UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2016
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to _____________
Commission File Number: 000-27816
REDWOOD MORTGAGE INVESTORS VIII,
a California Limited Partnership
(Exact name of registrant as specified in its charter)
California |
94-3158788 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1825 S. Grant Street, Suite 250, San Mateo, CA |
94402-2678 |
(Address of principal executive offices) |
(Zip Code) |
(650) 365-5341
(Registrant’s telephone number, including area code)
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 such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ YES ☐ NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ YES ☐ NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
|
Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
(Do not check if a smaller reporting company) |
Smaller reporting company |
☒ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ YES ☒ NO
Item 1. FINANCIAL STATEMENTS
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Consolidated Balance Sheets
September 30, 2016 (unaudited) and December 31, 2015 (audited)
($ in thousands)
ASSETS
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
Cash, in banks |
|
$ |
32,234 |
|
|
$ |
56,673 |
|
|
|
|
|
|
|
|
|
|
Loans, |
|
|
|
|
|
|
|
|
Secured by deeds of trust |
|
|
|
|
|
|
|
|
Principal |
|
|
83,385 |
|
|
|
62,740 |
|
Advances |
|
61 |
|
|
|
51 |
|
|
Accrued interest |
|
614 |
|
|
|
372 |
|
|
Loan balance, secured |
|
|
84,060 |
|
|
|
63,163 |
|
|
|
|
|
|
|
|
|
|
Unsecured |
|
|
53 |
|
|
|
69 |
|
Allowance for loan losses |
|
|
— |
|
|
|
— |
|
Loans, net |
|
|
84,113 |
|
|
|
63,232 |
|
|
|
|
|
|
|
|
|
|
Real estate owned (REO) |
|
|
76,200 |
|
|
|
82,949 |
|
Other assets, net |
|
|
681 |
|
|
|
4,281 |
|
Total assets |
|
$ |
193,228 |
|
|
$ |
207,135 |
|
LIABILITIES AND PARTNERS’ CAPITAL
Liabilities |
|
|
|
|
|
|
|
|
Mortgages payable |
|
$ |
27,089 |
|
|
$ |
27,509 |
|
Less unamortized debt issuance costs |
|
|
(354 |
) |
|
|
(398 |
) |
Mortgages payable, net |
|
|
26,735 |
|
|
|
27,111 |
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
507 |
|
|
|
336 |
|
|
Payable to affiliate |
|
|
— |
|
|
|
12 |
|
Total liabilities |
|
|
27,242 |
|
|
|
27,459 |
|
|
|
|
|
|
|
|
|
|
Partners’ capital |
|
|
|
|
|
|
|
|
Limited partners’ capital, subject to liquidation, net |
|
|
173,447 |
|
|
|
187,495 |
|
General partners’ capital (deficit) |
|
|
(842 |
) |
|
|
(885 |
) |
Total partners’ capital, net |
|
|
172,605 |
|
|
|
186,610 |
|
|
|
|
|
|
|
|
|
|
Receivable from affiliate (formation loan) |
|
|
(6,619 |
) |
|
|
(6,934 |
) |
|
|
|
|
|
|
|
|
|
Partners’ capital subject to liquidation, net of formation loan |
|
|
165,986 |
|
|
|
179,676 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners’ capital |
|
$ |
193,228 |
|
|
$ |
207,135 |
|
The accompanying notes are an integral part of these consolidated financial statements.
2
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Consolidated Income Statements
For the Three and Nine Months Ended September 30, 2016 and 2015
($ in thousands) (unaudited)
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Revenues, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
2,235 |
|
|
$ |
1,099 |
|
|
$ |
5,322 |
|
|
$ |
3,982 |
|
Late fees |
|
|
34 |
|
|
|
7 |
|
|
|
41 |
|
|
|
27 |
|
Revenue, loans |
|
|
2,269 |
|
|
|
1,106 |
|
|
|
5,363 |
|
|
|
4,009 |
|
Provision for (recovery of) loan losses |
|
|
— |
|
|
|
564 |
|
|
|
(25 |
) |
|
|
964 |
|
Loans, net |
|
|
2,269 |
|
|
|
542 |
|
|
|
5,388 |
|
|
|
3,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental operations, net |
|
|
518 |
|
|
|
1,173 |
|
|
|
1,783 |
|
|
|
3,575 |
|
Interest on mortgages |
|
|
(235 |
) |
|
|
(641 |
) |
|
|
(737 |
) |
|
|
(1,413 |
) |
Rental operations, net of mortgage interest |
|
|
283 |
|
|
|
532 |
|
|
|
1,046 |
|
|
|
2,162 |
|
Realized gains/(losses) on sales |
|
|
375 |
|
|
|
1,871 |
|
|
|
1,159 |
|
|
|
3,863 |
|
Impairment (loss)/gain |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
573 |
|
Holding costs, net of other income |
|
|
(18 |
) |
|
|
113 |
|
|
|
533 |
|
|
|
31 |
|
REO, net |
|
|
640 |
|
|
|
2,516 |
|
|
|
2,738 |
|
|
|
6,629 |
|
Total revenues, net |
|
|
2,909 |
|
|
|
3,058 |
|
|
|
8,126 |
|
|
|
9,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing fees |
|
|
348 |
|
|
|
255 |
|
|
|
875 |
|
|
|
832 |
|
Asset management fees |
|
|
167 |
|
|
|
181 |
|
|
|
515 |
|
|
|
548 |
|
Costs from Redwood Mortgage Corp. |
|
|
468 |
|
|
|
486 |
|
|
|
1,443 |
|
|
|
1,457 |
|
Professional services |
|
|
227 |
|
|
|
231 |
|
|
|
985 |
|
|
|
731 |
|
Other |
|
|
(12 |
) |
|
|
(3 |
) |
|
|
— |
|
|
|
114 |
|
Total operations expense |
|
|
1,198 |
|
|
|
1,150 |
|
|
|
3,818 |
|
|
|
3,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,711 |
|
|
$ |
1,908 |
|
|
$ |
4,308 |
|
|
$ |
5,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited partners (99%) |
|
$ |
1,694 |
|
|
$ |
1,889 |
|
|
$ |
4,265 |
|
|
$ |
5,932 |
|
General partners (1%) |
|
|
17 |
|
|
|
19 |
|
|
|
43 |
|
|
|
60 |
|
|
|
$ |
1,711 |
|
|
$ |
1,908 |
|
|
$ |
4,308 |
|
|
$ |
5,992 |
|
The accompanying notes are an integral part of these consolidated financial statements.
3
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Consolidated Statements of Changes in Partners’ Capital
For the nine months ended September 30, 2016
($ in thousands) (unaudited)
|
|
Limited |
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ |
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
General |
|
|
Total |
|
|||
|
|
Subject to |
|
|
Partners’ |
|
|
Partners’ |
|
|||
|
|
Liquidation, net |
|
|
Capital (Deficit) |
|
|
Capital |
|
|||
Balance, December 31, 2015 |
|
$ |
187,495 |
|
|
$ |
(885 |
) |
|
$ |
186,610 |
|
Net income |
|
|
4,265 |
|
|
|
43 |
|
|
|
4,308 |
|
Distributions |
|
|
(1,954 |
) |
|
|
— |
|
|
|
(1,954 |
) |
Liquidations |
|
|
(16,359 |
) |
|
|
— |
|
|
|
(16,359 |
) |
Balance, September 30, 2016 |
|
$ |
173,447 |
|
|
$ |
(842 |
) |
|
$ |
172,605 |
|
For the Three Months Ended September 30, 2016
($ in thousands) (unaudited)
|
|
Limited |
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ |
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
General |
|
|
Total |
|
|||
|
|
Subject to |
|
|
Partners’ |
|
|
Partners’ |
|
|||
|
|
Liquidation, net |
|
|
Capital (Deficit) |
|
|
Capital |
|
|||
Balance, June 30, 2016 |
|
$ |
178,023 |
|
|
$ |
(859 |
) |
|
$ |
177,164 |
|
Net income |
|
|
1,694 |
|
|
|
17 |
|
|
|
1,711 |
|
Distributions |
|
|
(632 |
) |
|
|
— |
|
|
|
(632 |
) |
Liquidations |
|
|
(5,638 |
) |
|
|
— |
|
|
|
(5,638 |
) |
Balance, September 30, 2016 |
|
$ |
173,447 |
|
|
$ |
(842 |
) |
|
$ |
172,605 |
|
The accompanying notes are an integral part of these consolidated financial statements.
4
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Consolidated Statements of Cash Flows
For the Three and Nine Months Ended September 30, 2016 and 2015
($ in thousands) (unaudited)
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Cash from Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received |
|
$ |
2,413 |
|
|
$ |
1,133 |
|
|
$ |
5,049 |
|
|
$ |
3,933 |
|
Other loan income |
|
|
36 |
|
|
|
7 |
|
|
|
53 |
|
|
|
27 |
|
Operations expense |
|
|
(1,134 |
) |
|
|
(2,083 |
) |
|
|
(3,678 |
) |
|
|
(4,550 |
) |
Rental operations, net |
|
|
733 |
|
|
|
1,219 |
|
|
|
1,947 |
|
|
|
4,246 |
|
Holding costs |
|
|
(18 |
) |
|
|
113 |
|
|
|
533 |
|
|
|
37 |
|
Mortgage interest and borrowing related fees |
|
|
(218 |
) |
|
|
(429 |
) |
|
|
(684 |
) |
|
|
(1,624 |
) |
Other assets |
|
|
— |
|
|
|
— |
|
|
|
3,411 |
|
|
|
— |
|
Total cash provided (used) by operations |
|
|
1,812 |
|
|
|
(40 |
) |
|
|
6,631 |
|
|
|
2,069 |
|
Cash from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal collected on loans - secured |
|
|
21,621 |
|
|
|
11,403 |
|
|
|
38,255 |
|
|
|
27,345 |
|
Unsecured loan payments received (made) |
|
|
8 |
|
|
|
16 |
|
|
|
17 |
|
|
|
18 |
|
Loans originated |
|
|
(14,975 |
) |
|
|
(3,383 |
) |
|
|
(61,745 |
) |
|
|
(24,363 |
) |
Loans sold to affiliates |
|
|
500 |
|
|
|
300 |
|
|
|
2,500 |
|
|
|
4,937 |
|
Advances on loans |
|
|
(38 |
) |
|
|
(31 |
) |
|
|
(49 |
) |
|
|
(133 |
) |
Total - Loans |
|
|
7,116 |
|
|
|
8,305 |
|
|
|
(21,022 |
) |
|
|
7,804 |
|
REO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
5,315 |
|
|
|
44,204 |
|
|
|
10,515 |
|
|
|
58,545 |
|
Development and acquisition |
|
|
(974 |
) |
|
|
(565 |
) |
|
|
(1,219 |
) |
|
|
(1,800 |
) |
Non-controlling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(475 |
) |
Total - REO |
|
|
4,341 |
|
|
|
43,639 |
|
|
|
9,296 |
|
|
|
56,270 |
|
Total cash provided (used) by investing activities |
|
|
11,457 |
|
|
|
51,944 |
|
|
|
(11,726 |
) |
|
|
64,074 |
|
Cash from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgages taken |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
27,747 |
|
Principal payments |
|
|
(139 |
) |
|
|
(17,954 |
) |
|
|
(1,346 |
) |
|
|
(35,835 |
) |
Cash provided (used) by debt activities |
|
|
(139 |
) |
|
|
(17,954 |
) |
|
|
(1,346 |
) |
|
|
(8,088 |
) |
Distributions to partners |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash – partner liquidations |
|
|
(5,638 |
) |
|
|
(4,778 |
) |
|
|
(16,359 |
) |
|
|
(11,434 |
) |
Formation loan payment, net of early withdrawal fees |
|
|
111 |
|
|
|
86 |
|
|
|
315 |
|
|
|
167 |
|
Cash – partner distributions |
|
|
(632 |
) |
|
|
(613 |
) |
|
|
(1,954 |
) |
|
|
(1,755 |
) |
Cash Distributions to partners, net |
|
|
(6,159 |
) |
|
|
(5,305 |
) |
|
|
(17,998 |
) |
|
|
(13,022 |
) |
Total cash provided (used) by financing activities |
|
|
(6,298 |
) |
|
|
(23,259 |
) |
|
|
(19,344 |
) |
|
|
(21,110 |
) |
Net increase/(decrease) in cash |
|
|
6,971 |
|
|
|
28,645 |
|
|
|
(24,439 |
) |
|
|
45,033 |
|
Cash and cash equivalents, beginning of period |
|
$ |
25,263 |
|
|
$ |
26,256 |
|
|
$ |
56,673 |
|
|
$ |
9,868 |
|
Cash and cash equivalents, September 30 |
|
$ |
32,234 |
|
|
$ |
54,901 |
|
|
$ |
32,234 |
|
|
$ |
54,901 |
|
The accompanying notes are an integral part of these consolidated financial statements.
5
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Consolidated Statements of Cash Flows
For the Three and Nine Months Ended September 30, 2016 and 2015
($ in thousands) (unaudited)
Reconciliation of net income to net cash provided by (used in) operations:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Cash flows from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,711 |
|
|
$ |
1,908 |
|
|
$ |
4,308 |
|
|
$ |
5,992 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of borrowings-related origination fees |
|
|
15 |
|
|
|
221 |
|
|
|
45 |
|
|
|
271 |
|
Provision for (recovery of) loan losses |
|
|
— |
|
|
|
564 |
|
|
|
(25 |
) |
|
|
964 |
|
REO – depreciation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
301 |
|
REO – loss/(gain) on disposal |
|
|
(375 |
) |
|
|
(1,871 |
) |
|
|
(1,159 |
) |
|
|
(3,863 |
) |
REO – impairment (gain) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(573 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in operation assets and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest |
|
|
178 |
|
|
|
34 |
|
|
|
(274 |
) |
|
|
(49 |
) |
Allowance for loan losses-recoveries |
|
|
— |
|
|
|
25 |
|
|
|
25 |
|
|
|
25 |
|
Receivable from affiliate |
|
|
— |
|
|
|
53 |
|
|
|
— |
|
|
|
— |
|
Other assets |
|
|
185 |
|
|
|
(45 |
) |
|
|
3,599 |
|
|
|
(87 |
) |
Accounts payable and other liabilities |
|
|
102 |
|
|
|
(255 |
) |
|
|
125 |
|
|
|
(379 |
) |
Payable to affiliate |
|
|
(4 |
) |
|
|
(674 |
) |
|
|
(13 |
) |
|
|
(533 |
) |
Net cash provided by (used in) operations |
|
$ |
1,812 |
|
|
$ |
(40 |
) |
|
$ |
6,631 |
|
|
$ |
2,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate acquired through foreclosure/settlement on loans, net of liabilities assumed |
|
$ |
— |
|
|
$ |
8,010 |
|
|
$ |
416 |
|
|
$ |
8,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
233 |
|
|
$ |
650 |
|
|
$ |
728 |
|
|
$ |
1,468 |
|
The accompanying notes are an integral part of these consolidated financial statements.
6
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
NOTE 1 – ORGANIZATION AND GENERAL
In the opinion of the general partners, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the consolidated financial information included therein. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the partnership’s Form 10-K for the fiscal year ended December 31, 2015 filed with the U.S. Securities and Exchange Commission (SEC). The results of operations for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the operations results to be expected for the full year.
Redwood Mortgage Investors VIII, a California Limited Partnership (we, RMI VIII or the partnership), was formed in 1993 to engage in business as a mortgage lender and investor by making and holding-for-investment mortgage loans secured by California real estate, primarily through first and second deeds of trust.
The partnership is externally managed. The general partners are Redwood Mortgage Corp. (RMC) and Michael R. Burwell (Burwell), an individual. Burwell is the president and majority shareholder of RMC through his holdings and beneficial interests in certain trusts. The general partners are solely responsible for managing the business and affairs of the partnership, subject to the voting rights of the limited partners on specified matters. Any one of the general partners acting alone has the power and authority to act for and bind the partnership. The mortgage loans the partnership invests in are arranged and are generally serviced by RMC.
The rights, duties and powers of the general and limited partners of the partnership are governed by the limited partnership agreement and Sections 15900 et seq. of the California Corporations Code. Partners should refer to the partnership agreement for complete disclosure of its provisions. A majority of the outstanding limited partnership units may, without the permission of the general partners, vote to: (i) terminate the partnership, (ii) amend the limited partnership agreement, (iii) approve or disapprove the sale of all or substantially all of the assets of the partnership, and (iv) remove or replace one or all of the general partners. The approval of all the limited partners is required to elect a new general partner to continue the partnership business where there is no remaining general partner after a general partner ceases to be a general partner other than by removal. The last offering of units of limited partnership interests closed in November 2008.
Profits and losses are allocated among the limited partners according to their respective capital accounts after one percent (1%) of profits and losses are allocated to the general partners. The monthly results are subject to subsequent adjustment as a result of quarterly and year-end accounting and reporting. Federal and state income taxes are the obligation of the partners, if and when taxes apply, other than the annual California franchise tax, and any California LLC cash receipts taxes paid by the partnership and its subsidiaries.
The ongoing sources of funds for loans are the proceeds from (1) earnings retained (i.e. not distributed) in partners’ capital accounts, (2) loan payoffs, (3) borrowers’ monthly principal and interest payments, (4) REO sales, and, (5) to a lesser degree and, if obtained, a line of credit. Cash generated from loan payoffs and borrower payments of principal and interest is used for operating expenses, income distributions to partners, and unit liquidations. The cash flow, if any, in excess of these uses is to be re-invested in new loans.
Distribution policy
At the time of their subscription for units, partners elected to have distributed to them their monthly, quarterly or annual allocation of profits, or to have profits allocated to their capital accounts to be retained by the partnership to compound. Subject to certain limitations, those electing compounding may subsequently change their election. A partner’s election to receive cash distributions is irrevocable.
Beginning in September 2015, the distributions annual rate increased to two and one-half percent (2.5%) from two percent (2%).
7
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
Liquidity, capital withdrawals and early withdrawals
There is no established public trading and/or secondary market for the units, and none is expected to develop. There are substantial restrictions on transferability of units. To provide liquidity to limited partners, the partnership agreement provides that limited partners in the partnership for the minimum five-year period may withdraw all or a portion of their capital accounts in twenty (20) quarterly installments or longer, as determined by the general partners in light of partnership cash flow, beginning the last day of the calendar quarter following the quarter in which the notice of withdrawal is given. A limited partner may liquidate all or part of the limited partner’s capital account in four (4) quarterly installments beginning on the last day of the calendar quarter following the quarter in which the notice of withdrawal is given, subject to a ten percent (10%) early withdrawal penalty applicable to any sums withdrawn prior to the time when such sums could have been withdrawn without penalty. There is also a limited right of liquidation for an investor’s heirs upon an investor’s death.
The partnership does not establish a reserve from which to fund withdrawals and, accordingly, the partnership’s capacity to return a limited partner’s capital is restricted by the availability of partnership cash. No more than twenty percent (20%) of the total limited partners’ capital account balances at the beginning of any year, may be liquidated during any calendar year.
Lending and investment guidelines, objectives and criteria
Generally, interest rates on the partnership’s mortgage loans are not affected by market movements in interest rates. The partnership’s loans generally have shorter maturity terms than typical mortgages. In the event a borrower is unable to repay in full the principal owing on the loan at maturity, the partnership may consider extending the term through a loan modification or may foreclose and take back the property for sale.
The partnership’s primary investment objectives are to:
|
• |
Yield a high rate of return from mortgage lending, and, |
|
• |
Preserve and protect the partners’ capital. |
The partnership generally funds loans:
|
• |
Having monthly payments of interest only or of principal and interest at fixed rates, calculated on a 30-year amortization basis, and, |
|
• |
Having maturities of 5 years or less, not to exceed 15 years. |
The cash flow and the income generated by the real property securing the loan factor into the credit decisions, as does the general creditworthiness, experience and reputation of the borrower. However, for loans secured by real property, other than owner-occupied personal residences, such considerations are subordinate to a determination that the value of the real property is sufficient, in and of itself, as a source of repayment. The amount of the partnership’s loan combined with the outstanding debt and claims secured by a senior deed of trust on the real property, if any, generally is not to exceed a percentage of the appraised value of the property (the “loan to value ratio”, or LTV) specified in the lending guidelines.
Term of the partnership
The term of the partnership will continue until 2032, unless sooner terminated as provided in the limited partnership agreement.
8
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
The partnership’s consolidated financial statements include the accounts of the partnership, its wholly-owned subsidiaries (consisting of single-member limited liability companies representing ownership in a single real property asset), and, in 2015, its 72.5%-owned subsidiary (a single-asset limited liability company which is owned with affiliates and whose single asset was a development property in San Francisco County). All significant intercompany transactions and balances have been eliminated in consolidation.
Management estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Such estimates relate principally to the determination of the allowance for loan losses, including, when applicable, the valuation of impaired loans (which itself requires determining the fair value of the collateral), and the valuation of real estate held for sale and held as investment, at acquisition and subsequently. Actual results could differ significantly from these estimates.
Fair value estimates
GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.
Fair values of assets and liabilities are determined based on the fair value hierarchy established in GAAP. The hierarchy is comprised of three levels of inputs to be used.
|
• |
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the partnership has the ability to access at the measurement date. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
|
• |
Level 2 inputs are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, in active markets and quoted prices for identical assets or liabilities that are not active, and inputs other than quoted prices that are observable or inputs derived from or corroborated by market data. |
|
• |
Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs reflect the partnership’s own assumptions about the assumptions market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the partnership’s own data. |
Collateral fair values are reviewed quarterly and the protective equity for each loan is computed. As used herein, “protective equity” is the arithmetic difference between the fair value of the collateral, net of any senior liens, and the loan balance, where “loan balance” is the sum of the unpaid principal, advances and the recorded interest thereon. This computation is done for each loan (whether impaired or performing), and while loans secured by collateral of similar property type are grouped, there is enough distinction and variation in the collateral that a loan-by-loan, collateral-by-collateral analysis is appropriate.
9
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
The fair value of the collateral is determined by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values, and publicly available information on in-market transactions. Appraisals of commercial real property generally present three approaches to estimating value: 1) market comparables or sales approach; 2) cost to replace; and 3) capitalized cash flows or investment approach. These approaches may or may not result in a common, single value. The market-comparables approach may yield several different values depending on certain basic assumptions, such as, determining highest and best use (which may or may not be the current use); determining the condition (e.g. as-is, when-completed, or for land when-entitled); and determining the unit of value (e.g. as a series of individual unit sales or as a bulk disposition).
Management has the requisite familiarity with the markets it lends in generally and of the properties lent on specifically to analyze sales-comparables and assess their suitability and/or applicability. Management is acquainted with market participants – investors, developers, brokers, lenders – that are useful, relevant secondary sources of data and information regarding valuation and valuation variability. These secondary sources may have familiarity with and perspectives on pending transactions, successful strategies to optimize value, and the history and details of specific properties – on and off the market – that enhance the process and analysis that is particularly and principally germane to establishing value in distressed markets and/or property types.
Cash, in banks
The partnership considers all highly liquid financial instruments with maturities of three months or less at the time of purchase to be cash equivalents. At September 30, 2016 and December 31, 2015, certain partnership cash balances in banks may at times exceed federally insured limits.
Loans and interest income
Loans generally are stated at the unpaid principal balance (principal). Management has discretion to pay amounts (advances) to third parties on behalf of borrowers to protect the partnership’s interest in the loan. Advances include, but are not limited to, the payment of interest and principal on a senior lien to prevent foreclosure by the senior lien holder, property taxes, insurance premiums, and attorney fees. Advances generally are stated at the amounts paid out on the borrower’s behalf and any accrued interest on amounts paid out, until repaid by the borrower.
The partnership may fund a specific loan origination net of an interest reserve to insure timely interest payments at the inception (one to two years) of the loan. As monthly interest payments become due, the partnership funds the payments into the affiliated trust account.
If based upon current information and events, it is probable the partnership will be unable to collect all amounts due according to the contractual terms of the loan agreement, then a loan may be designated as impaired. Impaired loans are included in management’s periodic analysis of recoverability. If a valuation allowance has been established on an impaired loan, any subsequent payments on impaired loans are applied to late fees and then to reduce first the accrued interest, then advances, and then unpaid principal.
From time to time, the partnership negotiates and enters into loan modifications with borrowers whose loans are delinquent. In the normal course of the partnership’s operations, loans that mature may be renewed at then current market rates and terms for new loans. Such renewals are not designated as impaired, unless the renewed loan was previously designated as impaired.
Interest is accrued daily based on the unpaid principal balance of the loans. An impaired loan continues to accrue as long as the loan is in the process of collection and is considered to be well-secured. Loans are placed on non-accrual status at the earlier of management’s determination that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan is no longer considered well-secured. When a loan is placed on non-accrual status, the accrual of interest is discontinued; however, previously recorded interest is not reversed. A loan may return to accrual status when all delinquent interest and principal payments become current in accordance with the terms of the loan agreement.
10
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
Loans and the related accrued interest and advances are analyzed on a periodic basis for ultimate recoverability. Delinquencies are identified and followed as part of the loan system. Delinquencies are determined based upon contractual terms. For impaired loans, a provision is made for loan losses to adjust the allowance for loan losses to an amount considered by management to be adequate, with due consideration to collateral values, such that the net carrying amount (unpaid principal balance, plus advances, plus accrued interest less the specific allowance) is reduced to the present value of future cash flows discounted at the loan’s effective interest rate, or, if a loan is collateral dependent, to the estimated fair value of the related collateral, net of any senior loans, and net of any costs to sell in arriving at net realizable value if planned disposition of the asset securing a loan is by way of sale.
The fair value estimates of the related collateral are derived from information available in the real estate markets including similar property, and may require the experience and judgment of third parties such as commercial real estate appraisers and brokers.
Loans determined not to be individually impaired are grouped by the property type of the underlying collateral, and for each loan and for the total by property type, the amount of protective equity or amount of exposure to loss is computed.
Based on its knowledge of the borrowers and their historical (and expected) performance, and the exposure to loss as indicated in the analysis, management estimates an appropriate reserve by property type for probable credit losses in the portfolio. Because the partnership is an asset-based lender, except as to owner-occupied residences, and because specific regions, neighborhoods and even properties within the same neighborhoods, vary significantly as to real estate values and transaction activity, general market trends, which may be indicative of a change in the risk of a loss, and a borrower’s creditworthiness are secondary to the condition of the property, the property type and the neighborhood/region in which the property is located, and do not enter substantially into the determination of the amount of the non-specific (i.e. general) reserves.
The partnership charges off uncollectible loans and related receivables directly to the allowance account once it is determined the full amount is not collectible.
Real estate owned (REO)
Real estate owned (REO) is property acquired in full or partial settlement of loan obligations generally through foreclosure, and is recorded at acquisition at the lower of the amount owed on the loan (legal basis), plus any senior indebtedness, or at the property’s net realizable value, which is the fair value less estimated costs to sell, as applicable. The fair value estimates are derived from information available in the real estate markets, including similar property, and often require the experience and judgment of third parties such as commercial real estate appraisers and brokers. The estimates figure materially in calculating the value of the property at acquisition, the level of charge to the allowance for loan losses and any subsequent valuation reserves. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. After acquisition, REO is analyzed periodically for changes in fair values and any subsequent write down is charged to operations expense. Any recovery in the fair value subsequent to such a write down is recorded, not to exceed the value recorded at acquisition. Recognition of gains on the sale of real estate is dependent upon the transaction meeting certain criteria related to the nature of the property and the terms of the sale, including potential seller financing.
Rental income/depreciation
Rental income is recognized when earned in accordance with the lease agreement. For commercial leases, the costs associated with originating the lease are amortized over the lease term. Residential lease terms generally range from month-to-month to one-year, and the expenses of originating the lease are expensed as incurred. Real estate owned that is designated held for sale is not depreciated. Real estate that was designated held for investment, and rented was depreciated on a straight-line basis over the estimated useful life of the property.
Recently issued accounting pronouncements
On June 16, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-13 (ASU 2016-13) Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope.
11
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
ASU 2016-13 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including loans. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13’s approach, referred to as the current expected credit losses (CECL) model, applies to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees, and net investments in leases, as well as reinsurance and trade receivables. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses (ECL) should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. ASU 2016-13 does not prescribe a specific method to make the estimate so its application will require significant judgment.
Generally, the initial estimate of the ECL and subsequent changes in the estimate will be reported in current earnings. The ECL will be recorded through an allowance for loan losses (ALL) in the statement of financial position.
ASU 2016-13 will be effective for SEC filers in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of fiscal years beginning after December 15, 2018 including interim periods within those fiscal years.
The partnership is evaluating the impact of ASU 2016-13 on the credit analytics and other processes used in establishing the ALL. The initial – and preliminary conclusion – is that, because RMI VIII is a real estate based lender, relying primarily on low LTV’s/significant protective equity in making the lending decision, the impact on reported financial position and results of operations will not be material to the financial position or results from operations of the partnership.
NOTE 3 – GENERAL PARTNERS AND OTHER RELATED PARTIES
The general partners are entitled to one percent (1%) of the profits and losses, which amounted to approximately $17,000 and $19,000 for the three months ended, and $43,000 and $60,000 for the nine months ended September 30, 2016 and 2015, respectively. Beginning with calendar year 2010, and continuing until January 1, 2020, RMC assigned its right to two-thirds of one percent (0.66%) of profits and losses to Burwell in exchange for Burwell assuming one hundred percent (100%) of the general partners’ equity deficit.
Formation loan/Commissions paid to broker-dealers
Commissions to broker-dealers (B/D sales commissions) for sales of limited partnership interests were paid by RMC and were not paid directly by the partnership out of offering proceeds. Instead, the partnership advanced to RMC amounts sufficient to pay the B/D sales commissions and premiums paid to partners in connection with unsolicited orders up to seven percent (7%) of offering proceeds. The receivable arising from the advances is unsecured, and non-interest bearing and is referred to as the “formation loan.” If the general partners are removed and RMC is no longer receiving payments for services rendered, the formation loan is forgiven, per the terms of the partnership agreement.
The formation loan transactions are summarized in the following table at nine months ended September 30, 2016 and 2015 ($ in thousands).
|
|
2016 |
|
|
Balance January 1 |
|
$ |
6,934 |
|
Formation loans made |
|
|
— |
|
Early withdrawal penalties |
|
|
(315 |
) |
Repayments |
|
|
— |
|
Balance September 30 |
|
$ |
6,619 |
|
12
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
The scheduled payments on the formation loan are presented in the following table ($ in thousands).
2016 |
|
$ |
335 |
|
2017 |
|
|
650 |
|
2018 |
|
|
650 |
|
2019 |
|
|
650 |
|
2020 |
|
|
650 |
|
Thereafter |
|
|
3,684 |
|
Total |
|
$ |
6,619 |
|
The loan brokerage commissions on the mortgage loans originated for RMI VIII are the primary source of the repayments made by RMC for the formation loan.
The following commissions and fees are paid by borrowers directly to RMC.
- Brokerage commissions, loan originations
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 borrowers, and thus, are not an expense of the partnership. Loan brokerage commissions paid to RMC by borrowers were $229,510 and $71,045, for the three months ended, and $1,117,871 and $515,702 for the nine months ended September 30, 2016 and 2015, respectively.
- Other fees
The partnership agreement provides for other fees such as reconveyance, mortgage assumption and mortgage extension fees. Such fees are incurred by borrowers and are paid to RMC. Other fees totaled $20,052 and $8,778, for the three months ended, and $71,811 and $53,148 for the nine months ended September 30, 2016 and 2015, respectively.
The following commissions and fees are paid by the partnership to RMC.
- Mortgage servicing fees
RMC earns mortgage servicing fees 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.
Mortgage servicing fees paid to RMC were approximately $348,000 and $255,000 for the three months ended, and $875,000 and $832,000 for the nine months ended September 30, 2016 and 2015, respectively. No mortgage servicing fees were waived during any period reported.
- 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).
Asset management fees were approximately $167,000 and $181,000 for the three months ended, and $515,000 and $548,000 for the nine months ended September 30, 2016 and 2015, respectively. No asset management fees were waived during any period reported.
13
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
- Costs from Redwood Mortgage Corp.
RMC is reimbursed by the partnership for operations expense 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. Expenses reimbursed to RMC totaled $468,000 and $486,000 for the three months ended, and $1,443,000 and $1,457,000 for the nine months ended September 30, 2016 and 2015, respectively. RMC did not waive its right to request reimbursement of any qualifying charges during any period reported.
NOTE 4 – LOANS
Loans generally are funded at a fixed interest rate with a loan term of up to five years.
As of September 30, 2016, 45 (79%) of the partnership’s loans (representing 96% of the aggregate principal of the partnership’s loan portfolio) have a term of five years or less from loan inception. The remaining loans have terms longer than five years. Substantially all loans are written without a prepayment penalty clause.
As of September 30, 2016, 22 (39%) of the loans outstanding (representing 62% of the aggregate principal balance of the partnership’s loan portfolio) provide for monthly payments of interest only, with the principal due in full at maturity. The remaining loans require monthly payments of principal and interest, typically calculated on a 30-year amortization, with the remaining principal balance due at maturity.
Secured loans unpaid principal balance (principal)
Secured loan transactions are summarized in the following table for the nine months ended September 30, 2016 and 2015, respectively ($ in thousands).
|
|
2016 |
|
|
2015 |
|
||
Principal, January 1 |
|
$ |
62,740 |
|
|
$ |
71,017 |
|
Loans funded or acquired |
|
|
61,745 |
|
|
|
24,363 |
|
Principal payments received |
|
|
(38,255 |
) |
|
|
(27,345 |
) |
Loans sold to affiliates |
|
|
(2,500 |
) |
|
|
(4,937 |
) |
Foreclosures |
|
|
(345 |
) |
|
|
(16,312 |
) |
Other - loans charged off against allowance |
|
|
— |
|
|
|
(65 |
) |
Principal, September 30 |
|
$ |
83,385 |
|
|
$ |
46,721 |
|
In September 2016, RMI 8 purchased three loans from affiliated funds in liquidation status. The purchase price was approximately $470,000 for loan balances of approximately $558,000.
There were no renewals during the nine months ended September 30, 2016.
14
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
Secured loans had the characteristics presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
Number of secured loans |
|
|
57 |
|
|
|
53 |
|
Secured loans – principal |
|
$ |
83,385 |
|
|
$ |
62,740 |
|
Secured loans – lowest interest rate (fixed) |
|
|
5.0 |
% |
|
|
5.0 |
% |
Secured loans – highest interest rate (fixed) |
|
|
11.0 |
% |
|
|
11.0 |
% |
|
|
|
|
|
|
|
|
|
Average secured loan – principal |
|
$ |
1,463 |
|
|
$ |
1,184 |
|
Average principal as percent of total principal |
|
|
1.8 |
% |
|
|
1.9 |
% |
Average principal as percent of partners’ capital |
|
|
0.9 |
% |
|
|
0.6 |
% |
Average principal as percent of total assets |
|
|
0.8 |
% |
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
Largest secured loan – principal |
|
$ |
14,000 |
|
|
$ |
14,000 |
|
Largest principal as percent of total principal |
|
|
16.8 |
% |
|
|
22.3 |
% |
Largest principal as percent of partners’ capital |
|
|
8.1 |
% |
|
|
7.5 |
% |
Largest principal as percent of total assets |
|
|
7.3 |
% |
|
|
6.7 |
% |
|
|
|
|
|
|
|
|
|
Smallest secured loan – principal |
|
$ |
49 |
|
|
$ |
95 |
|
Smallest principal as percent of total principal |
|
|
0.1 |
% |
|
|
0.2 |
% |
Smallest principal as percent of partners’ capital |
|
|
0.1 |
% |
|
|
0.1 |
% |
Smallest principal as percent of total assets |
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
Number of counties where security is located (all California) |
|
19 |
|
|
|
20 |
|
|
Largest percentage of principal in one county |
|
|
26.9 |
% |
|
|
23.7 |
% |
|
|
|
|
|
|
|
|
|
Number of secured loans in foreclosure status |
|
|
— |
|
|
|
1 |
|
Secured loans in foreclosure – principal |
|
$ |
— |
|
|
$ |
345 |
|
|
|
|
|
|
|
|
|
|
Number of secured loans with an interest reserve |
|
|
— |
|
|
|
— |
|
Interest reserves |
|
$ |
— |
|
|
$ |
— |
|
As of September 30, 2016, the partnership’s largest loan, in the unpaid principal balance of approximately $14,000,000 (representing 16.8% of outstanding secured loans and 7.2% of partnership total assets), had an interest rate of 7.3%, was secured by a commercial building in Contra Costa county, and has a maturity of January 1, 2019.
As of September 30, 2016, the partnership had no outstanding construction or rehabilitation loans and no commitments to fund construction, rehabilitation or other loans.
15
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
At funding, secured loans had the following lien positions and are presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||||||||||||||||||
|
|
Loans |
|
|
Principal |
|
|
Percent |
|
|
Loans |
|
|
Principal |
|
|
Percent |
|
||||||
First trust deeds |
|
|
36 |
|
|
$ |
62,173 |
|
|
|
74 |
% |
|
|
32 |
|
|
$ |
44,078 |
|
|
|
70 |
% |
Second trust deeds |
|
|
19 |
|
|
|
17,996 |
|
|
|
22 |
|
|
|
21 |
|
|
|
18,662 |
|
|
|
30 |
|
Third trust deeds |
|
|
2 |
|
|
|
3,216 |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total secured loans |
|
|
57 |
|
|
$ |
83,385 |
|
|
|
100 |
% |
|
|
53 |
|
|
|
62,740 |
|
|
|
100 |
% |
Liens due other lenders at loan closing |
|
|
|
|
|
|
30,884 |
|
|
|
|
|
|
|
|
|
|
|
30,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
|
|
|
|
$ |
114,269 |
|
|
|
|
|
|
|
|
|
|
$ |
93,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appraised property value at loan closing |
|
|
|
|
|
$ |
230,821 |
|
|
|
|
|
|
|
|
|
|
$ |
178,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of total debt to appraised values (LTV) at loan closing(1) |
|
|
|
|
|
|
51.7 |
% |
|
|
|
|
|
|
|
|
|
|
54.5 |
% |
|
|
|
|
(1) |
Based on appraised values and liens due other lenders at loan closing. The weighted-average loan-to-value (LTV) computation above does not take into account subsequent increases or decreases in property values following the loan closing, nor does it include decreases or increases of the amount owing on senior liens to other lenders. |
Property type
Secured loans summarized by property type are presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||||||||||||||
|
|
Loans |
|
Principal |
|
|
Percent |
|
|
Loans |
|
Principal |
|
|
Percent |
|
||||
Single family(2) |
|
35 |
|
$ |
29,479 |
|
|
|
35 |
% |
|
33 |
|
$ |
27,673 |
|
|
|
45 |
% |
Multi-family |
|
2 |
|
|
893 |
|
|
1 |
|
|
1 |
|
|
584 |
|
|
1 |
|
||
Commercial |
|
19 |
|
|
52,563 |
|
|
63 |
|
|
18 |
|
|
34,033 |
|
|
53 |
|
||
Land |
|
1 |
|
|
450 |
|
|
1 |
|
|
1 |
|
|
450 |
|
|
1 |
|
||
Total secured loans |
|
57 |
|
$ |
83,385 |
|
|
|
100 |
% |
|
53 |
|
$ |
62,740 |
|
|
|
100 |
% |
(2) |
Single family properties include owner-occupied and non-owner occupied 1-4 unit residential buildings, condominium units, townhouses, and condominium complexes. The single family property type as of September 30, 2016 consists of 17 loans with principal of approximately $12,221,000 that are owner occupied and 18 loans with principal of approximately $17,258,000 that are non-owner occupied. At December 31, 2015, single family property consisted of 15 loans with principal of approximately $14,157,000 that were owner occupied and 18 loans with principal of approximately $13,516,000 that were non-owner occupied. |
16
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
Distribution by California counties
The distribution of secured loans outstanding by the California county in which the primary collateral is located is presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||||||||||
|
|
Unpaid Principal Balance |
|
|
Percent |
|
|
Unpaid Principal Balance |
|
|
Percent |
|
||||
San Francisco Bay Area(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contra Costa |
|
$ |
16,724 |
|
|
|
20.1 |
% |
|
$ |
14,327 |
|
|
|
22.8 |
% |
San Mateo |
|
|
11,099 |
|
|
|
13.3 |
|
|
|
8,008 |
|
|
|
12.8 |
|
Santa Clara |
|
|
8,289 |
|
|
|
9.9 |
|
|
|
4,924 |
|
|
|
7.9 |
|
San Francisco |
|
|
7,204 |
|
|
|
8.6 |
|
|
|
7,656 |
|
|
|
12.2 |
|
Alameda |
|
|
3,704 |
|
|
|
4.4 |
|
|
|
920 |
|
|
|
1.5 |
|
Solano |
|
|
1,875 |
|
|
|
2.3 |
|
|
|
2,575 |
|
|
|
4.1 |
|
Napa |
|
|
963 |
|
|
|
1.2 |
|
|
|
976 |
|
|
|
1.6 |
|
Marin |
|
|
849 |
|
|
|
1.0 |
|
|
|
674 |
|
|
|
1.1 |
|
|
|
|
50,707 |
|
|
|
60.8 |
|
|
|
40,060 |
|
|
|
64.0 |
|
Other Northern California |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monterey |
|
|
3,513 |
|
|
|
4.2 |
|
|
|
1,366 |
|
|
|
3.2 |
|
El Dorado |
|
|
2,044 |
|
|
|
2.5 |
|
|
|
2,045 |
|
|
|
3.2 |
|
Santa Cruz |
|
|
871 |
|
|
|
1.0 |
|
|
|
928 |
|
|
|
1.5 |
|
Sacramento |
|
|
419 |
|
|
|
0.5 |
|
|
|
421 |
|
|
|
0.6 |
|
Calaveras |
|
|
152 |
|
|
|
0.2 |
|
|
|
156 |
|
|
|
0.2 |
|
San Benito |
|
|
94 |
|
|
|
0.1 |
|
|
|
95 |
|
|
|
0.1 |
|
Mariposa |
|
|
49 |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
|
7,142 |
|
|
|
8.6 |
|
|
|
5,011 |
|
|
|
7.8 |
|
Total Northern California |
|
|
57,849 |
|
|
|
69.4 |
|
|
|
45,071 |
|
|
|
71.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles & Coastal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles |
|
|
22,466 |
|
|
|
26.9 |
|
|
|
14,873 |
|
|
|
23.7 |
|
San Diego |
|
|
2,300 |
|
|
|
2.8 |
|
|
|
375 |
|
|
|
0.6 |
|
Orange |
|
|
666 |
|
|
|
0.8 |
|
|
|
669 |
|
|
|
1.1 |
|
Ventura |
|
|
— |
|
|
|
— |
|
|
|
344 |
|
|
|
0.5 |
|
|
|
|
25,432 |
|
|
|
30.5 |
|
|
|
16,261 |
|
|
|
25.9 |
|
Other Southern California |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kern |
|
|
104 |
|
|
|
0.1 |
|
|
|
108 |
|
|
|
0.2 |
|
San Bernardino |
|
|
— |
|
|
|
— |
|
|
|
1,300 |
|
|
|
2.1 |
|
|
|
|
104 |
|
|
|
0.1 |
|
|
|
1,408 |
|
|
|
2.3 |
|
Total Southern California |
|
|
25,536 |
|
|
|
30.6 |
|
|
|
17,669 |
|
|
|
28.2 |
|
Total Secured Loans Balance |
|
$ |
83,385 |
|
|
|
100.0 |
% |
|
$ |
62,740 |
|
|
|
100.0 |
% |
(3) |
Includes the Silicon Valley |
17
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
Delinquency, modifications, and workout agreements
Secured loans summarized by payment delinquency are presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||||||||||
|
|
Loans |
|
|
Amount |
|
|
Loans |
|
|
Amount |
|
||||
Past Due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days |
|
|
1 |
|
|
$ |
187 |
|
|
|
— |
|
|
$ |
— |
|
90-179 days |
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
345 |
|
180 or more days |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total past due |
|
|
1 |
|
|
$ |
187 |
|
|
|
1 |
|
|
|
345 |
|
Current |
|
|
56 |
|
|
|
83,198 |
|
|
|
52 |
|
|
|
62,395 |
|
Total secured loan balance |
|
|
57 |
|
|
$ |
83,385 |
|
|
|
53 |
|
|
$ |
62,740 |
|
At September 30, 2016, the partnership had one workout agreement in effect with a principal balance of $152,000. The borrower had made all required payments under the workout agreement, and was included in the above table as current. The loan was designated as impaired but was not in non-accrual status.
Scheduled maturities
Secured loans are scheduled to mature as presented in the following table ($ in thousands).
Scheduled maturities, as of September 30, 2016 |
|
Loans |
|
|
Principal |
|
|
Percent |
|
|||
2016(4) |
|
|
2 |
|
|
$ |
283 |
|
|
|
1 |
% |
2017 |
|
|
21 |
|
|
|
25,815 |
|
|
|
31 |
|
2018 |
|
|
9 |
|
|
|
18,693 |
|
|
|
22 |
|
2019 |
|
|
13 |
|
|
|
33,147 |
|
|
|
39 |
|
2020 |
|
|
6 |
|
|
|
3,192 |
|
|
|
4 |
|
2021 |
|
|
3 |
|
|
|
1,148 |
|
|
|
1 |
|
Thereafter |
|
|
1 |
|
|
|
871 |
|
|
|
1 |
|
Total future maturities |
|
|
55 |
|
|
|
83,149 |
|
|
|
99 |
|
Matured as of September 30, 2016 |
|
|
2 |
|
|
|
236 |
|
|
|
1 |
|
Total secured loan balance |
|
|
57 |
|
|
$ |
83,385 |
|
|
|
100 |
% |
(4) |
Loans maturing in 2016 from October 1 to December 31. |
It is the partnership’s experience that loans may be repaid or refinanced before, at or after the contractual maturity date. For matured loans, the partnership may continue to accept payments while pursuing collection of amounts owed from borrowers. Therefore, the above tabulation for scheduled maturities is not a forecast of future cash receipts.
18
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
Secured loans past maturity are summarized in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
Number of loans(5) |
|
|
2 |
|
|
|
1 |
|
Principal |
|
$ |
236 |
|
|
$ |
4,000 |
|
Advances |
|
|
47 |
|
|
|
— |
|
Accrued interest |
|
|
48 |
|
|
|
85 |
|
Total secured loan balance past maturity |
|
$ |
331 |
|
|
$ |
4,085 |
|
Percent of total secured loan balance |
|
|
1 |
% |
|
|
6 |
% |
(5) |
At September 30, 2016 there were two loans past maturity. Both loans were in the process of negotiating an extension agreement, and neither loan was designated impaired. At December 31, 2015, there was one loan past maturity, for which RMI 8 received all sums due per the note terms in September, 2016. |
Loans in non-accrual status
Secured loans in non-accrual status are summarized in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
Number of loans |
|
|
1 |
|
|
|
2 |
|
Principal |
|
$ |
230 |
|
|
$ |
577 |
|
Advances |
|
|
2 |
|
|
|
32 |
|
Accrued interest |
|
|
2 |
|
|
|
14 |
|
Loan balance |
|
$ |
234 |
|
|
$ |
623 |
|
Foregone interest |
|
$ |
— |
|
|
$ |
— |
|
At September 30, 2016, there were no loans that were contractually 90 or more days past due as to principal or interest and not in non-accrual status. At December 31, 2015, there was one loan with a loan balance of $345,000, that was contractually 90 or more days past due as to principal or interest and not in non-accrual status.
Loans designated impaired
Impaired loans had the balances shown and the associated allowance for loan losses presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
Principal |
|
$ |
383 |
|
|
$ |
732 |
|
Recorded investment(6) |
|
$ |
392 |
|
|
$ |
784 |
|
Impaired loans without allowance |
|
$ |
392 |
|
|
$ |
784 |
|
Impaired loans with allowance |
|
$ |
— |
|
|
$ |
— |
|
Allowance for loan losses, impaired loans |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Number of Loans |
|
|
2 |
|
|
|
3 |
|
(6) |
Recorded investment is the sum of principal, advances, and interest accrued for financial reporting purposes. |
19
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
Impaired loans had the average balances and interest income recognized and received in cash as presented in the following table as of, and for, the nine months ended September 30, 2016 and the year ended December 31, 2015 ($ in thousands).
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
Average recorded investment |
|
$ |
588 |
|
|
$ |
10,992 |
|
Interest income recognized |
|
$ |
28 |
|
|
$ |
43 |
|
Interest income received in cash |
|
$ |
28 |
|
|
$ |
29 |
|
Allowance for loan losses
At September 30, 2016 and December 31, 2015, the partnership had not recorded an allowance for loan losses, as all loans were deemed to have protective equity such that collection is reasonably assured for amounts owing.
NOTE 5 – REAL ESTATE OWNED (REO)
Transactions and activity, including changes in the net book values, are presented in the following table for the three and nine months ended September 30, 2016 ($ in thousands).
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||
Balance, beginning of period |
|
$ |
80,166 |
|
|
$ |
82,949 |
|
Acquisitions |
|
|
878 |
|
|
|
2,266 |
|
Dispositions |
|
|
(4,940 |
) |
|
|
(9,356 |
) |
Improvements/betterments |
|
|
96 |
|
|
|
341 |
|
Balance, end of period |
|
$ |
76,200 |
|
|
$ |
76,200 |
|
At September 30, 2016, all properties are designated held for sale.
The following transactions closed during the three months ended September 30, 2016:
|
- |
Sold 6 of 56 units remaining at the beginning of the period, in a condominium complex in Los Angeles County with a gain of approximately $47,000. |
|
- |
Sold 1 final unit remaining at the beginning of the period, in a condominium complex in Alameda County with a gain of approximately $238,000. |
|
- |
Sold 1 of the 12 units remaining at the beginning of the period, in a condominium complex in San Francisco County with a gain of approximately $126,000. |
|
- |
Sold 39 of 39 units remaining at the beginning of the period, in a condominium complex in Contra Costa County with a loss of approximately $36,000. |
|
- |
Acquired remaining 36% interest in commercial land from affiliated funds. The property, located in Stanislaus County, was purchased at its estimated net realizable value of approximately $878,000. |
The following transactions closed during the six months ended June 30, 2016:
|
- |
Sold 14 of the 70 units remaining at the beginning of the period, in a condominium complex in Los Angeles County with a gain of approximately $31,000. |
|
- |
Sold 3 of the 4 units remaining at the beginning of the period, in a condominium complex in Alameda County with a gain of approximately $618,000. |
|
- |
Sold 1 of the 13 units remaining at the beginning of the period, in a condominium complex in San Francisco County with a gain of approximately $135,000. |
|
- |
Acquired 3 commercial units and a parking lot located in Ventura County. |
20
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
REO summarized by property classification is presented in the following table ($ in thousands).
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||||||||||
|
|
Properties |
|
|
NBV |
|
|
Properties |
|
|
NBV |
|
||||
Property classification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental |
|
|
7 |
|
|
$ |
72,282 |
|
|
|
8 |
|
|
$ |
79,149 |
|
Non-Rental |
|
|
3 |
|
|
|
3,918 |
|
|
|
3 |
|
|
|
3,800 |
|
Total REO, net |
|
|
10 |
|
|
$ |
76,200 |
|
|
|
11 |
|
|
$ |
82,949 |
|
Rental properties consist of the following seven properties at September 30, 2016:
|
- |
In Los Angeles County, 50 units in a condominium complex. |
|
- |
In Los Angeles County, a 126-unit condominium complex. |
|
- |
In Amador County, a commercial property. |
|
- |
In Contra Costa County, a commercial property. |
|
- |
In San Francisco County, 11 units in a condominium complex. |
|
- |
In San Francisco County, a commercial property. |
|
- |
In Ventura County, a commercial property. |
Non-Rental properties consist of the following three properties at September 30, 2016:
|
- |
In Fresno County, a partially completed home subdivision. |
|
- |
In Stanislaus County, approximately 14 acres zoned commercial. |
|
- |
In Marin County, approximately 13 acres zoned for residential development. |
Earnings from rental operations are presented in the following table for the three and nine months ended September 30, 2016 and 2015 ($ in thousands).
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Rental income |
|
$ |
1,394 |
|
|
$ |
2,336 |
|
|
$ |
4,175 |
|
|
$ |
7,464 |
|
Operating expenses, rentals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administration and payroll |
|
|
160 |
|
|
|
354 |
|
|
|
543 |
|
|
|
1,041 |
|
Homeowner association fees |
|
|
122 |
|
|
|
151 |
|
|
|
352 |
|
|
|
527 |
|
Professional services |
|
|
36 |
|
|
|
21 |
|
|
|
62 |
|
|
|
38 |
|
Utilities and maintenance |
|
|
310 |
|
|
|
302 |
|
|
|
698 |
|
|
|
846 |
|
Advertising and promotions |
|
|
18 |
|
|
|
24 |
|
|
|
27 |
|
|
|
61 |
|
Property taxes |
|
|
191 |
|
|
|
270 |
|
|
|
588 |
|
|
|
890 |
|
Other |
|
|
24 |
|
|
|
36 |
|
|
|
105 |
|
|
|
177 |
|
Total operating expenses, rentals |
|
|
861 |
|
|
|
1,158 |
|
|
|
2,375 |
|
|
|
3,580 |
|
Net operating income |
|
|
533 |
|
|
|
1,178 |
|
|
|
1,800 |
|
|
|
3,884 |
|
Depreciation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
294 |
|
Receiver fees |
|
|
15 |
|
|
|
5 |
|
|
|
17 |
|
|
|
15 |
|
Rental operations, net |
|
|
518 |
|
|
|
1,173 |
|
|
|
1,783 |
|
|
|
3,575 |
|
Interest on mortgages |
|
|
235 |
|
|
|
641 |
|
|
|
737 |
|
|
|
1,413 |
|
Rental operation, net of mortgage interest |
|
$ |
283 |
|
|
$ |
532 |
|
|
$ |
1,046 |
|
|
$ |
2,162 |
|
Leases on residential properties are one-year lease terms or month to month. There is one commercial lease with a three-year term for annual rent payments of approximately $85,000. The lease expires in August 2017, with an option to extend.
21
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
Mortgages payable transactions are summarized in the following table for the nine months ended September 30, 2016 ($ in thousands).
|
|
2016 |
|
|
Principal, January 1 |
|
$ |
27,509 |
|
Mortgages acquired by foreclosure(1) |
|
|
926 |
|
Principal repaid |
|
|
(1,346 |
) |
Principal, September 30 |
|
$ |
27,089 |
|
|
(1) |
In February, 2016, the partnership took ownership of a property through foreclosure of its second mortgage, subject to the existing deed of trust. The loan was paid in full in June 2016. |
Mortgage payable as of September 30, 2016 and December 31, 2015 are summarized in the following table (mortgage balance $ in thousands).
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
NorthMarq Capital – Secured by a condominium complex, located in Los Angeles County, matures July 1, 2022, interest rate (3.11%) varies monthly (LIBOR plus 2.73%), monthly payment(2)(3) $167,753 |
|
$ |
27,089 |
|
|
$ |
27,509 |
|
(2) |
Monthly payments include amounts for various impounds such as property taxes, insurance, and repairs. |
(3) |
Monthly payments based upon a 30-year amortization, with a balloon payment due at maturity. |
Future minimum payments of principal at September 30, 2016 are presented in the following table ($ in thousands).
2016 (October 1 to December 31) |
|
$ |
144 |
|
2017 |
|
|
586 |
|
2018 |
|
|
606 |
|
2019 |
|
|
625 |
|
2020 |
|
|
646 |
|
Thereafter |
|
|
24,482 |
|
Total |
|
$ |
27,089 |
|
NOTE 6 – FAIR VALUE
The partnership does not record loans, REO or mortgages payable at fair value on a recurring basis.
The recorded amount of the performing loans (i.e., the loan balance) is deemed to approximate the fair value, as is the loan balance of loans designated impaired for which a specific reserve has not been recorded (i.e., the loan is well collateralized, such that the collection of the amount owed is assured, including foregone interest, if any).
Certain assets and liabilities are measured at fair value on a non-recurring basis and are listed below.
- Loans designated impaired (i.e., that are collateral dependent with a specific reserve)
- REO for which a valuation reserve has been recorded
- REO acquired through foreclosure during the year
22
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
Assets and liabilities measured at fair value on a non-recurring basis in the nine months ended September 30, 2016 are presented in the following table ($ in thousands).
|
|
Fair Value Measurement at Report Date Using |
|
|||||||||||||
|
|
Quoted Prices |
|
|
Significant |
|
|
|
|
|
|
|
|
|
||
|
|
In Active |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|||
|
|
Markets For |
|
|
Observable |
|
|
Unobservable |
|
|
Total |
|
||||
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
As Of |
|
||||
Item |
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
9/30/2016 |
|
||||
Impaired loans with specific allowance, net for which an adjustment was recorded in the year |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
REO for which a valuation reserve has been recorded in the year |
|
$ |
— |
|
|
$ |
5,725 |
|
|
$ |
— |
|
|
$ |
5,725 |
|
REO acquired through foreclosure during the year(1) |
|
$ |
— |
|
|
$ |
416 |
|
|
$ |
— |
|
|
$ |
416 |
|
|
(1) |
The dollar amount presented is net of the fair value of the property at acquisition of the REO and the principal and interest owing on the first mortgage assumed of approximately $926,000. The mortgage was paid off in June 2016. |
The following methods and assumptions are used when estimating fair value.
|
(a) |
Secured loans, performing (i.e., not designated as impaired) (Level 2) –Each loan is reviewed for its delinquency, protective equity (LTV) adjusted for the most recent valuation of the underlying collateral, remaining term to maturity, borrower’s payment history and other factors. Also considered is the limited resale market for the loans. Most companies or individuals making similar loans as the partnership intend to hold the loans until maturity as the average contractual term of the loans (and the historical experience of the time the loan is outstanding due to pre-payments) is shorter than conventional mortgages. Furthermore, there are no prepayment penalties to be collected and any loan buyers would be unwilling to risk paying above par. Due to these factors, sales of the loans are infrequent, and an active market does not exist. |
|
(b) |
Secured loans, designated impaired (Level 2) – Secured Loans designated impaired are deemed collateral dependent, and the fair value of the loan is the lesser of the fair value of the collateral or the enforceable amount owing under the note. The fair value of the collateral is determined by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values and publicly available information on in-market transactions Level 2 inputs. |
The following methods are used depending upon the property type of the collateral of the secured loans.
Single family – Management’s preferred method for determining the fair market value of its single-family residential assets is the sale comparison (sale comp) method. Management primarily obtains sale comps through its subscription to the RealQuest service, but also uses free online services such as Zillow.com and other available resources to supplement this data. Sale comps are reviewed for similarity to the subject property, examining features such as proximity to subject, number of bedrooms and bathrooms, square footage, sale date, condition and year built.
If applicable sale comps are not available or deemed unreliable, management will seek additional information in the form of brokers’ opinions of value or appraisals.
Multi-family residential – The partnership’s multi-family residential assets consist of multiple owned units at fractured condominium projects and wholly owned apartment complexes with condominium overlays. Management’s fair market value analysis compares the aggregate retail value of the units as for-sale condominiums against the asset’s value as an income-producing rental property in determining its most favorable market.
Management’s preferred method for determining the aggregate retail value of its multifamily units is the sale comparison method for the individual condominium units. Management primarily obtains sale comps via its subscription to the RealQuest service, but also uses free online services such as Zillow.com to supplement this data. Sale comps are reviewed for similarity to the subject property, examining features such as proximity to subject, number of bedrooms and bathrooms, square footage, sale date, condition, amenities and year built. For fractured condominium projects, sales of units within the same community are preferred.
23
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
Management compiles the list of the most relevant sale comps and derives an average price per square foot, which is then applied to the average square footage of partnership-owned units at the subject property to determine the average price per unit and the gross square footage of all partnership units to determine the aggregate retail value of the units as for-sale condominiums.
Where adequate sale comps are not available, management will seek additional information in the form of brokers’ opinions of value or appraisals.
Management’s preferred method for valuing its multifamily assets as income-producing rental operations is the direct capitalization method when rental operations are consistent and rental income and expenses have been normalized. In order to determine market capitalization rates (cap rates), management refers to published data from reliable third-party sources such as the CBRE Cap Rate Survey. Management then applies the appropriate cap rate to the property’s most recent available annual net operating income to determine the property’s value as an income-producing project. When reliable net operating income information is not available, or the project is under development, or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value.
Where such information is available, management may also determine the asset’s value as an income-producing rental project via the sale comparison method by comparing the value of similar multifamily assets sold recently. This method typically applies only to wholly owned apartment complexes.
Management compares the aggregate retail value to the value as an income-producing rental project to determine the property’s current highest and best use/ most favorable market, setting the fair market value accordingly.
Commercial buildings – Where commercial rental income information is available, management’s preferred method for determining the fair value of its commercial real estate assets is the direct capitalization method. In order to determine cap rates for properties of the same class and location as the subject, management refers to reputable third-party sources such as the CBRE Cap Rate Survey. Management then applies the appropriate cap rate to the subject’s most recent available annual net operating income to determine the property’s value as an income-producing commercial rental project. When reliable net operating income information is not available or the project is under development or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value of stabilized properties performing at market, less any cost to improve.
Supplementally, and particularly when reliable net operating income is not available or the project is under development, management will seek additional information in the form of a sale comparison analysis (where adequate sale comps are available), brokers’ opinion of value, or appraisal.
Commercial land – Commercial land has many variations/uses, thus requiring management to employ a variety of methods depending upon the unique characteristics of the subject land. Management may rely on information in the form of a sale comparison analysis (where adequate sales comps are available), brokers’ opinion of value or appraisal.
|
(c) |
Unsecured loans (Level 3). Unsecured loans are valued at their principal less any discount or loss reserves established by management after taking into account the borrower’s creditworthiness and ability to repay the loan. |
|
(d) |
Mortgages payable (Level 2). The partnership has mortgages payable. The interest rates are deemed to be at market rates for the type and location of the securing property, the length of the mortgage, and the other terms and conditions are deemed to be customary. All of the partnership’s mortgages are deemed to be at fair value as they are either, with variable interest rates which have adjusted within the past twelve months, or were refinanced/extended within the past twelve months with terms and conditions deemed customary for the collateral property. |
24
REDWOOD MORTGAGE INVESTORS VIII,
A California Limited Partnership
Notes to Consolidated Financial Statements
September 30, 2016 (unaudited)
NOTE 7 – COMMITMENTS AND CONTINGENCIES, OTHER THAN LOAN AND REO COMMITMENTS
Legal proceedings
In the normal course of business, the partnership may become involved in various legal proceedings (such as assignment of rents, bankruptcy proceedings, appointment of receivers, unlawful detainers, judicial foreclosure, etc.) to collect debt owed under promissory notes, to enforce the provisions of deeds of trust, to protect its interest in real property subject to the deeds of trust, and to resolve disputes with borrowers, lenders, lien holders and mechanics. None of these actions typically would be of any material importance. As of the date hereof, the partnership was not involved in any legal proceedings other than those that would be considered part of the normal course of business.
Commitments
None.
NOTE 8 – SUBSEQUENT EVENTS
At November 10, 2016, the partnership had 3 REO properties, with an aggregate carrying value of approximately $55.1 million, in contract to sell. Contracts are subject to the purchaser’s final due diligence and certain other customary conditions.
25
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto, which are included in Item 1 of this report on Form 10-Q, as well as the audited financial statements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the partnership’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the U.S. Securities and Exchange Commission. The results of operations for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the operations results to be expected for the full year.
Forward-Looking Statements
Certain statements in this report on Form 10-Q which are not historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (or the Exchange Act), including statements regarding the partnership’s expectations, hopes, intentions, beliefs and strategies regarding the future. Forward-looking statements, which are based on various assumptions (some of which are beyond our control), may be identified by reference to a future period or periods or by use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” “possible” or similar terms or variations on those terms or the negative of those terms. Forward-looking statements include statements regarding trends in the California real estate market, future interest rates and economic conditions and their effect on the partnership and its assets, estimates as to the allowance for loan losses, estimates of future liquidations of units, future funding of loans by the partnership, and beliefs relating to how the partnership will be affected by current economic conditions and trends in the financial and credit markets. Actual results may be materially different from what is projected by such forward-looking statements. Factors that might cause such a difference include, but are not limited to, the following:
|
• |
changes in economic conditions and interest rates, |
|
• |
the impact of competition and competitive pricing for mortgage loans, |
|
• |
downturns in the California real estate markets which affect the general partners’ and our ability to find suitable loans in a weaker economy where there is less activity in the real estate market, |
|
• |
our ability to grow our mortgage lending business, |
|
• |
the general partners’ ability to make and arrange for loans that fit our investment criteria, |
|
• |
the concentration of credit risks to which we are exposed, |
|
• |
increases in payment delinquencies and defaults on our mortgage loans, and |
|
• |
changes in government regulation and legislative actions affecting our business. |
All forward-looking statements and reasons why results may differ included in this report on Form 10-Q are made as of the date hereof, and we assume no obligation to update any such forward-looking statement or reason why actual results may differ.
Overview
Redwood Mortgage Investors VIII, a California Limited Partnership (we, RMI VIII or the partnership), was formed in 1993 to engage in business as a mortgage lender and investor by making and holding-for-investment mortgage loans secured by California real estate, primarily through first and second deeds of trust. The partnership is externally managed. The general partners are Redwood Mortgage Corp. (RMC) and Michael R. Burwell (Burwell), an individual.
See Note 1 (Organization and General) to the financial statements included in Part I, Item 1 of this report on Form 10-Q for additional detail on the organization and operations of RMI VIII which detail is incorporated by this reference into this Item 2. For a detailed presentation of the partnership activities for which the general partners and related parties are compensated and related transactions, including the formation loan to RMC, See Note 1 (Organization and General) and Note 3 (General Partners and Other Related Parties) to the financial statements included in Part I, Item 1 of this report which presentation is incorporated by this reference into this Item 2.
Critical Accounting Policies
See Note 2 (Summary of Significant Accounting Policies) to the financial statements included in Part I, Item 1 of this report for a detailed presentation of critical accounting policies, which presentation is incorporated by this reference into this Item 2.
26
General Economic Conditions - California
All of our mortgage loans are secured by California real estate. Our secured-loan investment activity and the value of the real estate securing our loans is significantly dependent on economic activity and employment conditions in the state. Wells Fargo’s Economics Group periodically provides timely, relevant information and analysis in its commentary and reports regarding California’s employment and economic conditions. Highlights from recently issued reports from Wells Fargo Securities Economics Group are presented below.
In the publication “California Employment Conditions” August 2016 (dated September 16, 2016), the Wells Fargo Economics Group notes:
California employers added 63,100 net new jobs in August, marking the second largest increase over the past year. The breakneck pace of hiring brought year-to-year nonfarm employment growth to 2.3 percent, which translates into an annual gain of 378,000 jobs. Nearly half of last month’s increase came from government employment, which added an outsized 27,900 jobs in August, with most of that gain occurring at the local level. We suspect that August’s unusually large rise in public sector payrolls is due to seasonal adjustment quirks surrounding the start of the school year. Local government payrolls tumbled in July for instance, and have added only 35,500 jobs over the past year.
Outside of the surge in government hiring, the jobs picture still looks solid. Private sector payrolls added 35,200 jobs in August and have added 332,800 jobs over the past year. Hiring in California’s important professional, scientific & technical services sector, which includes tech-related professions such as engineering, computer systems design and scientific research ramped up in August. Payrolls rose by 13,100 on the month, pushing the annual gain over 60,000. Energy-related industries continued to shed jobs in August, with employment in mining & logging reporting a loss of 400 jobs. In addition, manufacturers cut 3,400 jobs. Both industries have seen employment declines over the past year.
On a regional basis, the Los Angeles-Long Beach-Glendale metropolitan area accounted for the bulk of August’s gains, as employment rose by 15,300 jobs on the month. Riverside and Sacramento also reported healthy increases, each seeing payrolls rise by more than 5,000.
Recently released data from the Quarterly Census of Employment and Wages (QCEW) for the first quarter suggests that the Current Employment Statistics (CES), which is reported on a more frequent month-to-month basis, has understated job growth in California’s key information sector. The industry captures many tech-related professions, including positions in search portals, software and data processing, as well as occupations in the motion picture industry. The CES had estimated that information payrolls rose 3.4 percent year-to-year in the first quarter while the QCEW data show an 8.5 percent gain, marking the strongest pace since 2001. Hiring in the state’s sizable motion picture and sound recording industry rose at a staggering 16 percent year-to-year pace in the first quarter according to the QCEW data, much stronger than the CES’s 1.9 percent estimate. Total job growth was also understated for the Los Angeles and San Francisco metro areas, as the QCEW reported a 3.0 percent and 3.8 percent increase, respectively, versus 2.5 percent and 3.5 percent in the CES.
In the publication: “California Mid-Year Economic Update” (dated June 23, 2016), the Wells Fargo Economics Group Notes:
Newly Released Data Show Stronger GDP Growth in the Golden State – While a few signs of slowing are evident, California’s economy remains in the midst of a tremendous run of economic growth. Nonfarm employment growth has averaged nearly three percent over the past three years, and the state’s jobless rate has tumbled to 5.2 percent, narrowing the gap to the U.S. rate to just half a percentage point. California’s good fortune has largely been due to the rapid growth of technology, knowledge-based and creative industries.
Recently released data from the U.S. Bureau of Economic Analysis put some solid numbers behind California’s recent performance. Real gross domestic product (GDP) grew 4.1 percent in 2015 to 2.46 trillion, …. Growth slowed during the second half of the year, however, with real GDP rising at 2.7 percent annualized in the fourth quarter and averaging just 1.6 percent during the second half of the year. This past year marked the strongest growth rate since 2004 and was also one of the fastest growth rates of any state, tying Oregon for the largest percentage gain. California easily outpaced the national average for the fourth consecutive year, as the nation grew at a lesser 2.4 percent growth pace. California, which accounts for 13.8 percent of national GDP, accounted for 23.8 percent of the nation’s growth in 2015.
California’s world-renown technology sector, which is largely captured in the information and professional, scientific & technical services sectors, continued in the fourth quarter. The two sectors made the most significant contribution to California’s real GDP growth, contributing a combined 1.3 percentage points to the 2.7 percent overall annualized growth during the quarter. Moreover, tech-related growth in California has far outpaced the national average over the past year, with tech output growing by a larger 10.3 percent in the California relative to a 6.0 percent gain nationwide.
27
Housing remains a bright spot in the state’s economy, as California’s burgeoning employment and population growth continues to fuel demand for new homes. Residential construction activity ramped up in 2015, with single-family permits registering 44,132 units for the year, marking their highest level since 2007. The multifamily market also continued to thrive, with 53,479 units permitted in 2015. The gains in housing helped boost construction output, which accounted for 0.26 percentage points of real GDP growth in the fourth quarter. That said, we expect the pace of construction to moderate slightly through the balance of this year and in 2017. Multifamily development is set to cool from its breakneck pace and population growth is likely to take a bit of a breather, as residents and would-be residents re-examine the costs and the benefits of living in expensive coastal regions in the Bay Area and Southern California.
Performance Highlights
For the three and nine months ended September 30, 2016, net income available to limited partners as a percent of Limited Partners’ capital – average daily balance was 3.9% and 3.2% (annualized), respectively. Distributions to those limited partners electing periodic distributions was 2.5% (annualized).
For the three months ended September 30, 2016, continuing improvement in interest on loans ($2.235 million in 2016, $1.099 million in 2015, and $872,000 in 2014) is reflective of the growth in the portfolio of performing loans and the increasing effective yield rate (9.8% in 2016, 7.1% and 2015, and 5.4% in 2014). For the nine months ended September 30, 2016, the effective yield rate on the loan portfolio was higher than the portfolio interest rate (8.9% and 8.3%, respectively) due to default-rate interest received on two loans collected in September 2016.
REO income decreased approximately $1.876 million (74.6%) for the three months ended, and $3.891 million (58.7%) for the nine months ended September 30, 2016, compared to the same period in 2015, due primarily to the sale of certain REO properties and the overall reduction in the REO portfolio. As the REO portfolio continues to sell in a favorable real estate market, and the proceeds are reinvested in performing loans, REO income is expected to decline with offsetting increases to interest income. REO income includes earnings from rental operations, net of mortgage interest, holding costs of non-rental properties, impairment gains or losses on all REO and gains or losses on the sale of REO.
Net income for the nine months ended September 30, 2016 was $4.308 million, a decrease of $1.684 million (28.1%) compared to the same period in 2015 due to the decrease in REO income as the REO portfolio is liquidated, and proceeds reinvested in loans. Total operations expense as a percent of interest income on loans was 53.6% and 104.6% for the three months ended, and 71.7% and 92.4% for the nine months ended September 30, 2016 and 2015, respectively.
28
The table below shows key performance indicators for the nine months ended September 30 ($ in thousands).
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Limited Partners’ capital – average balance |
|
$ |
180,394 |
|
|
|
193,309 |
|
|
|
199,417 |
|
Limited Partners’ capital – end-of-period |
|
$ |
173,447 |
|
|
|
189,233 |
|
|
|
197,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured loans – average daily balance |
|
$ |
79,446 |
|
|
|
71,258 |
|
|
|
57,780 |
|
Secured loans – end-of-period |
|
$ |
83,385 |
|
|
|
46,721 |
|
|
|
71,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on loans |
|
$ |
5,322 |
|
|
|
3,982 |
|
|
|
2,318 |
|
Portfolio interest rate(1) |
|
|
8.3 |
% |
|
|
7.5 |
% |
|
|
6.8 |
% |
Effective yield rate(2) |
|
|
8.9 |
% |
|
|
7.5 |
% |
|
|
5.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (recovery of) loan losses |
|
$ |
(25 |
) |
|
|
964 |
|
|
|
(160 |
) |
Percent(2) |
|
|
0.0 |
% |
|
|
1.8 |
% |
|
|
(0.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate owned (REO) |
|
|
|
|
|
|
|
|
|
|
|
|
REO – end of period |
|
$ |
76,200 |
|
|
|
102,511 |
|
|
|
158,179 |
|
Mortgages payable – end-of-period |
|
$ |
27,089 |
|
|
|
27,654 |
|
|
|
41,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental operations, net |
|
$ |
1,783 |
|
|
|
3,575 |
|
|
|
3,514 |
|
Interest on mortgages payable |
|
$ |
737 |
|
|
|
1,413 |
|
|
|
1,640 |
|
Rental operations, net after mortgage interest |
|
$ |
1,046 |
|
|
|
2,162 |
|
|
|
1,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains on REO sales |
|
$ |
1,159 |
|
|
|
3,863 |
|
|
|
187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations expense |
|
$ |
3,818 |
|
|
|
3,682 |
|
|
|
2,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
4,308 |
|
|
|
5,992 |
|
|
|
1,555 |
|
Percent(3)(4) |
|
|
3.2 |
% |
|
|
4.1 |
% |
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Partner Distributions |
|
$ |
1,954 |
|
|
|
1,755 |
|
|
|
1,689 |
|
Percent (annual rate)(5) |
|
|
2.5 |
% |
|
|
2.5 |
% |
|
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Partner Liquidations(6) |
|
$ |
16,359 |
|
|
|
11,434 |
|
|
|
4,624 |
|
(1) |
Stated note interest rate, weighted daily average |
(2) Yield rate of interest on loans, annualized
(3) |
Percent of limited partners’ capital – average balance, annualized |
(4) |
Percent based on the net income available to limited partners (excluding 1% of profits and losses allocated to general partners) |
(5) |
Percent distributed from limited partners’ capital accounts for partners electing periodic distributions. In September 2015, the distribution rate (annualized) was raised to 2.5% from the 2.0% in effect until that date and prior. |
(6) |
Liquidations are made once a quarter, on the last business day of the quarter. |
29
The table below shows key performance indicators for the three months ended September 30 ($ in thousands).
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Limited Partners’ capital – average balance |
|
$ |
175,735 |
|
|
$ |
190,984 |
|
|
$ |
197,844 |
|
Limited Partners’ capital – end-of-period |
|
$ |
173,447 |
|
|
$ |
189,233 |
|
|
$ |
197,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured loans – average daily balance |
|
$ |
90,980 |
|
|
$ |
61,840 |
|
|
$ |
64,492 |
|
Secured loans – end-of-period |
|
$ |
83,385 |
|
|
$ |
46,721 |
|
|
$ |
71,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on loans |
|
$ |
2,235 |
|
|
$ |
1,099 |
|
|
$ |
872 |
|
Portfolio interest rate(1) |
|
|
8.2 |
% |
|
|
8.0 |
% |
|
|
6.9 |
% |
Effective yield rate(2) |
|
|
9.8 |
% |
|
|
7.1 |
% |
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (recovery of) loan losses |
|
|
— |
|
|
$ |
564 |
|
|
|
— |
|
Percent(2) |
|
|
0.0 |
% |
|
|
3.6 |
% |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate owned (REO) |
|
|
|
|
|
|
|
|
|
|
|
|
REO – end of period |
|
$ |
76,200 |
|
|
$ |
102,511 |
|
|
|
158,179 |
|
Mortgages payable – end-of-period |
|
$ |
27,089 |
|
|
$ |
27,654 |
|
|
|
51,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental operations, net |
|
$ |
518 |
|
|
$ |
1,173 |
|
|
|
1,414 |
|
Interest on mortgages payable |
|
$ |
235 |
|
|
$ |
641 |
|
|
|
546 |
|
Rental operations, net after mortgage interest |
|
$ |
283 |
|
|
$ |
532 |
|
|
|
868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains on REO sales |
|
$ |
375 |
|
|
$ |
1,871 |
|
|
|
184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations expense |
|
$ |
1,198 |
|
|
$ |
1,150 |
|
|
|
1,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
1,711 |
|
|
$ |
1,908 |
|
|
|
873 |
|
Percent(3)(4) |
|
|
3.9 |
% |
|
|
4.0 |
% |
|
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Partner Distributions |
|
$ |
632 |
|
|
$ |
613 |
|
|
|
570 |
|
Percent (annual rate)(5) |
|
|
2.5 |
% |
|
|
2.5 |
% |
|
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Partner Liquidations(6) |
|
$ |
5,638 |
|
|
$ |
4,778 |
|
|
|
1,802 |
|
(1) |
Stated note interest rate, weighted daily average |
(2) |
Yield rate of interest on loans, annualized |
(3) |
Percent of limited partners’ capital – average balance, annualized |
(4) |
Percent based on the net income available to limited partners (excluding 1% of profits and losses allocated to general partners) |
(5) |
Percent distributed from limited partners’ capital accounts for partners electing periodic distributions. In September 2015, the distribution rate (annualized) was raised to 2.5% from the 2.0% in effect until that date and prior. |
(6) |
Liquidations are made once a quarter, on the last business day of the quarter. |
Limited Partners’ Capital – End-of-Period
The September 30, 2016 end-of-period limited partners’ capital balance was approximately $173.4 million, which was a decrease of approximately 8.3% ($15.8 million) over 2015’s $189.2 million. The decrease in limited partners’ capital is due to liquidations and distributions made, partially offset by net income allocated to the limited partners.
30
The September 30, 2016 end-of-period secured loan balance of approximately $83.4 million, was an increase of approximately 78.5% ($36.7 million) over the September 30, 2015 end-of-period secured loan balance of approximately $46.7 million. The Secured loans – average daily balance for the nine months ended September 30, 2016 increased approximately $8.188 million or approximately 11.5% compared to the average daily balance for the same period in 2015. The increases in the loan portfolio are due primarily to the sale of REO, with proceeds reinvested in loans.
The partnership added approximately $15.0 million and $61.7 million of new loans for the three and nine months ended September 30, 2016 (respectively).
As of September 30, 2016, 45 (79%) of the partnership’s loans (representing 96% of the aggregate principal of the partnership’s loan portfolio) have a term of five years or less from loan inception. The remaining loans have terms longer than five years. Substantially all loans are written without a prepayment-penalty clause. As of September 30, 2016, 22 (39%) of the loans outstanding (representing 62% of the aggregate principal balance of the partnership’s loan portfolio) provide for monthly payments of interest only, with the principal due in full at maturity. The remaining loans require monthly payments of principal and interest, typically calculated on a 30-year amortization, with the remaining principal balance due at maturity.
We have sought to exercise strong discipline in underwriting loan applications and lending against collateral at amounts that create a mortgage portfolio that has substantial protective equity (i.e., safety margins to outstanding debt) as indicated by the overall conservative weighted average loan-to-value ratio (LTV) which at September 30, 2016 was 51.7%. Thus, per the appraisal-based valuations at the time of loan inception, borrowers have, in the aggregate, equity of 48.3% in the property, and we as lender have lent in the aggregate 51.7% (including other senior liens on the property) against the properties we hold as collateral for the repayment of our loans.
See Note 4 (Loans) to the financial statements included in Part I, Item 1 of this report for detailed presentations on the secured loan portfolio and on the allowance for loan losses, which presentations are incorporated by this reference into this Item 2.
REO – End-of-Period
At September 30, 2016, the partnership held 10 REO properties (7 rental properties), all of which were designated held for sale. The September 30, 2016 end-of-period REO balance was approximately $76.2 million, which was a decrease of approximately 25.7% ($26.3 million) compared to the September 30, 2015 balance of approximately $102.5 million, due to REO sales made in a favorable real estate market.
At September 30, 2016 approximately 88.5% ($67.4 million) of total REO was comprised of two properties located in Glendale, California.
The total REO balance and number of properties held is expected to continue to decline as the remaining properties are managed for income, marketed and sold, with the proceeds reinvested into new loans.
See Note 5 (REO) to the financial statements included in Part I, Item 1 of this report for detailed presentations of REO sales transactions, rental activity, and additional information regarding REO activity during the period.
Mortgages Payable – End-of-Period
The September 30, 2016 end-of-period mortgages payable balance was approximately $27.1 million, which was a decrease of approximately 2.0% (565,000) compared to the September 30, 2015 balance of $27.7 million. The decrease is due to the partnership making regular mortgage payments consisting of principal and interest, and the payoff of loans due to the sale of REO held as collateral.
31
Analysis and discussion of income from operations
Significant changes to income or expense areas for the nine month period ended September 30, 2016 compared to the same period in 2015 are summarized in the following table ($ in thousands).
|
|
|
|
|
|
|
|
|
|
REO, net |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
Provision for |
|
|
Rental, |
|
|
|
|
|
|
|
|
|
|
Holding |
|
|
|
|
|
|
Net |
|
||||
|
|
Interest |
|
|
(Recovery of) |
|
|
Net After |
|
|
Gains/ |
|
|
Impairment |
|
|
Costs, |
|
|
Operations |
|
|
Income |
|
||||||||
|
|
Income |
|
|
Loan Losses |
|
|
Interest |
|
|
(Losses) on sales |
|
|
(Loss)/Gain |
|
|
Net |
|
|
Expense |
|
|
/(Loss) |
|
||||||||
Nine Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016 |
|
$ |
5,322 |
|
|
$ |
(25 |
) |
|
$ |
1,046 |
|
|
$ |
1,159 |
|
|
$ |
— |
|
|
$ |
533 |
|
|
$ |
3,818 |
|
|
$ |
4,308 |
|
September 30, 2015 |
|
|
3,982 |
|
|
|
964 |
|
|
|
2,162 |
|
|
|
3,863 |
|
|
|
573 |
|
|
|
31 |
|
|
|
3,682 |
|
|
|
5,992 |
|
Change |
|
$ |
1,340 |
|
|
$ |
(989 |
) |
|
$ |
(1,116 |
) |
|
$ |
(2,704 |
) |
|
$ |
(573 |
) |
|
$ |
502 |
|
|
$ |
136 |
|
|
$ |
(1,684 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balance increase (decrease) |
|
|
644 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
|
|
603 |
|
Effective yield rate |
|
|
696 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
696 |
|
Stabilized portfolio |
|
|
— |
|
|
|
(989 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(989 |
) |
REO sales |
|
|
— |
|
|
|
— |
|
|
|
(1,290 |
) |
|
|
(2,704 |
) |
|
|
(573 |
) |
|
|
(81 |
) |
|
|
— |
|
|
|
(4,648 |
) |
Cost reimbursements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(44 |
) |
|
|
44 |
|
Professional services |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
254 |
|
|
|
(254 |
) |
Change in rental operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
174 |
|
|
|
— |
|
|
|
— |
|
|
|
583 |
|
|
|
(115 |
) |
|
|
2,864 |
|
Change |
|
$ |
1,340 |
|
|
$ |
(989 |
) |
|
$ |
(1,116 |
) |
|
$ |
(2,704 |
) |
|
$ |
(573 |
) |
|
$ |
502 |
|
|
$ |
136 |
|
|
$ |
(1,684 |
) |
The table above displays only significant changes to net income for the period, and is not intended to cross foot.
Significant changes to income or expense areas for the three month period ended September 30, 2016 compared to the same period in 2015 are summarized in the following table ($ in thousands).
|
|
|
|
|
|
|
|
|
|
REO, net |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
Provision for |
|
|
Rental, |
|
|
|
|
|
|
|
|
|
|
Holding |
|
|
|
|
|
|
Net |
|
||||
|
|
Interest |
|
|
(Recovery of) |
|
|
Net After |
|
|
Gains/ |
|
|
Impairment |
|
|
Costs, |
|
|
Operations |
|
|
Income |
|
||||||||
|
|
Income |
|
|
Loan Losses |
|
|
Interest |
|
|
(Losses) on sales |
|
|
(Loss)/Gain |
|
|
Net |
|
|
Expense |
|
|
/(Loss) |
|
||||||||
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016 |
|
$ |
2,235 |
|
|
$ |
— |
|
|
$ |
283 |
|
|
$ |
375 |
|
|
$ |
— |
|
|
$ |
(18 |
) |
|
$ |
1,198 |
|
|
$ |
1,711 |
|
September 30, 2015 |
|
|
1,099 |
|
|
|
564 |
|
|
|
532 |
|
|
|
1,871 |
|
|
|
— |
|
|
|
113 |
|
|
|
1,150 |
|
|
|
1,908 |
|
Change |
|
$ |
1,136 |
|
|
$ |
(564 |
) |
|
$ |
(249 |
) |
|
$ |
(1,496 |
) |
|
$ |
— |
|
|
$ |
(131 |
) |
|
$ |
48 |
|
|
$ |
(197 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balance increase (decrease) |
|
|
626 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
93 |
|
|
|
533 |
|
Effective yield rate |
|
|
510 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
510 |
|
Stabilized portfolio |
|
|
— |
|
|
|
(564 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
564 |
|
REO sales |
|
|
— |
|
|
|
— |
|
|
|
(249 |
) |
|
|
(1,496 |
) |
|
|
— |
|
|
|
(131 |
) |
|
|
— |
|
|
|
(1,876 |
) |
Cost reimbursements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Professional services |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
|
|
4 |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(41 |
) |
|
|
68 |
|
Change |
|
$ |
1,136 |
|
|
$ |
(564 |
) |
|
$ |
(249 |
) |
|
$ |
(1,496 |
) |
|
$ |
— |
|
|
$ |
(131 |
) |
|
$ |
48 |
|
|
$ |
(197 |
) |
The table above displays only significant changes to net income for the period, and is not intended to cross foot.
32
Interest on loans increased approximately $1.136 million (103.4%) for the three months ended and $1.340 million (33.7%) for nine months ended September 30, 2016, compared to the same periods in 2015, respectively, due to the continued increase in the balance of performing loans and the increase in the effective interest rates.
Provision for (recovery of) loan losses/allowance for loan losses
At September 30, 2016, the partnership had no allowance for loan losses as all loans had protective equity such that at September 30, 2016, collection was deemed probable for amounts owing.
REO - rental operations, net after mortgage interest
At September 30, 2016, the partnership held 7 rental properties, all of which were designated held for sale, and not subject to depreciation.
Rental operations, net after mortgage interest decreased by approximately $249,000 for the three months ended, and $1.116 million for nine months ended September 30, 2016 compared to the same periods in 2015, respectively, primarily due to the sale of REO properties.
Rental financial highlights by property type are presented in the table below for the nine month period ended September 30, 2016 ($ in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental, |
|
|
|
|
Rental |
|
|
Rental |
|
|
|
|
|
|
Receiver |
|
|
Mortgage |
|
|
Net After |
|
|||||
|
|
Income |
|
|
Expenses |
|
|
Depreciation |
|
|
Fees |
|
|
Interest |
|
|
Interest |
|
||||||
Property type |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
3,719 |
|
|
$ |
1,951 |
|
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
700 |
|
|
$ |
1,067 |
|
Commercial(1) |
|
|
456 |
|
|
|
424 |
|
|
|
— |
|
|
|
16 |
|
|
|
37 |
|
|
|
(21 |
) |
Total |
|
$ |
4,175 |
|
|
$ |
2,375 |
|
|
$ |
— |
|
|
$ |
17 |
|
|
$ |
737 |
|
|
$ |
1,046 |
|
Rental financial highlights by property type are presented in the table below for the three months ended September 30, 2016 ($ in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental, |
|
|
|
|
Rental |
|
|
Rental |
|
|
|
|
|
|
Receiver |
|
|
Mortgage |
|
|
Net After |
|
|||||
|
|
Income |
|
|
Expenses |
|
|
Depreciation |
|
|
Fees |
|
|
Interest |
|
|
Interest |
|
||||||
Property type |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
1,191 |
|
|
$ |
683 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
235 |
|
|
$ |
273 |
|
Commercial(1) |
|
|
203 |
|
|
|
178 |
|
|
|
— |
|
|
|
15 |
|
|
|
— |
|
|
|
10 |
|
Total |
|
$ |
1,394 |
|
|
$ |
861 |
|
|
$ |
— |
|
|
$ |
15 |
|
|
$ |
235 |
|
|
$ |
283 |
|
|
(1) |
The partnership took ownership of a property through foreclosure of its second mortgage, subject to the existing deed of trust. The loan was paid in full in June 2016. |
REO – realized gains/(losses) on REO sales
The realized gains/(losses) on REO sales is presented in the following table for the nine months ended September 30, 2016 and 2015 ($ in thousands).
Nine Months Ended September 30, |
|
Sales proceeds, net |
|
|
Gains(losses) |
|
||
2016 |
|
$ |
10,515 |
|
|
$ |
1,159 |
|
2015 |
|
$ |
58,545 |
|
|
$ |
3,863 |
|
The realized gains/(losses) on REO sales is presented in the following table for the three months ended September 30, 2016 and 2015 ($ in thousands).
Three Months Ended September 30, |
|
Sales proceeds, net |
|
|
Gains(losses) |
|
||
2016 |
|
$ |
5,315 |
|
|
$ |
375 |
|
2015 |
|
$ |
44,204 |
|
|
$ |
1,871 |
|
33
Revenues – REO – Impairment (loss)/gain
There was no impairment (loss)/gain for the three or nine months ended September 30, 2016. The REO impairment (loss)/gain is primarily driven by specific reserves, associated with the estimated net realizable value of properties, as analyzed each year.
Operations Expense
Significant changes to operations expense areas for the nine month period ended September 30, 2016 compared to the same period in 2015 are summarized in the following table ($ in thousands).
|
|
Mortgage |
|
|
Asset |
|
|
Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Servicing |
|
|
Management |
|
|
From |
|
|
Professional |
|
|
|
|
|
|
|
|
|
||||
|
|
Fees |
|
|
Fees |
|
|
RMC |
|
|
Services |
|
|
Other |
|
|
Total |
|
||||||
For the Nine Months Ended, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016 |
|
$ |
875 |
|
|
$ |
515 |
|
|
$ |
1,443 |
|
|
$ |
985 |
|
|
$ |
— |
|
|
$ |
3,818 |
|
September 30, 2015 |
|
|
832 |
|
|
|
548 |
|
|
|
1,457 |
|
|
|
731 |
|
|
|
114 |
|
|
|
3,682 |
|
Change |
|
$ |
43 |
|
|
$ |
(33 |
) |
|
$ |
(14 |
) |
|
$ |
254 |
|
|
$ |
(114 |
) |
|
$ |
136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Explanation of change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balance increase (decrease) |
|
|
41 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
Manager expense allocations |
|
|
— |
|
|
|
— |
|
|
|
(44 |
) |
|
|
— |
|
|
|
— |
|
|
|
(44 |
) |
Professional services rendered |
|
|
— |
|
|
|
— |
|
|
|
48 |
|
|
|
255 |
|
|
|
— |
|
|
|
303 |
|
Capital balance decrease |
|
|
— |
|
|
|
(33 |
) |
|
|
(18 |
) |
|
|
— |
|
|
|
— |
|
|
|
(51 |
) |
Other |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(114 |
) |
|
|
(113 |
) |
Change |
|
$ |
43 |
|
|
$ |
(33 |
) |
|
$ |
(14 |
) |
|
$ |
254 |
|
|
$ |
(114 |
) |
|
$ |
136 |
|
Significant changes to operations expense areas for the three month period ended September 30, 2016 compared to the same period in 2015 are summarized in the following table ($ in thousands).
|
|
Mortgage |
|
|
Asset |
|
|
Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Servicing |
|
|
Management |
|
|
From |
|
|
Professional |
|
|
|
|
|
|
|
|
|
||||
|
|
Fees |
|
|
Fees |
|
|
RMC |
|
|
Services |
|
|
Other |
|
|
Total |
|
||||||
For the Three Months Ended, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016 |
|
$ |
348 |
|
|
$ |
167 |
|
|
$ |
468 |
|
|
$ |
227 |
|
|
$ |
(12 |
) |
|
$ |
1,198 |
|
September 30, 2015 |
|
|
255 |
|
|
|
181 |
|
|
|
486 |
|
|
|
231 |
|
|
|
(3 |
) |
|
|
1,150 |
|
Change |
|
$ |
93 |
|
|
$ |
(14 |
) |
|
$ |
(18 |
) |
|
$ |
(4 |
) |
|
$ |
(9 |
) |
|
$ |
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Explanation of change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balance increase (decrease) |
|
|
93 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
93 |
|
Manager expense allocations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Professional services rendered |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
|
|
— |
|
|
|
(4 |
) |
Capital balance decrease |
|
|
— |
|
|
|
(14 |
) |
|
|
(18 |
) |
|
|
— |
|
|
|
— |
|
|
|
(32 |
) |
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9 |
) |
|
|
(9 |
) |
Change |
|
$ |
93 |
|
|
$ |
(14 |
) |
|
$ |
(18 |
) |
|
$ |
(4 |
) |
|
$ |
(9 |
) |
|
$ |
48 |
|
– Mortgage servicing fees
The increase in mortgage servicing fees was due to the increase in the average secured loan balance for the nine months ended September 30, 2016.
– Asset management fees
The decrease in asset management fees was due to the reduction in the total capital under management for the three and nine months ended September 30, 2016.
– Costs from RMC
The decrease in costs from RMC for the three and nine months ended September 30, 2016 was due primarily to a reduction in total capital under management.
34
Professional services, including audit and tax fees, increased due primarily to changes in the provision of services rendered for the three and nine months ended September 30, 2016.
Liquidity and Capital Resources
The ongoing sources of funds for loans are the proceeds from (1) earnings retained (i.e. not distributed) in partners’ capital accounts, (2) loan payoffs, (3) borrowers’ monthly principal and interest payments, (4) REO sales, and, (5) to a lesser degree and, if obtained, a line of credit. Cash generated from loan payoffs and borrower payments of principal and interest is used for operating expenses, income distributions to partners, and partner liquidations. The cash flow in excess of these uses is to be re-invested in new loans.
Cash flows by operating function are summarized in the following table ($ in thousands).
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Loan earnings and payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
2,413 |
|
|
$ |
1,133 |
|
|
$ |
5,049 |
|
|
$ |
3,933 |
|
Other loan income |
|
|
36 |
|
|
|
7 |
|
|
|
53 |
|
|
|
26 |
|
Operations expense |
|
|
(1,134 |
) |
|
|
(2,286 |
) |
|
|
(3,749 |
) |
|
|
(4,753 |
) |
Principal payments and recoveries |
|
|
21,629 |
|
|
|
11,444 |
|
|
|
38,296 |
|
|
|
27,389 |
|
Total cash from loan earnings |
|
|
22,944 |
|
|
|
10,298 |
|
|
|
39,649 |
|
|
|
26,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans originated, net |
|
|
(14,475 |
) |
|
|
(3,083 |
) |
|
|
(59,245 |
) |
|
|
(19,426 |
) |
Advances on loans |
|
|
(38 |
) |
|
|
(31 |
) |
|
|
(49 |
) |
|
|
(134 |
) |
Total cash from loan production |
|
|
(14,513 |
) |
|
|
(3,114 |
) |
|
|
(59,294 |
) |
|
|
(19,560 |
) |
Cash from loan earnings and production |
|
|
8,431 |
|
|
|
7,184 |
|
|
|
(19,645 |
) |
|
|
7,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REO operations, sales and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental operations, net |
|
|
(241 |
) |
|
|
899 |
|
|
|
775 |
|
|
|
3,277 |
|
Holding costs |
|
|
(18 |
) |
|
|
46 |
|
|
|
533 |
|
|
|
(1,090 |
) |
Other Assets |
|
|
— |
|
|
|
— |
|
|
|
3,411 |
|
|
|
— |
|
Proceeds from real estate sales |
|
|
5,315 |
|
|
|
44,204 |
|
|
|
10,515 |
|
|
|
58,545 |
|
Cash from REO operations, sales and development |
|
|
5,056 |
|
|
|
45,149 |
|
|
|
15,234 |
|
|
|
60,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outside financing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(218 |
) |
|
|
(429 |
) |
|
|
(684 |
) |
|
|
(1,624 |
) |
Principal, net |
|
|
(139 |
) |
|
|
(17,954 |
) |
|
|
(1,346 |
) |
|
|
(8,088 |
) |
Cash from outside financing |
|
|
(357 |
) |
|
|
(18,383 |
) |
|
|
(2,030 |
) |
|
|
(9,712 |
) |
Net cash increase/(decrease) before distributions to limited partners |
|
|
13,130 |
|
|
|
33,950 |
|
|
|
(6,441 |
) |
|
|
58,055 |
|
Partner withdrawals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
(632 |
) |
|
|
(613 |
) |
|
|
(1,954 |
) |
|
|
(1,755 |
) |
Early withdrawal fees |
|
|
111 |
|
|
|
86 |
|
|
|
315 |
|
|
|
167 |
|
Liquidations |
|
|
(5,638 |
) |
|
|
(4,778 |
) |
|
|
(16,359 |
) |
|
|
(11,434 |
) |
Cash used in partner withdrawals |
|
|
(6,159 |
) |
|
|
(5,305 |
) |
|
|
(17,998 |
) |
|
|
(13,022 |
) |
Net increase/(decrease) in cash |
|
$ |
6,971 |
|
|
$ |
28,645 |
|
|
$ |
(24,439 |
) |
|
$ |
45,033 |
|
Cash, end of period |
|
$ |
32,234 |
|
|
$ |
54,901 |
|
|
$ |
32,234 |
|
|
$ |
54,901 |
|
The presentation above differs in format from the Statements of Cash Flows included in Part I, Item 1 of this report and emphasizes net cash generated or used in the partnership’s primary business activity. The format of the Statements of Cash Flows is defined by GAAP.
35
The partnership’s contractual obligations consist of one mortgage note payable of approximately $27.1 million which matures in 2022. See Note 5 (Real Estate Owned (REO)) to the financial statements included in Part I, Item 1 of this report for a detailed presentation on mortgage notes payable, which presentation is incorporated by this reference into this Item 2.
At September 30, 2016, the partnership had no construction or rehabilitation loans outstanding.
Distributions to limited partners
At the time of their subscription to the partnership, limited partners elected either to receive monthly, quarterly or annual cash distributions from the partnership, or to compound profits in their capital account. If an investor initially elected to receive monthly, quarterly or annual distributions, such election, once made, is irrevocable. If the investor initially elected to compound profits in their capital account, in lieu of cash distributions, the investor may, after three (3) years, change the election and receive monthly, quarterly or annual cash distributions. Profits allocable to limited partners who elect to compound profits in their capital account will be retained by the partnership for making further loans or for other proper partnership purposes and such amounts will be added to such limited partners’ capital accounts. The percentage of limited partners electing distribution of allocated net income, by weighted average to total partners’ capital was 58.1% and 59.1% at September 30, 2016 and 2015, respectively.
Off-balance Sheet Arrangements
During the nine months ended September 30, 2016, we had no material off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, result of operations, liquidity, capital expenditures or capital resources.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk (Not included as smaller reporting company)
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The partnership carried out an evaluation, under the supervision and with the participation of the general partners of the effectiveness of the design and operation of the partnership’s disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this report. Based upon that evaluation, the general partners concluded the partnership’s disclosure controls and procedures were effective.
Changes to Internal Control Over Financial Reporting
There have not been any changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the manager’s or partnership’s internal control over financial reporting.
36
In the normal course of business, the partnership may become involved in various types of legal proceedings such as assignment of rents, bankruptcy proceedings, appointment of receivers, unlawful detainers, judicial foreclosure, etc. to enforce provisions of the deeds of trust, collect the debt owed under promissory notes or protect or recoup its investment from real property secured by the deeds of trust and resolve disputes between borrowers, lenders, lien holders and mechanics. None of these actions would typically be of any material importance. As of September 30, 2016, the partnership was not involved in any legal proceedings other than those that would be considered part of the normal course of business.
Not included as the partnership is a smaller reporting company.
There were no sales of securities by the partnership which were not registered under the Securities Act of 1933.
Liquidations are made once a quarter, on the last business day of the quarter. Liquidations for the three months ended September 30, 2016 were $5,637,149. The unit liquidation program is ongoing and available to partners beginning one year after the purchase of the units. The maximum number of units that may be liquidated in any year and the maximum amount of liquidation available in any period to partners are subject to certain limitations.
Not Applicable.
Not Applicable.
None.
Exhibit No. |
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Description of Exhibits |
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31.1 |
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Certification of General Partner pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 |
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Certification of General Partner pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1 |
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Certification of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2 |
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Certification of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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101.INS |
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XBRL Instance Document |
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101.SCH |
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XBRL Taxonomy Extension Schema Document |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document |
37
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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REDWOOD MORTGAGE INVESTORS VIII, a California Limited Partnership |
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(Registrant) |
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Date: November 14, 2016 |
By: |
Redwood Mortgage Corp., General Partner |
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By: |
/s/ Michael R. Burwell |
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Name: |
Michael R. Burwell |
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Title: |
President, Secretary and Treasurer |
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(On behalf of the registrant, and in the capacity of principal financial officer), Director |
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Date: November 14, 2016 |
By: |
Michael R. Burwell, General Partner |
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By: |
/s/ Michael R. Burwell |
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Name: |
Michael R. Burwell |
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Title: |
General Partner |
38
Exhibit No. |
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Description of Exhibits |
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31.1 |
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Certification of General Partner pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 |
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Certification of General Partner pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1 |
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Certification of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2 |
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Certification of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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101.INS |
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XBRL Instance Document |
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101.SCH |
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XBRL Taxonomy Extension Schema Document |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document |
39
Exhibit 31.1
PRINCIPAL OFFICER CERTIFICATION
I, Michael R. Burwell, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Redwood Mortgage Investors VIII, a California Limited Partnership (the “Registrant”); |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. |
The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the Registrant and have: |
|
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. |
The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
/s/ Michael R. Burwell |
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Michael R. Burwell, President, |
(principal executive officer and principal financial officer) |
Redwood Mortgage Corp., |
General Partner |
November 14, 2016 |
Exhibit 31.2
GENERAL PARTNER CERTIFICATION
I, Michael R. Burwell, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Redwood Mortgage Investors VIII, a California Limited Partnership (the “Registrant”); |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. |
The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the Registrant and have: |
|
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. |
The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
/s/ Michael R. Burwell |
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Michael R. Burwell, General Partner |
November 14, 2016 |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Redwood Mortgage Investors VIII, a California Limited Partnership (the “Partnership”) on Form 10-Q for the period ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, certify that to the best of my knowledge:
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the partnership at the dates and for the periods indicated. |
A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Michael R. Burwell |
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Michael R. Burwell, President, |
(principal executive officer and principal financial officer) |
Redwood Mortgage Corp., |
General Partner |
November 14, 2016 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Redwood Mortgage Investors VIII, a California Limited Partnership (the “Partnership”) on Form 10-Q for the period ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, certify that to the best of my knowledge:
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(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the partnership at the dates and for the periods indicated. |
A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Michael R. Burwell |
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Michael R. Burwell, General Partner |
November 14, 2016 |
Document and Entity Information |
9 Months Ended |
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Sep. 30, 2016
shares
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Document And Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Sep. 30, 2016 |
Document Fiscal Year Focus | 2016 |
Document Fiscal Period Focus | Q3 |
Trading Symbol | CK0000889123 |
Entity Registrant Name | REDWOOD MORTGAGE INVESTORS VIII |
Entity Central Index Key | 0000889123 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Smaller Reporting Company |
Entity Common Stock, Shares Outstanding | 0 |
Consolidated Statements of Income - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Loans | ||||
Interest income | $ 2,235 | $ 1,099 | $ 5,322 | $ 3,982 |
Late fees | 34 | 7 | 41 | 27 |
Revenue, loans | 2,269 | 1,106 | 5,363 | 4,009 |
Provision for (recovery of) loan losses | 564 | (25) | 964 | |
Loans, net | 2,269 | 542 | 5,388 | 3,045 |
REO | ||||
Rental operations, net | 518 | 1,173 | 1,783 | 3,575 |
Interest on mortgages | (235) | (641) | (737) | (1,413) |
Rental operations, net of mortgage interest | 283 | 532 | 1,046 | 2,162 |
Realized gains/(losses) on sales | 375 | 1,871 | 1,159 | 3,863 |
Impairment (loss)/gain | 573 | |||
Holding costs, net of other income | (18) | 113 | 533 | 31 |
REO, net | 640 | 2,516 | 2,738 | 6,629 |
Total revenues, net | 2,909 | 3,058 | 8,126 | 9,674 |
Operations Expense | ||||
Mortgage servicing fees | 348 | 255 | 875 | 832 |
Asset management fees | 167 | 181 | 515 | 548 |
Costs from Redwood Mortgage Corp. | 468 | 486 | 1,443 | 1,457 |
Professional services | 227 | 231 | 985 | 731 |
Other | (12) | (3) | 114 | |
Total operations expense | 1,198 | 1,150 | 3,818 | 3,682 |
Net income | 1,711 | 1,908 | 4,308 | 5,992 |
Limited partners (99%) | 1,694 | 1,889 | 4,265 | 5,932 |
General partners (1%) | $ 17 | $ 19 | $ 43 | $ 60 |
Consolidated Statements of Income (Parenthetical) |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Income Statement [Abstract] | ||||
Limited partners | 99.00% | 99.00% | 99.00% | 99.00% |
General partners | 1.00% | 1.00% | 1.00% | 1.00% |
Consolidated Statements of Changes in Partners' Capital - USD ($) $ in Thousands |
Total |
Capital Units Gross [Member]
Limited Partner [Member]
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Formation Loan [Member]
General Partner [Member]
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Capital Units [Member] |
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Beginning balance at Dec. 31, 2015 | $ 179,676 | $ 187,495 | $ (885) | $ 186,610 |
Net income | 4,308 | 4,265 | 43 | 4,308 |
Distributions | (1,954) | (1,954) | ||
Liquidations | (16,359) | (16,359) | ||
Ending balance at Sep. 30, 2016 | 165,986 | 173,447 | (842) | 172,605 |
Beginning balance at Jun. 30, 2016 | 178,023 | (859) | 177,164 | |
Net income | 1,711 | 1,694 | 17 | 1,711 |
Distributions | (632) | (632) | ||
Liquidations | (5,638) | (5,638) | ||
Ending balance at Sep. 30, 2016 | $ 165,986 | $ 173,447 | $ (842) | $ 172,605 |
Organization and General |
9 Months Ended | ||||||||||||
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Sep. 30, 2016 | |||||||||||||
Accounting Policies [Abstract] | |||||||||||||
ORGANIZATION AND GENERAL | NOTE 1 – ORGANIZATION AND GENERAL In the opinion of the general partners, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the consolidated financial information included therein. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the partnership’s Form 10-K for the fiscal year ended December 31, 2015 filed with the U.S. Securities and Exchange Commission (SEC). The results of operations for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the operations results to be expected for the full year. Redwood Mortgage Investors VIII, a California Limited Partnership (we, RMI VIII or the partnership), was formed in 1993 to engage in business as a mortgage lender and investor by making and holding-for-investment mortgage loans secured by California real estate, primarily through first and second deeds of trust. The partnership is externally managed. The general partners are Redwood Mortgage Corp. (RMC) and Michael R. Burwell (Burwell), an individual. Burwell is the president and majority shareholder of RMC through his holdings and beneficial interests in certain trusts. The general partners are solely responsible for managing the business and affairs of the partnership, subject to the voting rights of the limited partners on specified matters. Any one of the general partners acting alone has the power and authority to act for and bind the partnership. The mortgage loans the partnership invests in are arranged and are generally serviced by RMC. The rights, duties and powers of the general and limited partners of the partnership are governed by the limited partnership agreement and Sections 15900 et seq. of the California Corporations Code. Partners should refer to the partnership agreement for complete disclosure of its provisions. A majority of the outstanding limited partnership units may, without the permission of the general partners, vote to: (i) terminate the partnership, (ii) amend the limited partnership agreement, (iii) approve or disapprove the sale of all or substantially all of the assets of the partnership, and (iv) remove or replace one or all of the general partners. The approval of all the limited partners is required to elect a new general partner to continue the partnership business where there is no remaining general partner after a general partner ceases to be a general partner other than by removal. The last offering of units of limited partnership interests closed in November 2008. Profits and losses are allocated among the limited partners according to their respective capital accounts after one percent (1%) of profits and losses are allocated to the general partners. The monthly results are subject to subsequent adjustment as a result of quarterly and year-end accounting and reporting. Federal and state income taxes are the obligation of the partners, if and when taxes apply, other than the annual California franchise tax, and any California LLC cash receipts taxes paid by the partnership and its subsidiaries. The ongoing sources of funds for loans are the proceeds from (1) earnings retained (i.e. not distributed) in partners’ capital accounts, (2) loan payoffs, (3) borrowers’ monthly principal and interest payments, (4) REO sales, and, (5) to a lesser degree and, if obtained, a line of credit. Cash generated from loan payoffs and borrower payments of principal and interest is used for operating expenses, income distributions to partners, and unit liquidations. The cash flow, if any, in excess of these uses is to be re-invested in new loans. Distribution policy At the time of their subscription for units, partners elected to have distributed to them their monthly, quarterly or annual allocation of profits, or to have profits allocated to their capital accounts to be retained by the partnership to compound. Subject to certain limitations, those electing compounding may subsequently change their election. A partner’s election to receive cash distributions is irrevocable. Beginning in September 2015, the distributions annual rate increased to two and one-half percent (2.5%) from two percent (2%).
Liquidity, capital withdrawals and early withdrawals There is no established public trading and/or secondary market for the units, and none is expected to develop. There are substantial restrictions on transferability of units. To provide liquidity to limited partners, the partnership agreement provides that limited partners in the partnership for the minimum five-year period may withdraw all or a portion of their capital accounts in twenty (20) quarterly installments or longer, as determined by the general partners in light of partnership cash flow, beginning the last day of the calendar quarter following the quarter in which the notice of withdrawal is given. A limited partner may liquidate all or part of the limited partner’s capital account in four (4) quarterly installments beginning on the last day of the calendar quarter following the quarter in which the notice of withdrawal is given, subject to a ten percent (10%) early withdrawal penalty applicable to any sums withdrawn prior to the time when such sums could have been withdrawn without penalty. There is also a limited right of liquidation for an investor’s heirs upon an investor’s death. The partnership does not establish a reserve from which to fund withdrawals and, accordingly, the partnership’s capacity to return a limited partner’s capital is restricted by the availability of partnership cash. No more than twenty percent (20%) of the total limited partners’ capital account balances at the beginning of any year, may be liquidated during any calendar year. Lending and investment guidelines, objectives and criteria Generally, interest rates on the partnership’s mortgage loans are not affected by market movements in interest rates. The partnership’s loans generally have shorter maturity terms than typical mortgages. In the event a borrower is unable to repay in full the principal owing on the loan at maturity, the partnership may consider extending the term through a loan modification or may foreclose and take back the property for sale. The partnership’s primary investment objectives are to:
The partnership generally funds loans:
The cash flow and the income generated by the real property securing the loan factor into the credit decisions, as does the general creditworthiness, experience and reputation of the borrower. However, for loans secured by real property, other than owner-occupied personal residences, such considerations are subordinate to a determination that the value of the real property is sufficient, in and of itself, as a source of repayment. The amount of the partnership’s loan combined with the outstanding debt and claims secured by a senior deed of trust on the real property, if any, generally is not to exceed a percentage of the appraised value of the property (the “loan to value ratio”, or LTV) specified in the lending guidelines. Term of the partnership The term of the partnership will continue until 2032, unless sooner terminated as provided in the limited partnership agreement.
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Summary of Significant Accounting Policies |
9 Months Ended | |||||||||
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Sep. 30, 2016 | ||||||||||
Accounting Policies [Abstract] | ||||||||||
Summary of Significant Accounting Policies |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The partnership’s consolidated financial statements include the accounts of the partnership, its wholly-owned subsidiaries (consisting of single-member limited liability companies representing ownership in a single real property asset), and, in 2015, its 72.5%-owned subsidiary (a single-asset limited liability company which is owned with affiliates and whose single asset was a development property in San Francisco County). All significant intercompany transactions and balances have been eliminated in consolidation. Management estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Such estimates relate principally to the determination of the allowance for loan losses, including, when applicable, the valuation of impaired loans (which itself requires determining the fair value of the collateral), and the valuation of real estate held for sale and held as investment, at acquisition and subsequently. Actual results could differ significantly from these estimates. Fair value estimates GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. Fair values of assets and liabilities are determined based on the fair value hierarchy established in GAAP. The hierarchy is comprised of three levels of inputs to be used.
Collateral fair values are reviewed quarterly and the protective equity for each loan is computed. As used herein, “protective equity” is the arithmetic difference between the fair value of the collateral, net of any senior liens, and the loan balance, where “loan balance” is the sum of the unpaid principal, advances and the recorded interest thereon. This computation is done for each loan (whether impaired or performing), and while loans secured by collateral of similar property type are grouped, there is enough distinction and variation in the collateral that a loan-by-loan, collateral-by-collateral analysis is appropriate. The fair value of the collateral is determined by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values, and publicly available information on in-market transactions. Appraisals of commercial real property generally present three approaches to estimating value: 1) market comparables or sales approach; 2) cost to replace; and 3) capitalized cash flows or investment approach. These approaches may or may not result in a common, single value. The market-comparables approach may yield several different values depending on certain basic assumptions, such as, determining highest and best use (which may or may not be the current use); determining the condition (e.g. as-is, when-completed, or for land when-entitled); and determining the unit of value (e.g. as a series of individual unit sales or as a bulk disposition). Management has the requisite familiarity with the markets it lends in generally and of the properties lent on specifically to analyze sales-comparables and assess their suitability and/or applicability. Management is acquainted with market participants – investors, developers, brokers, lenders – that are useful, relevant secondary sources of data and information regarding valuation and valuation variability. These secondary sources may have familiarity with and perspectives on pending transactions, successful strategies to optimize value, and the history and details of specific properties – on and off the market – that enhance the process and analysis that is particularly and principally germane to establishing value in distressed markets and/or property types. Cash, in banks The partnership considers all highly liquid financial instruments with maturities of three months or less at the time of purchase to be cash equivalents. At September 30, 2016 and December 31, 2015, certain partnership cash balances in banks may at times exceed federally insured limits. Loans and interest income Loans generally are stated at the unpaid principal balance (principal). Management has discretion to pay amounts (advances) to third parties on behalf of borrowers to protect the partnership’s interest in the loan. Advances include, but are not limited to, the payment of interest and principal on a senior lien to prevent foreclosure by the senior lien holder, property taxes, insurance premiums, and attorney fees. Advances generally are stated at the amounts paid out on the borrower’s behalf and any accrued interest on amounts paid out, until repaid by the borrower. The partnership may fund a specific loan origination net of an interest reserve to insure timely interest payments at the inception (one to two years) of the loan. As monthly interest payments become due, the partnership funds the payments into the affiliated trust account. If based upon current information and events, it is probable the partnership will be unable to collect all amounts due according to the contractual terms of the loan agreement, then a loan may be designated as impaired. Impaired loans are included in management’s periodic analysis of recoverability. If a valuation allowance has been established on an impaired loan, any subsequent payments on impaired loans are applied to late fees and then to reduce first the accrued interest, then advances, and then unpaid principal. From time to time, the partnership negotiates and enters into loan modifications with borrowers whose loans are delinquent. In the normal course of the partnership’s operations, loans that mature may be renewed at then current market rates and terms for new loans. Such renewals are not designated as impaired, unless the renewed loan was previously designated as impaired. Interest is accrued daily based on the unpaid principal balance of the loans. An impaired loan continues to accrue as long as the loan is in the process of collection and is considered to be well-secured. Loans are placed on non-accrual status at the earlier of management’s determination that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan is no longer considered well-secured. When a loan is placed on non-accrual status, the accrual of interest is discontinued; however, previously recorded interest is not reversed. A loan may return to accrual status when all delinquent interest and principal payments become current in accordance with the terms of the loan agreement. Allowance for loan losses Loans and the related accrued interest and advances are analyzed on a periodic basis for ultimate recoverability. Delinquencies are identified and followed as part of the loan system. Delinquencies are determined based upon contractual terms. For impaired loans, a provision is made for loan losses to adjust the allowance for loan losses to an amount considered by management to be adequate, with due consideration to collateral values, such that the net carrying amount (unpaid principal balance, plus advances, plus accrued interest less the specific allowance) is reduced to the present value of future cash flows discounted at the loan’s effective interest rate, or, if a loan is collateral dependent, to the estimated fair value of the related collateral, net of any senior loans, and net of any costs to sell in arriving at net realizable value if planned disposition of the asset securing a loan is by way of sale. The fair value estimates of the related collateral are derived from information available in the real estate markets including similar property, and may require the experience and judgment of third parties such as commercial real estate appraisers and brokers. Loans determined not to be individually impaired are grouped by the property type of the underlying collateral, and for each loan and for the total by property type, the amount of protective equity or amount of exposure to loss is computed. Based on its knowledge of the borrowers and their historical (and expected) performance, and the exposure to loss as indicated in the analysis, management estimates an appropriate reserve by property type for probable credit losses in the portfolio. Because the partnership is an asset-based lender, except as to owner-occupied residences, and because specific regions, neighborhoods and even properties within the same neighborhoods, vary significantly as to real estate values and transaction activity, general market trends, which may be indicative of a change in the risk of a loss, and a borrower’s creditworthiness are secondary to the condition of the property, the property type and the neighborhood/region in which the property is located, and do not enter substantially into the determination of the amount of the non-specific (i.e. general) reserves. The partnership charges off uncollectible loans and related receivables directly to the allowance account once it is determined the full amount is not collectible. Real estate owned (REO) Real estate owned (REO) is property acquired in full or partial settlement of loan obligations generally through foreclosure, and is recorded at acquisition at the lower of the amount owed on the loan (legal basis), plus any senior indebtedness, or at the property’s net realizable value, which is the fair value less estimated costs to sell, as applicable. The fair value estimates are derived from information available in the real estate markets, including similar property, and often require the experience and judgment of third parties such as commercial real estate appraisers and brokers. The estimates figure materially in calculating the value of the property at acquisition, the level of charge to the allowance for loan losses and any subsequent valuation reserves. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. After acquisition, REO is analyzed periodically for changes in fair values and any subsequent write down is charged to operations expense. Any recovery in the fair value subsequent to such a write down is recorded, not to exceed the value recorded at acquisition. Recognition of gains on the sale of real estate is dependent upon the transaction meeting certain criteria related to the nature of the property and the terms of the sale, including potential seller financing. Rental income/depreciation Rental income is recognized when earned in accordance with the lease agreement. For commercial leases, the costs associated with originating the lease are amortized over the lease term. Residential lease terms generally range from month-to-month to one-year, and the expenses of originating the lease are expensed as incurred. Real estate owned that is designated held for sale is not depreciated. Real estate that was designated held for investment, and rented was depreciated on a straight-line basis over the estimated useful life of the property. Recently issued accounting pronouncements On June 16, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-13 (ASU 2016-13) Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. ASU 2016-13 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including loans. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13’s approach, referred to as the current expected credit losses (CECL) model, applies to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees, and net investments in leases, as well as reinsurance and trade receivables. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses (ECL) should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. ASU 2016-13 does not prescribe a specific method to make the estimate so its application will require significant judgment. Generally, the initial estimate of the ECL and subsequent changes in the estimate will be reported in current earnings. The ECL will be recorded through an allowance for loan losses (ALL) in the statement of financial position. ASU 2016-13 will be effective for SEC filers in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. The partnership is evaluating the impact of ASU 2016-13 on the credit analytics and other processes used in establishing the ALL. The initial – and preliminary conclusion – is that, because RMI VIII is a real estate based lender, relying primarily on low LTV’s/significant protective equity in making the lending decision, the impact on reported financial position and results of operations will not be material to the financial position or results from operations of the partnership. |
General Partners and Other Related Parties |
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Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Partners and Other Related Parties | NOTE 3 – GENERAL PARTNERS AND OTHER RELATED PARTIES The general partners are entitled to one percent (1%) of the profits and losses, which amounted to approximately $17,000 and $19,000 for the three months ended, and $43,000 and $60,000 for the nine months ended September 30, 2016 and 2015, respectively. Beginning with calendar year 2010, and continuing until January 1, 2020, RMC assigned its right to two-thirds of one percent (0.66%) of profits and losses to Burwell in exchange for Burwell assuming one hundred percent (100%) of the general partners’ equity deficit. Formation loan/Commissions paid to broker-dealers Commissions to broker-dealers (B/D sales commissions) for sales of limited partnership interests were paid by RMC and were not paid directly by the partnership out of offering proceeds. Instead, the partnership advanced to RMC amounts sufficient to pay the B/D sales commissions and premiums paid to partners in connection with unsolicited orders up to seven percent (7%) of offering proceeds. The receivable arising from the advances is unsecured, and non-interest bearing and is referred to as the “formation loan.” If the general partners are removed and RMC is no longer receiving payments for services rendered, the formation loan is forgiven, per the terms of the partnership agreement. The formation loan transactions are summarized in the following table at nine months ended September 30, 2016 and 2015 ($ in thousands).
The scheduled payments on the formation loan are presented in the following table ($ in thousands).
The loan brokerage commissions on the mortgage loans originated for RMI VIII are the primary source of the repayments made by RMC for the formation loan. The following commissions and fees are paid by borrowers directly to RMC. - Brokerage commissions, loan originations 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 borrowers, and thus, are not an expense of the partnership. Loan brokerage commissions paid to RMC by borrowers were $229,510 and $71,045, for the three months ended, and $1,117,871 and $515,702 for the nine months ended September 30, 2016 and 2015, respectively. - Other fees The partnership agreement provides for other fees such as reconveyance, mortgage assumption and mortgage extension fees. Such fees are incurred by borrowers and are paid to RMC. Other fees totaled $20,052 and $8,778, for the three months ended, and $71,811 and $53,148 for the nine months ended September 30, 2016 and 2015, respectively. The following commissions and fees are paid by the partnership to RMC. - Mortgage servicing fees RMC earns mortgage servicing fees 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. Mortgage servicing fees paid to RMC were approximately $348,000 and $255,000 for the three months ended, and $875,000 and $832,000 for the nine months ended September 30, 2016 and 2015, respectively. No mortgage servicing fees were waived during any period reported. - 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). Asset management fees were approximately $167,000 and $181,000 for the three months ended, and $515,000 and $548,000 for the nine months ended September 30, 2016 and 2015, respectively. No asset management fees were waived during any period reported. - Costs from Redwood Mortgage Corp. RMC is reimbursed by the partnership for operations expense 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. Expenses reimbursed to RMC totaled $468,000 and $486,000 for the three months ended, and $1,443,000 and $1,457,000 for the nine months ended September 30, 2016 and 2015, respectively. RMC did not waive its right to request reimbursement of any qualifying charges during any period reported. |
Loans |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans | NOTE 4 – LOANS Loans generally are funded at a fixed interest rate with a loan term of up to five years. As of September 30, 2016, 45 (79%) of the partnership’s loans (representing 96% of the aggregate principal of the partnership’s loan portfolio) have a term of five years or less from loan inception. The remaining loans have terms longer than five years. Substantially all loans are written without a prepayment penalty clause. As of September 30, 2016, 22 (39%) of the loans outstanding (representing 62% of the aggregate principal balance of the partnership’s loan portfolio) provide for monthly payments of interest only, with the principal due in full at maturity. The remaining loans require monthly payments of principal and interest, typically calculated on a 30-year amortization, with the remaining principal balance due at maturity. Secured loans unpaid principal balance (principal) Secured loan transactions are summarized in the following table for the nine months ended September 30, 2016 and 2015, respectively ($ in thousands).
In September 2016, RMI 8 purchased three loans from affiliated funds in liquidation status. The purchase price was approximately $470,000 for loan balances of approximately $558,000.
There were no renewals during the nine months ended September 30, 2016. Loan characteristics Secured loans had the characteristics presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
As of September 30, 2016, the partnership’s largest loan, in the unpaid principal balance of approximately $14,000,000 (representing 16.8% of outstanding secured loans and 7.2% of partnership total assets), had an interest rate of 7.3%, was secured by a commercial building in Contra Costa county, and has a maturity of January 1, 2019. As of September 30, 2016, the partnership had no outstanding construction or rehabilitation loans and no commitments to fund construction, rehabilitation or other loans. Lien position At funding, secured loans had the following lien positions and are presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
Property type Secured loans summarized by property type are presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
Distribution by California counties The distribution of secured loans outstanding by the California county in which the primary collateral is located is presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
Delinquency, modifications, and workout agreements Secured loans summarized by payment delinquency are presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
At September 30, 2016, the partnership had one workout agreement in effect with a principal balance of $152,000. The borrower had made all required payments under the workout agreement, and was included in the above table as current. The loan was designated as impaired but was not in non-accrual status. Scheduled maturities Secured loans are scheduled to mature as presented in the following table ($ in thousands).
It is the partnership’s experience that loans may be repaid or refinanced before, at or after the contractual maturity date. For matured loans, the partnership may continue to accept payments while pursuing collection of amounts owed from borrowers. Therefore, the above tabulation for scheduled maturities is not a forecast of future cash receipts. Matured loans Secured loans past maturity are summarized in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
Loans in non-accrual status Secured loans in non-accrual status are summarized in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
At September 30, 2016, there were no loans that were contractually 90 or more days past due as to principal or interest and not in non-accrual status. At December 31, 2015, there was one loan with a loan balance of $345,000, that was contractually 90 or more days past due as to principal or interest and not in non-accrual status. Loans designated impaired Impaired loans had the balances shown and the associated allowance for loan losses presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
Impaired loans had the average balances and interest income recognized and received in cash as presented in the following table as of, and for, the nine months ended September 30, 2016 and the year ended December 31, 2015 ($ in thousands).
Allowance for loan losses At September 30, 2016 and December 31, 2015, the partnership had not recorded an allowance for loan losses, as all loans were deemed to have protective equity such that collection is reasonably assured for amounts owing. |
Real estate owned (REO) |
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Real Estate [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real estate owned (REO) | NOTE 5 – REAL ESTATE OWNED (REO) Transactions and activity, including changes in the net book values, are presented in the following table for the three and nine months ended September 30, 2016 ($ in thousands).
At September 30, 2016, all properties are designated held for sale.
The following transactions closed during the three months ended September 30, 2016:
The following transactions closed during the six months ended June 30, 2016:
REO summarized by property classification is presented in the following table ($ in thousands).
Rental properties consist of the following seven properties at September 30, 2016:
Non-Rental properties consist of the following three properties at September 30, 2016:
Earnings from rental operations are presented in the following table for the three and nine months ended September 30, 2016 and 2015 ($ in thousands).
Leases on residential properties are one-year lease terms or month to month. There is one commercial lease with a three-year term for annual rent payments of approximately $85,000. The lease expires in August 2017, with an option to extend. Mortgages payable Mortgages payable transactions are summarized in the following table for the nine months ended September 30, 2016 ($ in thousands).
Mortgage payable as of September 30, 2016 and December 31, 2015 are summarized in the following table (mortgage balance $ in thousands).
Future minimum payments of principal at September 30, 2016 are presented in the following table ($ in thousands).
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Fair Value |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | NOTE 6 – FAIR VALUE The partnership does not record loans, REO or mortgages payable at fair value on a recurring basis. The recorded amount of the performing loans (i.e., the loan balance) is deemed to approximate the fair value, as is the loan balance of loans designated impaired for which a specific reserve has not been recorded (i.e., the loan is well collateralized, such that the collection of the amount owed is assured, including foregone interest, if any). Certain assets and liabilities are measured at fair value on a non-recurring basis and are listed below. - Loans designated impaired (i.e., that are collateral dependent with a specific reserve) - REO for which a valuation reserve has been recorded - REO acquired through foreclosure during the year Assets and liabilities measured at fair value on a non-recurring basis in the nine months ended September 30, 2016 are presented in the following table ($ in thousands).
The following methods and assumptions are used when estimating fair value.
The following methods are used depending upon the property type of the collateral of the secured loans. Single family – Management’s preferred method for determining the fair market value of its single-family residential assets is the sale comparison (sale comp) method. Management primarily obtains sale comps through its subscription to the RealQuest service, but also uses free online services such as Zillow.com and other available resources to supplement this data. Sale comps are reviewed for similarity to the subject property, examining features such as proximity to subject, number of bedrooms and bathrooms, square footage, sale date, condition and year built. If applicable sale comps are not available or deemed unreliable, management will seek additional information in the form of brokers’ opinions of value or appraisals. Multi-family residential – The partnership’s multi-family residential assets consist of multiple owned units at fractured condominium projects and wholly owned apartment complexes with condominium overlays. Management’s fair market value analysis compares the aggregate retail value of the units as for-sale condominiums against the asset’s value as an income-producing rental property in determining its most favorable market. Management’s preferred method for determining the aggregate retail value of its multifamily units is the sale comparison method for the individual condominium units. Management primarily obtains sale comps via its subscription to the RealQuest service, but also uses free online services such as Zillow.com to supplement this data. Sale comps are reviewed for similarity to the subject property, examining features such as proximity to subject, number of bedrooms and bathrooms, square footage, sale date, condition, amenities and year built. For fractured condominium projects, sales of units within the same community are preferred. Management compiles the list of the most relevant sale comps and derives an average price per square foot, which is then applied to the average square footage of partnership-owned units at the subject property to determine the average price per unit and the gross square footage of all partnership units to determine the aggregate retail value of the units as for-sale condominiums. Where adequate sale comps are not available, management will seek additional information in the form of brokers’ opinions of value or appraisals. Management’s preferred method for valuing its multifamily assets as income-producing rental operations is the direct capitalization method when rental operations are consistent and rental income and expenses have been normalized. In order to determine market capitalization rates (cap rates), management refers to published data from reliable third-party sources such as the CBRE Cap Rate Survey. Management then applies the appropriate cap rate to the property’s most recent available annual net operating income to determine the property’s value as an income-producing project. When reliable net operating income information is not available, or the project is under development, or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value. Where such information is available, management may also determine the asset’s value as an income-producing rental project via the sale comparison method by comparing the value of similar multifamily assets sold recently. This method typically applies only to wholly owned apartment complexes. Management compares the aggregate retail value to the value as an income-producing rental project to determine the property’s current highest and best use/ most favorable market, setting the fair market value accordingly. Commercial buildings – Where commercial rental income information is available, management’s preferred method for determining the fair value of its commercial real estate assets is the direct capitalization method. In order to determine cap rates for properties of the same class and location as the subject, management refers to reputable third-party sources such as the CBRE Cap Rate Survey. Management then applies the appropriate cap rate to the subject’s most recent available annual net operating income to determine the property’s value as an income-producing commercial rental project. When reliable net operating income information is not available or the project is under development or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value of stabilized properties performing at market, less any cost to improve. Supplementally, and particularly when reliable net operating income is not available or the project is under development, management will seek additional information in the form of a sale comparison analysis (where adequate sale comps are available), brokers’ opinion of value, or appraisal. Commercial land – Commercial land has many variations/uses, thus requiring management to employ a variety of methods depending upon the unique characteristics of the subject land. Management may rely on information in the form of a sale comparison analysis (where adequate sales comps are available), brokers’ opinion of value or appraisal.
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Commitments and Contingencies Disclosure |
9 Months Ended |
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Sep. 30, 2016 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies Disclosure |
NOTE 7 – COMMITMENTS AND CONTINGENCIES, OTHER THAN LOAN AND REO COMMITMENTS Legal proceedings In the normal course of business, the partnership may become involved in various legal proceedings (such as assignment of rents, bankruptcy proceedings, appointment of receivers, unlawful detainers, judicial foreclosure, etc.) to collect debt owed under promissory notes, to enforce the provisions of deeds of trust, to protect its interest in real property subject to the deeds of trust, and to resolve disputes with borrowers, lenders, lien holders and mechanics. None of these actions typically would be of any material importance. As of the date hereof, the partnership was not involved in any legal proceedings other than those that would be considered part of the normal course of business. Commitments None. |
Subsequent Events |
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Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 8 – SUBSEQUENT EVENTS At November 10, 2016, the partnership had 3 REO properties, with an aggregate carrying value of approximately $55.1 million, in contract to sell. Contracts are subject to the purchaser’s final due diligence and certain other customary conditions. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||
Basis of Presentation | Basis of presentation The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The partnership’s consolidated financial statements include the accounts of the partnership, its wholly-owned subsidiaries (consisting of single-member limited liability companies representing ownership in a single real property asset), and, in 2015, its 72.5%-owned subsidiary (a single-asset limited liability company which is owned with affiliates and whose single asset was a development property in San Francisco County). All significant intercompany transactions and balances have been eliminated in consolidation. |
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Use of Estimates | Management estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Such estimates relate principally to the determination of the allowance for loan losses, including, when applicable, the valuation of impaired loans (which itself requires determining the fair value of the collateral), and the valuation of real estate held for sale and held as investment, at acquisition and subsequently. Actual results could differ significantly from these estimates. Fair value estimates GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. Fair values of assets and liabilities are determined based on the fair value hierarchy established in GAAP. The hierarchy is comprised of three levels of inputs to be used.
Collateral fair values are reviewed quarterly and the protective equity for each loan is computed. As used herein, “protective equity” is the arithmetic difference between the fair value of the collateral, net of any senior liens, and the loan balance, where “loan balance” is the sum of the unpaid principal, advances and the recorded interest thereon. This computation is done for each loan (whether impaired or performing), and while loans secured by collateral of similar property type are grouped, there is enough distinction and variation in the collateral that a loan-by-loan, collateral-by-collateral analysis is appropriate. The fair value of the collateral is determined by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values, and publicly available information on in-market transactions. Appraisals of commercial real property generally present three approaches to estimating value: 1) market comparables or sales approach; 2) cost to replace; and 3) capitalized cash flows or investment approach. These approaches may or may not result in a common, single value. The market-comparables approach may yield several different values depending on certain basic assumptions, such as, determining highest and best use (which may or may not be the current use); determining the condition (e.g. as-is, when-completed, or for land when-entitled); and determining the unit of value (e.g. as a series of individual unit sales or as a bulk disposition). Management has the requisite familiarity with the markets it lends in generally and of the properties lent on specifically to analyze sales-comparables and assess their suitability and/or applicability. Management is acquainted with market participants – investors, developers, brokers, lenders – that are useful, relevant secondary sources of data and information regarding valuation and valuation variability. These secondary sources may have familiarity with and perspectives on pending transactions, successful strategies to optimize value, and the history and details of specific properties – on and off the market – that enhance the process and analysis that is particularly and principally germane to establishing value in distressed markets and/or property types. |
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Cash, in Banks | Cash, in banks The partnership considers all highly liquid financial instruments with maturities of three months or less at the time of purchase to be cash equivalents. At September 30, 2016 and December 31, 2015, certain partnership cash balances in banks may at times exceed federally insured limits. |
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Loans and Interest Income | Loans and interest income Loans generally are stated at the unpaid principal balance (principal). Management has discretion to pay amounts (advances) to third parties on behalf of borrowers to protect the partnership’s interest in the loan. Advances include, but are not limited to, the payment of interest and principal on a senior lien to prevent foreclosure by the senior lien holder, property taxes, insurance premiums, and attorney fees. Advances generally are stated at the amounts paid out on the borrower’s behalf and any accrued interest on amounts paid out, until repaid by the borrower. The partnership may fund a specific loan origination net of an interest reserve to insure timely interest payments at the inception (one to two years) of the loan. As monthly interest payments become due, the partnership funds the payments into the affiliated trust account. If based upon current information and events, it is probable the partnership will be unable to collect all amounts due according to the contractual terms of the loan agreement, then a loan may be designated as impaired. Impaired loans are included in management’s periodic analysis of recoverability. If a valuation allowance has been established on an impaired loan, any subsequent payments on impaired loans are applied to late fees and then to reduce first the accrued interest, then advances, and then unpaid principal. From time to time, the partnership negotiates and enters into loan modifications with borrowers whose loans are delinquent. In the normal course of the partnership’s operations, loans that mature may be renewed at then current market rates and terms for new loans. Such renewals are not designated as impaired, unless the renewed loan was previously designated as impaired. Interest is accrued daily based on the unpaid principal balance of the loans. An impaired loan continues to accrue as long as the loan is in the process of collection and is considered to be well-secured. Loans are placed on non-accrual status at the earlier of management’s determination that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan is no longer considered well-secured. When a loan is placed on non-accrual status, the accrual of interest is discontinued; however, previously recorded interest is not reversed. A loan may return to accrual status when all delinquent interest and principal payments become current in accordance with the terms of the loan agreement. |
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Allowance for Loan Losses | Allowance for loan losses Loans and the related accrued interest and advances are analyzed on a periodic basis for ultimate recoverability. Delinquencies are identified and followed as part of the loan system. Delinquencies are determined based upon contractual terms. For impaired loans, a provision is made for loan losses to adjust the allowance for loan losses to an amount considered by management to be adequate, with due consideration to collateral values, such that the net carrying amount (unpaid principal balance, plus advances, plus accrued interest less the specific allowance) is reduced to the present value of future cash flows discounted at the loan’s effective interest rate, or, if a loan is collateral dependent, to the estimated fair value of the related collateral, net of any senior loans, and net of any costs to sell in arriving at net realizable value if planned disposition of the asset securing a loan is by way of sale. The fair value estimates of the related collateral are derived from information available in the real estate markets including similar property, and may require the experience and judgment of third parties such as commercial real estate appraisers and brokers. Loans determined not to be individually impaired are grouped by the property type of the underlying collateral, and for each loan and for the total by property type, the amount of protective equity or amount of exposure to loss is computed. Based on its knowledge of the borrowers and their historical (and expected) performance, and the exposure to loss as indicated in the analysis, management estimates an appropriate reserve by property type for probable credit losses in the portfolio. Because the partnership is an asset-based lender, except as to owner-occupied residences, and because specific regions, neighborhoods and even properties within the same neighborhoods, vary significantly as to real estate values and transaction activity, general market trends, which may be indicative of a change in the risk of a loss, and a borrower’s creditworthiness are secondary to the condition of the property, the property type and the neighborhood/region in which the property is located, and do not enter substantially into the determination of the amount of the non-specific (i.e. general) reserves. The partnership charges off uncollectible loans and related receivables directly to the allowance account once it is determined the full amount is not collectible. |
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Real Estate Owned (REO) | Real estate owned (REO) Real estate owned (REO) is property acquired in full or partial settlement of loan obligations generally through foreclosure, and is recorded at acquisition at the lower of the amount owed on the loan (legal basis), plus any senior indebtedness, or at the property’s net realizable value, which is the fair value less estimated costs to sell, as applicable. The fair value estimates are derived from information available in the real estate markets, including similar property, and often require the experience and judgment of third parties such as commercial real estate appraisers and brokers. The estimates figure materially in calculating the value of the property at acquisition, the level of charge to the allowance for loan losses and any subsequent valuation reserves. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. After acquisition, REO is analyzed periodically for changes in fair values and any subsequent write down is charged to operations expense. Any recovery in the fair value subsequent to such a write down is recorded, not to exceed the value recorded at acquisition. Recognition of gains on the sale of real estate is dependent upon the transaction meeting certain criteria related to the nature of the property and the terms of the sale, including potential seller financing. |
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Rental Income/Depreciation | Rental income/depreciation Rental income is recognized when earned in accordance with the lease agreement. For commercial leases, the costs associated with originating the lease are amortized over the lease term. Residential lease terms generally range from month-to-month to one-year, and the expenses of originating the lease are expensed as incurred. Real estate owned that is designated held for sale is not depreciated. Real estate that was designated held for investment, and rented was depreciated on a straight-line basis over the estimated useful life of the property. |
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Recently Issued Accounting Pronouncements | Recently issued accounting pronouncements On June 16, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-13 (ASU 2016-13) Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. ASU 2016-13 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including loans. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13’s approach, referred to as the current expected credit losses (CECL) model, applies to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees, and net investments in leases, as well as reinsurance and trade receivables. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses (ECL) should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. ASU 2016-13 does not prescribe a specific method to make the estimate so its application will require significant judgment. Generally, the initial estimate of the ECL and subsequent changes in the estimate will be reported in current earnings. The ECL will be recorded through an allowance for loan losses (ALL) in the statement of financial position. ASU 2016-13 will be effective for SEC filers in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. The partnership is evaluating the impact of ASU 2016-13 on the credit analytics and other processes used in establishing the ALL. The initial – and preliminary conclusion – is that, because RMI VIII is a real estate based lender, relying primarily on low LTV’s/significant protective equity in making the lending decision, the impact on reported financial position and results of operations will not be material to the financial position or results from operations of the partnership. |
General Partners and Other Related Parties (Tables) |
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Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||
Schedule of Accounts, Notes, Loans and Financing Receivable | The formation loan transactions are summarized in the following table at nine months ended September 30, 2016 and 2015 ($ in thousands).
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Schedule of Financing Receivables, Minimum Payments | The scheduled payments on the formation loan are presented in the following table ($ in thousands).
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Loans (Tables) |
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Secured Loan Principal Transactions | Secured loan transactions are summarized in the following table for the nine months ended September 30, 2016 and 2015, respectively ($ in thousands).
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Secured Loans Characteristics | Secured loans had the characteristics presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
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Secured Loans by Lien Position in the Collateral | At funding, secured loans had the following lien positions and are presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
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Secured Loans by Property Type of the Collateral | Secured loans summarized by property type are presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
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Secured Loans Distributed within California | The distribution of secured loans outstanding by the California county in which the primary collateral is located is presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
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Secured Loans Scheduled Maturities | Secured loans are scheduled to mature as presented in the following table ($ in thousands).
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Schedule of Financing Receivables, Non Accrual Status | Secured loans in non-accrual status are summarized in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
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By Days Past Due [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Past Due Financing Receivables | Secured loans summarized by payment delinquency are presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
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Past Due [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Past Due Financing Receivables | Secured loans past maturity are summarized in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
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Impaired Loans [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Financing Receivables | Impaired loans had the balances shown and the associated allowance for loan losses presented in the following table as of September 30, 2016 and December 31, 2015 ($ in thousands).
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Average Balances And Interest Income [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Financing Receivables | Impaired loans had the average balances and interest income recognized and received in cash as presented in the following table as of, and for, the nine months ended September 30, 2016 and the year ended December 31, 2015 ($ in thousands).
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Real estate owned (REO) (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REO Held for Sale | Transactions and activity, including changes in the net book values, are presented in the following table for the three and nine months ended September 30, 2016 ($ in thousands).
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REO Held for Sale by Property Type | REO summarized by property classification is presented in the following table ($ in thousands).
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Earnings/(Loss) from Rental Operations of the Real Estate Owned, Held as Investment | Earnings from rental operations are presented in the following table for the three and nine months ended September 30, 2016 and 2015 ($ in thousands).
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Schedule of Participating Mortgage Loans | Mortgages payable transactions are summarized in the following table for the nine months ended September 30, 2016 ($ in thousands).
Mortgage payable as of September 30, 2016 and December 31, 2015 are summarized in the following table (mortgage balance $ in thousands).
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Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum payments of principal at September 30, 2016 are presented in the following table ($ in thousands).
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Fair Value (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements, Nonrecurring | Assets and liabilities measured at fair value on a non-recurring basis in the nine months ended September 30, 2016 are presented in the following table ($ in thousands).
|
Note 2 - Summary of Significant Accounting Policies (Detail) |
9 Months Ended |
---|---|
Sep. 30, 2016
Approach
| |
Summary of Significant Accounting Policies Details [Line Items] | |
Noncontrolling Interest, Ownership Percentage by Parent | 72.50% |
Estimating Real Property Value, Number of Approaches | 3 |
Cash and Cash Equivalents, Maximum Initial Maturity | 3 months |
Interest Reserve Minimum Length | 1 year |
Interest Reserve Maximum Length | 2 years |
Maximum [Member] | |
Summary of Significant Accounting Policies Details [Line Items] | |
Residential Lease Term | 1 year |
Note 3 - General Partners and Other Related Parties - Formation Loan - Transactions (Detail) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Formation Loan - Transactions [Abstract] | |
Balance January 1 | $ 6,934 |
Formation loans made | 0 |
Early withdrawal penalties | (315) |
Repayments | 0 |
Balance September 30 | $ 6,619 |
Note 3 - General Partners and Other Related Parties - Future Minimum Payments on Formation Loan (Detail) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Future Minimum Payments On Formation Loan [Abstract] | |
2016 | $ 335 |
2017 | 650 |
2018 | 650 |
2019 | 650 |
2020 | 650 |
Thereafter | 3,684 |
Total | $ 6,619 |
Note 4 - Loans - Secured Loan Transactions (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Receivables [Abstract] | ||||
Principal, beginning of period | $ 62,740 | $ 71,017 | ||
Loans funded or acquired | $ 14,975 | $ 3,383 | 61,745 | 24,363 |
Principal payments received | (21,621) | (11,403) | (38,255) | (27,345) |
Loans sold to affiliates | (2,500) | (4,937) | ||
Foreclosures | (345) | (16,312) | ||
Other - loans charged off against allowance | (65) | |||
Principal, end of period | $ 83,385 | $ 46,721 | $ 83,385 | $ 46,721 |
Note 4 - Loans - Secured Loans by Property Type of the Collateral (Detail) $ in Thousands |
9 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|
Sep. 30, 2016
USD ($)
MortgageLoan
|
Dec. 31, 2015
USD ($)
MortgageLoan
|
Sep. 30, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Number of loans | MortgageLoan | 57 | 53 | |||||
Loans - principal (in Dollars) | $ | $ 83,385 | $ 62,740 | $ 46,721 | $ 71,017 | |||
Loans - percent | 100.00% | 100.00% | |||||
Single Family [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Number of loans | MortgageLoan | [1] | 35 | 33 | ||||
Loans - principal (in Dollars) | $ | [1] | $ 29,479 | $ 27,673 | ||||
Loans - percent | [1] | 35.00% | 45.00% | ||||
Multi-family [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Number of loans | MortgageLoan | 2 | 1 | |||||
Loans - principal (in Dollars) | $ | $ 893 | $ 584 | |||||
Loans - percent | 1.00% | 1.00% | |||||
Commercial [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Number of loans | MortgageLoan | 19 | 18 | |||||
Loans - principal (in Dollars) | $ | $ 52,563 | $ 34,033 | |||||
Loans - percent | 63.00% | 53.00% | |||||
Land [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Number of loans | MortgageLoan | 1 | 1 | |||||
Loans - principal (in Dollars) | $ | $ 450 | $ 450 | |||||
Loans - percent | 1.00% | 1.00% | |||||
|
Note 4 - Loans - Secured Loans by Property Type of the Collateral (Parenthetical) (Detail) |
9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016
USD ($)
MortgageLoan
|
Dec. 31, 2015
USD ($)
MortgageLoan
|
Sep. 30, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Loans Details [Line Items] | ||||
Mortgage Loans on Real Estate, Number of Loans | MortgageLoan | 57 | 53 | ||
Loans - principal (in Dollars) | $ | $ 83,385,000 | $ 62,740,000 | $ 46,721,000 | $ 71,017,000 |
Single Family Property-Owner Occupied [Member] | ||||
Loans Details [Line Items] | ||||
Mortgage Loans on Real Estate, Number of Loans | MortgageLoan | 17 | 15 | ||
Loans - principal (in Dollars) | $ | $ 12,221,000 | $ 14,157,000 | ||
Single Family Property-NonOwner Occupied [Member] | ||||
Loans Details [Line Items] | ||||
Mortgage Loans on Real Estate, Number of Loans | MortgageLoan | 18 | 18 | ||
Loans - principal (in Dollars) | $ | $ 17,258,000 | $ 13,516,000 |
Note 4 - Loans - Secured Loans Distributed within California (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Dec. 31, 2014 |
|||
---|---|---|---|---|---|---|---|
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 83,385 | $ 62,740 | $ 46,721 | $ 71,017 | |||
Loans - percent | 100.00% | 100.00% | |||||
Contra Costa [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 16,724 | $ 14,327 | |||||
Loans - percent | 20.10% | 22.80% | |||||
San Mateo [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 11,099 | $ 8,008 | |||||
Loans - percent | 13.30% | 12.80% | |||||
Santa Clara [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 8,289 | $ 4,924 | |||||
Loans - percent | 9.90% | 7.90% | |||||
San Francisco [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 7,204 | $ 7,656 | |||||
Loans - percent | 8.60% | 12.20% | |||||
Solano [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 1,875 | $ 2,575 | |||||
Loans - percent | 2.30% | 4.10% | |||||
Alameda [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 3,704 | $ 920 | |||||
Loans - percent | 4.40% | 1.50% | |||||
Napa [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 963 | $ 976 | |||||
Loans - percent | 1.20% | 1.60% | |||||
Marin [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 849 | $ 674 | |||||
Loans - percent | 1.00% | 1.10% | |||||
San Francisco Bay Area [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | [1] | $ 50,707 | $ 40,060 | ||||
Loans - percent | [1] | 60.80% | 64.00% | ||||
El Dorado [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 2,044 | $ 2,045 | |||||
Loans - percent | 2.50% | 3.20% | |||||
Monterey [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 3,513 | $ 1,366 | |||||
Loans - percent | 4.20% | 3.20% | |||||
Santa Cruz [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 871 | $ 928 | |||||
Loans - percent | 1.00% | 1.50% | |||||
Sacramento [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 419 | $ 421 | |||||
Loans - percent | 0.50% | 0.60% | |||||
Calaveras [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 152 | $ 156 | |||||
Loans - percent | 0.20% | 0.20% | |||||
San Benito [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 94 | $ 95 | |||||
Loans - percent | 0.10% | 0.10% | |||||
Mariposa [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 49 | ||||||
Loans - percent | 0.10% | ||||||
Other Northern California [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 7,142 | $ 5,011 | |||||
Loans - percent | 8.60% | 7.80% | |||||
Northern California [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 57,849 | $ 45,071 | |||||
Loans - percent | 69.40% | 71.80% | |||||
Los Angeles [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 22,466 | $ 14,873 | |||||
Loans - percent | 26.90% | 23.70% | |||||
Orange [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 666 | $ 669 | |||||
Loans - percent | 0.80% | 1.10% | |||||
San Diego [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 2,300 | $ 375 | |||||
Loans - percent | 2.80% | 0.60% | |||||
Ventura [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 344 | ||||||
Loans - percent | 0.50% | ||||||
Los Angeles And Coastal [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 25,432 | $ 16,261 | |||||
Loans - percent | 30.50% | 25.90% | |||||
Kern [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 104 | $ 108 | |||||
Loans - percent | 0.10% | 0.20% | |||||
San Bernardino [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 1,300 | ||||||
Loans - percent | 2.10% | ||||||
Other Southern California [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 104 | $ 1,408 | |||||
Loans - percent | 0.10% | 2.30% | |||||
Southern California [Member] | |||||||
Loans Details - Secured Loans by Property Type of the Collateral [Line Items] | |||||||
Loans - principal (in Dollars) | $ 25,536 | $ 17,669 | |||||
Loans - percent | 30.60% | 28.20% | |||||
|
Note 4 - Loans - Secured Loans Summarized by Payment Delinquency (Detail) $ in Thousands |
Sep. 30, 2016
USD ($)
MortgageLoan
|
Dec. 31, 2015
USD ($)
MortgageLoan
|
Sep. 30, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
---|---|---|---|---|
Past Due | ||||
Delinquent loans, number | MortgageLoan | 57 | 53 | ||
Loans, amount | $ | $ 83,385 | $ 62,740 | $ 46,721 | $ 71,017 |
Past Due 30-89 Days [Member] | ||||
Past Due | ||||
Delinquent loans, number | MortgageLoan | 1 | |||
Loans, amount | $ | $ 187 | |||
Past Due 90-179 Days [Member] | ||||
Past Due | ||||
Delinquent loans, number | MortgageLoan | 1 | |||
Loans, amount | $ | $ 345 | |||
Past Due [Member] | ||||
Past Due | ||||
Delinquent loans, number | MortgageLoan | 1 | 1 | ||
Loans, amount | $ | $ 187 | $ 345 | ||
Current [Member] | ||||
Past Due | ||||
Delinquent loans, number | MortgageLoan | 56 | 52 | ||
Loans, amount | $ | $ 83,198 | $ 62,395 |
Note 4 - Loans - Secured Loans Scheduled Maturities (Detail) $ in Thousands |
Sep. 30, 2016
USD ($)
Loan
|
Dec. 31, 2015
USD ($)
Loan
|
Sep. 30, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|||
---|---|---|---|---|---|---|---|
Secured Loans Scheduled Maturities [Abstract] | |||||||
2016 | Loan | [1] | 2 | |||||
2017 | Loan | 21 | ||||||
2018 | Loan | 9 | ||||||
2019 | Loan | 13 | ||||||
2020 | Loan | 6 | ||||||
2021 | Loan | 3 | ||||||
Thereafter | Loan | 1 | ||||||
Total future maturities | Loan | 55 | ||||||
Matured as of September 30, 2016 | Loan | 2 | ||||||
Total secured loan balance | Loan | 57 | 53 | |||||
2016 (in Dollars) | $ | [1] | $ 283 | |||||
2017 (in Dollars) | $ | 25,815 | ||||||
2018 (in Dollars) | $ | 18,693 | ||||||
2019 (in Dollars) | $ | 33,147 | ||||||
2020 (in Dollars) | $ | 3,192 | ||||||
2021 (in Dollars) | $ | 1,148 | ||||||
Thereafter | $ | 871 | ||||||
Total future maturities | $ | 83,149 | ||||||
Matured as of September 30, 2016 | $ | 236 | ||||||
Total secured loan balance | $ | $ 83,385 | $ 62,740 | $ 46,721 | $ 71,017 | |||
2016 | [1] | 1.00% | |||||
2017 | 31.00% | ||||||
2018 | 22.00% | ||||||
2019 | 39.00% | ||||||
2020 | 4.00% | ||||||
2021 | 1.00% | ||||||
Thereafter | 1.00% | ||||||
Total future maturities | 99.00% | ||||||
Matured as of September 30, 2016 | 1.00% | ||||||
Total secured loan balance | 100.00% | ||||||
|
Note 4 - Loans - Secured Loans Past Maturity (Detail) $ in Thousands |
Sep. 30, 2016
USD ($)
Loan
MortgageLoan
|
Dec. 31, 2015
USD ($)
MortgageLoan
|
Sep. 30, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
||
---|---|---|---|---|---|---|
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Number of loans | Loan | 2 | |||||
Principal | $ 83,385 | $ 62,740 | $ 46,721 | $ 71,017 | ||
Advances | 61 | 51 | ||||
Accrued interest | 614 | 372 | ||||
Loans, net | $ 84,113 | $ 63,232 | ||||
Percent of total secured loan balance | 100.00% | 100.00% | ||||
Past Maturity [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Number of loans | MortgageLoan | [1] | 2 | 1 | |||
Principal | $ 236 | $ 4,000 | ||||
Advances | 47 | |||||
Accrued interest | 48 | 85 | ||||
Loans, net | $ 331 | $ 4,085 | ||||
Percent of total secured loan balance | 1.00% | 6.00% | ||||
|
Note 4 - Loans - Secured Loans in Nonaccrual Status (Detail) $ in Thousands |
9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016
USD ($)
MortgageLoan
|
Dec. 31, 2015
USD ($)
MortgageLoan
|
Sep. 30, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Loans Details Secured Loans In Nonaccrual Status [Line Items] | ||||
Number of loans | MortgageLoan | 57 | 53 | ||
Loans - principal (in Dollars) | $ 83,385 | $ 62,740 | $ 46,721 | $ 71,017 |
Accrued interest | $ 614 | $ 372 | ||
Nonaccrual Status [Member] | ||||
Loans Details Secured Loans In Nonaccrual Status [Line Items] | ||||
Number of loans | MortgageLoan | 1 | 2 | ||
Loans - principal (in Dollars) | $ 234 | $ 623 | ||
Accrued interest | 2 | 14 | ||
Principal [Member] | Nonaccrual Status [Member] | ||||
Loans Details Secured Loans In Nonaccrual Status [Line Items] | ||||
Loans - principal (in Dollars) | 230 | 577 | ||
Advances [Member] | Nonaccrual Status [Member] | ||||
Loans Details Secured Loans In Nonaccrual Status [Line Items] | ||||
Loans - principal (in Dollars) | $ 2 | $ 32 |
Note 4 - Loans - Secured Loans Designated as Impaired Loans (Detail) $ in Thousands |
9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016
USD ($)
Loan
|
Dec. 31, 2015
USD ($)
Loan
|
|||
Secured Loans Designated as Impaired Loans [Abstract] | ||||
Principal | $ 383 | $ 732 | ||
Recorded investment | [1] | 392 | 784 | |
Impaired loans without allowance | $ 392 | $ 784 | ||
Number of Loans | Loan | 2 | 3 | ||
|
Note 4 - Loans - Impaired Loans - Average Balances and Interest Income (Detail) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Impaired Loans - Average Balances and Interest Income [Abstract] | ||
Average recorded investment | $ 588 | $ 10,992 |
Interest income recognized | 28 | 43 |
Interest income received in cash | $ 28 | $ 29 |
Note 5 - Real Estate Owned (REO) - REO, Held for Sale (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2016 |
|
Reo Held For Sale [Abstract] | ||
Balance, beginning of period | $ 80,166 | $ 82,949 |
Acquisitions | 878 | 2,266 |
Dispositions | (4,940) | (9,356) |
Improvements/betterments | 96 | 341 |
Balance, end of period | $ 76,200 | $ 76,200 |
Note 5 - Real Estate Owned (REO) (Detail) |
3 Months Ended | 6 Months Ended | 9 Months Ended |
---|---|---|---|
Sep. 30, 2016
USD ($)
a
Property
|
Jun. 30, 2016
USD ($)
Property
|
Sep. 30, 2016
USD ($)
a
Property
|
|
Real Estate Owned REO Details [Line Items] | |||
Property purchased at estimated net realizable value | $ | $ 878,000 | $ 2,266,000 | |
Rental Property [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Real Estate Properties | 7 | 7 | |
Residential Properties [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Lease term | 1 year | ||
Commercial [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Lease term | 3 years | ||
Lease, Periodic Payment (in Dollars) | $ | $ 85,000 | ||
Lease, Expiration Period | 2017-08 | ||
Los Angeles [Member] | Rental Property Held For Sale [Member] | Condominium Complex [Member] | Property 1 [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 50 | 50 | |
Los Angeles [Member] | Rental Property Held For Sale [Member] | Condominium Complex [Member] | Property 2 [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 126 | 126 | |
Los Angeles [Member] | Condominium Complex [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 56 | 70 | 56 |
Gains (Losses) on Sales of Other Real Estate (in Dollars) | $ | $ 47,000 | $ 31,000 | |
Los Angeles [Member] | Condominium Complex [Member] | Sold [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 6 | 14 | 6 |
Alameda County [Member] | Condominium Complex [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 4 | ||
Gains (Losses) on Sales of Other Real Estate (in Dollars) | $ | $ 238,000 | $ 618,000 | |
Alameda County [Member] | Condominium Complex [Member] | Sold [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 1 | 3 | 1 |
San Francisco County [Member] | Condominium Complex [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 12 | 13 | 12 |
Gains (Losses) on Sales of Other Real Estate (in Dollars) | $ | $ 126,000 | $ 135,000 | |
San Francisco County [Member] | Sold [Member] | Condominium Complex [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 1 | 1 | 1 |
San Francisco County [Member] | Rental Property Held For Sale [Member] | Condominium Complex [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 11 | 11 | |
San Francisco County [Member] | Rental Property Held For Sale [Member] | Commercial Property [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Real Estate Properties | 1 | 1 | |
Contra Costa [Member] | Rental Property Held For Sale [Member] | Commercial Property [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Real Estate Properties | 1 | 1 | |
Contra Costa [Member] | Condominium Complex [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 39 | 39 | |
Gains (Losses) on Sales of Other Real Estate (in Dollars) | $ | $ 36,000 | ||
Contra Costa [Member] | Condominium Complex [Member] | Sold [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 39 | 39 | |
Stanislaus County [Member] | Affiliated Funds [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Acquired remaining percentage of interest in commercial land | 36.00% | 36.00% | |
Property purchased at estimated net realizable value | $ | $ 878,000 | ||
Stanislaus County [Member] | Non Rental Held For Sale [Member] | Residential Single Family [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Area of Real Estate Property (in Acres) | a | 14 | 14 | |
Amador [Member] | Rental Property Held For Sale [Member] | Commercial Property [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Real Estate Properties | 1 | 1 | |
Ventura [Member] | Rental Property Held For Sale [Member] | Commercial Property [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Real Estate Properties | 1 | 1 | |
Fresno County California [Member] | Non Rental Held For Sale [Member] | Residential Single Family [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Number of Units in Real Estate Property | 1 | 1 | |
Marin County [Member] | Non Rental Held For Sale [Member] | Residential Single Family [Member] | |||
Real Estate Owned REO Details [Line Items] | |||
Area of Real Estate Property (in Acres) | a | 13 | 13 |
Note 5 - Real Estate Owned (REO) - REO, Held for Sale, by Property Type (Detail) $ in Thousands |
Sep. 30, 2016
USD ($)
Property
|
Jun. 30, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
Property
|
---|---|---|---|
Real Estate Acquired Through Foreclosure Or Similar Procedures [Line Items] | |||
REO, held for sale, net book value | $ 76,200 | $ 80,166 | $ 82,949 |
Rental Properties Held as Investment [Member] | |||
Real Estate Acquired Through Foreclosure Or Similar Procedures [Line Items] | |||
REO, held for sale, number of properties | Property | 7 | 8 | |
REO, held for sale, net book value | $ 72,282 | $ 79,149 | |
Non-Rental Held as Investment [Member] | |||
Real Estate Acquired Through Foreclosure Or Similar Procedures [Line Items] | |||
REO, held for sale, number of properties | Property | 3 | 3 | |
REO, held for sale, net book value | $ 3,918 | $ 3,800 | |
REO Held as Investment [Member] | |||
Real Estate Acquired Through Foreclosure Or Similar Procedures [Line Items] | |||
REO, held for sale, number of properties | Property | 10 | 11 | |
REO, held for sale, net book value | $ 76,200 | $ 82,949 |
Note 5 - Real Estate Owned (REO) - Earnings/(Loss) from Rental Operations of the Real Estate Owned (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Professional services | $ 227 | $ 231 | $ 985 | $ 731 |
Other | (12) | (3) | 114 | |
Total operations expense | 1,198 | 1,150 | 3,818 | 3,682 |
Rental operations, net | 518 | 1,173 | 1,783 | 3,575 |
Interest on mortgages | 235 | 641 | 737 | 1,413 |
Rental operations, net of mortgage interest | 283 | 532 | 1,046 | 2,162 |
REO Held for Sale [Member] | ||||
Rental income | 1,394 | 2,336 | 4,175 | 7,464 |
Administration and payroll | 160 | 354 | 543 | 1,041 |
Homeowner association fees | 122 | 151 | 352 | 527 |
Professional services | 36 | 21 | 62 | 38 |
Utilities and maintenance | 310 | 302 | 698 | 846 |
Advertising and promotions | 18 | 24 | 27 | 61 |
Property taxes | 191 | 270 | 588 | 890 |
Other | 24 | 36 | 105 | 177 |
Total operations expense | 861 | 1,158 | 2,375 | 3,580 |
Net operating income | 533 | 1,178 | 1,800 | 3,884 |
Depreciation | 294 | |||
Receiver fees | 15 | 5 | 17 | 15 |
Rental operations, net | 518 | 1,173 | 1,783 | 3,575 |
Interest on mortgages | 235 | 641 | 737 | 1,413 |
Rental operations, net of mortgage interest | $ 283 | $ 532 | $ 1,046 | $ 2,162 |
Note 5 - Real Estate Owned (REO) - Mortgages Payable (Detail) $ in Thousands |
9 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2016
USD ($)
| ||||
Real Estate [Abstract] | ||||
Principal, January 1 | $ 27,509 | |||
Mortgages acquired by foreclosure | 926 | [1] | ||
Principal repaid | (1,346) | |||
Principal, September 30 | $ 27,089 | |||
|
Note 5 - Real Estate Owned (REO) - Mortgages Payable by Lender (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
||||
---|---|---|---|---|---|---|
Secured debt | $ 27,089 | $ 27,509 | ||||
NorthMarq Capital [Member] | ||||||
Secured debt | [1],[2] | $ 27,089 | $ 27,509 | |||
|
Note 5 - Real Estate Owned (REO) - Mortgages Payable by Lender (Parenthetical) (Detail) - NorthMarq Capital [Member] - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Maturity Date | Jul. 01, 2022 | Jul. 01, 2022 |
Interest rate | 3.11% | 3.11% |
Monthly payment (in Dollars) | $ 167,753 | $ 167,753 |
London Interbank Offered Rate (LIBOR) [Member] | ||
Interest rate | 2.73% | 2.73% |
Note 5 - Real Estate Owned (REO) - Future Minimum Payments of Principal on Mortgages (Detail) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Real Estate [Abstract] | |
2016 (October 1 to December 31) | $ 144 |
2017 | 586 |
2018 | 606 |
2019 | 625 |
2020 | 646 |
Thereafter | 24,482 |
Total | $ 27,089 |
Note 6 - Fair Value - Assets and Liabilities Measured at Fair Value on a Non-recurring basis (Detail) - Fair Value, Measurements, Nonrecurring [Member] $ in Thousands |
Sep. 30, 2016
USD ($)
|
|||
---|---|---|---|---|
Fair Value, Inputs, Level 1 [Member] | ||||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
Impaired loans with specific allowance, net for which an adjustment was recorded in the year | $ 0 | |||
REO for which a valuation reserve has been recorded in the year | 0 | |||
Fair Value, Inputs, Level 2 [Member] | ||||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
Impaired loans with specific allowance, net for which an adjustment was recorded in the year | 0 | |||
REO for which a valuation reserve has been recorded in the year | 5,725 | |||
REO acquired through foreclosure during the year | 416 | [1] | ||
Fair Value, Inputs, Level 3 [Member] | ||||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
Impaired loans with specific allowance, net for which an adjustment was recorded in the year | 0 | |||
REO for which a valuation reserve has been recorded in the year | 0 | |||
Estimate of Fair Value Measurement [Member] | ||||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
Impaired loans with specific allowance, net for which an adjustment was recorded in the year | 0 | |||
REO for which a valuation reserve has been recorded in the year | 5,725 | |||
REO acquired through foreclosure during the year | $ 416 | [1] | ||
|
Note 6 - Fair Value - Assets and Liabilities Measured at Fair Value on a Non-recurring basis (Parenthetical) (Detail) - Fair Value, Measurements, Nonrecurring [Member] - First Mortgage [Member] - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Jun. 30, 2016 |
|
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Principal and interest payable on mortgage | $ 926,000 | |
Repayment date of mortgage | 2016-06 |
Note 8 - Subsequent Events (Detail) $ in Thousands |
Nov. 10, 2016
USD ($)
Property
|
Sep. 30, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
---|---|---|---|
Subsequent Event [Line Items] | |||
Carrying value of property | $ 76,200 | $ 82,949 | |
Subsequent Event [Member] | Real Estate Owned Properties in Contract to Sale [Member] | |||
Subsequent Event [Line Items] | |||
Number of Units in Real Estate Property | Property | 3 | ||
Carrying value of property | $ 55,100 |
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