, is made by RMC in its sole discretion.

Mortgage servicing fees paid to RMC by the partnership are presented in the following table for the years ended December 31, ($ in thousands).

	2011			2010
Chargeable by RMC	$	3,906		$	2,321
Waived by RMC		(1,302	)		(816	)
Charged	$	2,604		$	1,505

Asset management fees

The general partners receive monthly fees for managing the partnership’s loan portfolio and operations of up to 1/32 of 1% of the “net asset value” (3/8 of 1% annually). At times, the general partners have charged less than the maximum allowable rate to enhance the partnership’s earnings. Such fee waivers were not made with the purpose of providing the partnership with sufficient funds to satisfy withdrawal requests, nor to meet any required level of distributions, as the partnership has no such required level of distributions. RMC does not use any specific criteria in determining the exact amount of fees, if any, to be waived. The decision to waive fees and the amount, if any, to be waived, is made by RMC in its sole discretion.

Asset management fees paid to the general partners are presented in the following table for the years ended December 31, ($ in thousands).

	2011		2010
Chargeable by the general partners	$	938	$	1,196
Waived by the general partners		—		—
Charged	$	938	$	1,196

Costs from Redwood Mortgage Corp.

RMC is reimbursed by the partnership for operating expenses incurred on behalf of the partnership, including without limitation, accounting and audit fees, legal fees and expenses, postage and preparation of reports to limited partners, and out-of-pocket general and administration expenses. The decision to request reimbursement of any qualifying charges is made by RMC in its sole discretion. During 2011 and 2010, operating expenses totaling $1,195,000 and $446,000, respectively, were reimbursed to RMC.  To the extent some operating expenses incurred on behalf of RMI VIII were not charged by RMC, the financial position and results of operations for the partnership would be different.

Formation loan

The formation loan transactions are summarized in the following table at December 31, 2011 ($ in thousands).

	Initial Offering of $15,000			1996 Offering of $30,000			2000 Offering of $30,000			2002 Offering of $50,000			2003 Offering of $75,000			2005 Offering of $100,000			Total
Limited Partner contributions	$	14,932		$	29,993		$	29,999		$	49,985		$	74,904		$	100,000		$	299,813
Formation Loan	$	1,075		$	2,272		$	2,218		$	3,777		$	5,661		$	7,564		$	22,567
Unamortized discount on Formation loan		—			—			(2	)		(31	)		(238	)		(1,018	)		(1,289	)
Formation Loan, net		1,075			2,272			2,216			3,746			5,423			6,546			21,278
Repayments		(991	)		(2,099	)		(1,883	)		(2,948	)		(3,414	)		(2,962	)		(14,297	)
Early withdrawal penalties		(84	)		(173	)		(137	)		(100	)		(142	)		(7	)		(643	)
Formation Loan, net at December 31, 2011		—			—			196			698			1,867			3,577			6,338
Unamortized discount on Formation loan		—			—			2			31			238			1,018			1,289
Balance, December 31, 2011	$	—		$	—		$	198		$	729		$	2,105		$	4,595		$	7,627
Percent loaned		7.2	%		7.6	%		7.4	%		7.6	%		7.6	%		7.6	%		7.5	%

Interest has been imputed at the market rate of interest in effect at the date the offerings closed which ranged from 4.00% to 9.50%. An estimated amount of imputed interest is recorded for offerings still outstanding. During 2011 and 2010, $470,000 and $554,000, respectively, were recorded related to amortization of the discount on imputed interest.

The future minimum payments on the formation loan are presented in the following table ($ in thousands).

2012	$	1,898
2013		1,674
2014		1,323
2015		1,163
2016		756
Thereafter		813
Total	$	7,627

Syndication costs

The partnership bears its own syndication costs, other than certain sales commissions, including legal and accounting expenses, printing costs, selling expenses and filing fees. Syndication costs are charged against partners’ capital and are being allocated to individual partners consistent with the partnership agreement.

Through December 31, 2011, syndication costs of $5,010,000 had been incurred by the partnership with the following distribution ($ in thousands).

Costs incurred	$	5,010
Early withdrawal penalties applied		(190	)
Allocated to date		(4,146	)
December 31, 2011 balance	$	674

The syndication costs associated with the offerings is as follows.

· For 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 $14,932,000. Related expenditures totaled $582,000 ($570,000 syndication costs plus $12,000 organization expense) or 3.9% of gross proceeds.

· For the 1996 offering ($30,000,000) were limited to the lesser of 10% of the gross proceeds or $1,200,000 with any excess being paid by the general partners. Gross proceeds of the offering were $29,993,000. Syndication costs totaled $598,000 or 2% of gross proceeds.

· For the 2000 offering ($30,000,000) were limited to the lesser of 10% of the gross proceeds or $1,200,000 with any excess being paid by the general partners. Gross proceeds of the offering were $29,999,000. Syndication costs totaled $643,000 or 2.1% of gross proceeds.

· For the 2002 offering ($50,000,000) were limited to the lesser of 10% of the gross proceeds or $2,000,000 with any excess to be paid by the general partners. Gross proceeds of the offering were $49,985,000. Syndication costs totaled $658,000 or 1.3% of gross proceeds.

· For the 2003 offering ($75,000,000) were limited to the lesser of 10% of the gross proceeds or $3,000,000 with any excess to be paid by the general partners. Gross proceeds of the offering were $74,904,000. Syndication costs totaled $789,000 or 1.1% of gross proceeds.

· For the 2005 offering ($100,000,000) were limited to the lesser of 10% of the gross proceeds or $4,000,000 with any excess to be paid by the general partners. Gross proceeds of the offering were $100,000,000. Syndication costs totaled $1,752,000 or 1.75% of gross proceeds.