General Partners and Other Related Parties

9 Months Ended

Sep. 30, 2023

Related Party Transactions [Abstract]

General Partners and Other Related Parties

NOTE 3 – GENERAL PARTNERS AND OTHER RELATED PARTIES

The Partnership Agreement provides for fees as compensation to the manager and for reimbursement of qualifying expenses, as detailed below.

Mortgage servicing fees

The manager acting as servicing agent with respect to all loans is entitled to receive a servicing fee of up to 1.5% annually of the unpaid principal balance of the loan portfolio. The mortgage servicing fees are accrued monthly on all loans. Remittance to RMC is made monthly unless the loan has been assigned a specific loss reserve, at which point remittance is deferred until the specific loss reserve is no longer required, or the property has been acquired by the partnership.

Asset Management Fees

The general partners are entitled to monthly fees for managing the business and affairs of RMI VIII, including management of the partnership’s loan portfolio and operations, of up to 1/32 of 1% of the “net asset value” of the partnership (3/8 of 1% annually).

Costs from RMC

The manager is entitled to request reimbursement for operations expense incurred on behalf of RMI VIII, including without limitation, RMC’s personnel and non-personnel costs incurred for qualifying business activities, including investor services, accounting, tax and data processing, postage and out-of-pocket general and administration expenses. Qualifying personnel/compensation costs and consulting fees are tracked by business activity, and then costs of qualifying activities are allocated to RMI VIII pro-rata based on the percentage of RMI VIII’s limited partners’ capital to the total capital of all related mortgage funds managed by RMC. Certain other non-personnel, qualifying costs such as postage and out-of-pocket general and administrative expenses can be tracked by RMC as specifically attributable to RMI VIII; other non-personnel, qualifying costs (e.g., RMC’s accounting and audit fees, legal fees and expenses, occupancy, and insurance premiums) are allocated pro-rata based on the percentage of RMI VIII's partners' capital to total capital of the related mortgage funds managed by RMC.

Commissions and fees are paid by the borrowers to RMC

-Brokerage commissions, loan originations

For periods prior to the Dissolution Date, fees in connection with the review, selection, evaluation and negotiation of loans (including extensions), the general partners collected loan brokerage commissions (points) limited to an amount not to exceed 4% of the total partnership assets per year. The loan brokerage commissions were paid by the borrowers to RMC, and thus were not an expense of the partnership. Loan brokerage commissions paid by the borrowers to RMC approximated $22 thousand and $269 thousand for the three months ended September 30, 2023 and 2022, respectively, and $172 thousand and $902 thousand for the nine months ended September 30, 2023 and 2022, respectively.

For periods after the Dissolution Date, all fees paid by the borrowers to RMC are extension fees.

-Other fees

RMC receives fees for processing, notary, document preparation, credit investigation, reconveyance and other mortgage related services. The amounts received are customary for comparable services in the geographical area where the property securing the loan is located, and are payable solely by the borrower and not by the partnership.

Formation loan

Commissions for sales of limited partnership units paid to broker-dealers (“B/D sales commissions”) were paid by RMC and were not paid directly by the partnership out of offering proceeds. Instead, the partnership advanced to RMC amounts sufficient to pay the B/D sales commissions and premiums paid to partners in connection with unsolicited orders up to 7% of offering proceeds. The receivable arising from the advances is unsecured and non-interest bearing and is referred to as the “formation loan”. Since its inception, the partnership’s advances totaled $22.6 million, of which $2.7 million remains outstanding at September 30, 2023.

For periods prior to the Dissolution Date, RMC was repaying the formation loan principally from loan brokerage commissions earned on loans, early withdrawal penalties on partner withdrawals and other fees paid by the partnership. If both or either one of the initial general partners was removed as a general partner by the vote of holders of a majority of the limited partnership units, and if such successor or additional general partner(s) began using any other loan brokerage firm for the placement of loans, RMC would have been immediately released from any further obligation under the formation loans (except for a proportionate share of the principal installment due at the end of that year). In addition, if both of the general partners were removed, no successor general partners were elected, the partnership was liquidated and RMC was no longer receiving any payments for services rendered, the debt on the formation loans was to be forgiven and RMC would have been immediately released from any further obligations under the formation loans. As such, the formation loan is presented as contra equity.

Prior to the Dissolution Date, the formation loan was being repaid by RMC in annual installments of approximately $650 thousand which was payable by RMC either in full on December 31st of each calendar year during the term of the partnership (each, an “Annual Payment Date”) or in four equal quarterly installments beginning on the Annual Payment Date.

The formation loan transactions for the nine months ended September 30 are presented in the following table ($ in thousands).

	2023		2022
Balance, January 1	$	2,702	$	3,361
Payments received from RMC		—		(496	)
Balance, September 30	$	2,702	$	2,865

Effective as of the Dissolution Date, RMC is entitled to collect the Dissolution Fee, which is equal to 7.0% of each capital distribution to be made to the limited partners over the course of the wind-up period. The Dissolution Fee amounts received by RMC are intended to first be remitted back to the partnership in satisfaction of amounts owed by RMC on the formation loan and to restore the general partners’ capital deficit (i.e., the deficit restoration obligation) required by the Partnership Agreement. Any proceeds of the Dissolution Fee remaining after payment of the formation loan and restoration of the general partners’ capital deficit will be retained by RMC. The Dissolution Fee will be treated as an expense of the partnership and included in the allocation of income/losses to limited partners’ capital accounts.

Limited partner capital - withdrawals

Withdrawals of limited partners’ capital for the three and nine months ended September 30 are presented in the following table ($ in thousands).

	Three Months Ended September 30,						Nine Months Ended September 30,
Withdrawals	2023			2022			2023			2022
Without penalty	$	—		$	2,900		$	4,284		$	8,741
With penalty		—			239			489			984
Total	$	—		$	3,139		$	4,773		$	9,725
Scheduled, at September 30,	$	—		$	15,708		$	—		$	15,708
Percentage of scheduled withdrawals in end of period capital		0.0	%		26.0	%		0.0	%		26.0	%

Effective as of the Dissolution Date: (i) all limited partners, including limited partners who previously elected not to receive periodic distributions of partnership net income under the Partnership Agreement, begin receiving quarterly distributions of the partnership’s net income (if any); and (ii) all scheduled withdrawals of limited partner capital made pursuant to the Partnership Agreement terminated in favor of quarterly pro rata withdrawals to all limited partners of cash received from the liquidation of partnership assets and available to fund capital distributions in accordance with the distribution provisions set forth in the Plan. For the three months ended September 30, 2023, there were no income allocations or liquidations.

Other related party transactions

-Payable to/receivable from related mortgage funds and manager

From time to time, in the normal course of business operations, the partnership may have payables to and/or receivables from related parties. At September 30, 2023, the payable to related parties of approximately $51 thousand consisted of accounts payable due to the manager. These related party transactions were settled in October 2023. There were no receivables from related parties at September 30, 2023.

At December 31, 2022, the payable to related parties of approximately $154 thousand consisted of accounts payable and cost reimbursements to the manager. At December 31, 2022, the receivable from related parties of approximately $68 thousand consisted of accounts receivable from related mortgage funds. These related party transactions outstanding at December 31, 2022 were settled in March 2023.

-Loan transactions with related mortgage funds

In the ordinary course of business, performing loans may be transferred by executed assignment, in-part or in-full, between the RMC managed mortgage funds at par, which approximates fair value.

In the nine months ended September 30, 2023, RMI VIII transferred to related mortgage funds five performing loans with aggregate principal of approximately $4.0 million at par value, which approximates fair value. The related mortgage funds paid cash for the loans and RMI VIII has no continuing involvement with the loans. No loans were transferred from related mortgage funds to RMI VIII.

In the nine months ended September 30, 2022, RMI VIII transferred to a related mortgage fund four performing loans with aggregate principal of approximately $3.3 million at par value, which approximates fair value. The related mortgage fund paid cash for the loans and RMI VIII has no continuing involvement with the loans. No loans were transferred from related mortgage funds.

-Promissory note repaid to related mortgage fund

In June, 2023, RMI VIII borrowed from a related mortgage fund $3.3 million secured by the net cash flow payable on three mortgage loans totaling approximately $7.5 million which were expected to be paid off by October 1, 2023. The promissory note balance at September 30, 2023 was $2.8 million and matures December 29, 2023 (extended from the original maturity date of October 1, 2023). Interest on the loan accrues at 8.75% per annum through a term ending on the earlier of (i) the payoff of pledged mortgage loans; and (ii) December 29, 2023. The promissory note payable to the related mortgage fund is secured by all proceeds payable to RMI VIII upon the payoff or repayments of the pledged mortgage loans, net of any amounts outstanding by RMI VIII on its line of credit secured by the pledged mortgage loans.