Filed Pursuant to Rule 424(b)(3)
Registration No. 33-155428
SUPPLEMENT NO. 8 DATED MAY 8, 2012
TO THE PROSPECTUS DATED JUNE 8, 2009
REDWOOD MORTGAGE INVESTORS IX, LLC
This Supplement No. 8 updates certain information contained in the prospectus of Redwood Mortgage Investors IX, LLC, dated June 8, 2009, and Supplement No. 7 thereto, dated April 27, 2012. Important additional information regarding the company and the risks involved in investing in the company are contained in the prospectus, as supplemented. You should carefully read this Supplement No. 8 in conjunction with the prospectus, as supplemented. Unless otherwise defined in this supplement, all capitalized terms used have the meanings given them in the prospectus.
The purpose of this supplement is to describe, among other things, the following:
· | updated disclosure regarding certain risk factors associated with investing in the units |
· | supplemental information regarding our distributions to members |
· | supplemental information regarding our prior performance tables |
There is a high degree of risk associated with investing in the units. See “Risk Factors” beginning on page 18 of the prospectus, page 4 of Supplement 7 and the first page of this supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if the prospectus or this supplement is truthful or complete. Any representation to the contrary is a criminal offense.
1. Risk Factors
The following new risk factor entitled “We May Pay Distributions from Sources other than Cash Flow From Operating Activities Which Will Result in Fewer Funds Available to Invest in Mortgages and Could Reduce Our Members’ Overall Return” is hereby inserted on page 30 of the prospectus (as the second risk factor on such page):
We May Pay Distributions From Sources Other Than Cash Flow From Operating Activities Which Will Result in Fewer Funds Available to Invest in Mortgages and Could Reduce Our Members’ Overall Return | In the event we do not have enough cash flow from operating activities to fund our distributions, we may need to defer or reduce distributions or fund distributions from cash on hand, which may include proceeds from offerings and loan repayments from borrowers. Through December 31, 2011, we had received aggregate gross offering proceeds of approximately $11,568,188 million in our initial public offering. We commenced active operations and began originating and funding loans in October 2009. For the years ended December 31, 2010 and 2011, we funded 100% and 77% of our distributions, respectively, using cash flow from operating activities, and we funded 0% and 23% of our distributions, respectively, using proceeds from loan repayments from borrowers. If we continue to pay distributions from sources other than cash flow from operating activities, we will have fewer funds available to invest in mortgages, which may reduce our members’ overall returns. |
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2. Supplemental Information in “DISTRIBUTION POLICIES” Section
A new section entitled “DISTRIBUTION POLICIES — Distributions” is hereby inserted immediately after the section entitled “DISTRIBUTION POLICIES — Allocation of Net Profit and Net Losses” on page 102 of the prospectus. Such new section shall read in its entirety as follows:
Distributions. The company, in accordance with its operating agreement, allocates profits and losses and distributes cash monthly to members who have not elected to participate in our distribution reinvestment plan. The amount distributed is based on an annual forecast of profits which is adjusted for any surplus or shortfall from the prior year resulting from a forecast-to-actual difference. The requirement to maintain a cash reserve in the company is considered in determining whether the amount that would otherwise be distributed requires adjustment.
We commenced active operations in October 2009. In 2009 and 2011, we did not generate enough cash flow from operating activities to fully fund distributions. Therefore, some of our distributions in those years were paid from sources other than cash flow from operating activities. Distributions in excess of our cash flow from operating activities have been funded from cash on hand, which may include proceeds from offerings and loan repayments from borrowers.
Net cash provided by (used in) operating activities, net income, and distributions to members, from inception to December 31, 2011, are summarized in the following table:
Date | Net Cash Provided By (Used In) Operating Activities ($) | Net Income ($) | Distributions to Members ($) | Distributions to Managers ($) |
Jul - Sep 09 | 0 | 0 | 0 | 0 |
Oct - Dec 09 | -68,128 | 14,055 | 13,914 | 141 |
Jan - Mar 10 | -27,333 | 27,335 | 28,048 | 179 |
Apr - Jun 10 | 137,616 | 23,534 | 38,713 | 0 |
Jul - Sep 10 | 45,968 | 56,474 | 58,414 | 0 |
Oct - Dec 10 | 54,852 | 58,341 | 78,800 | 1,477 |
Jan - Mar 11 | 64,741 | 96,883 | 112,962 | 0 |
Apr - Jun 11 | 125,021 | 116,177 | 147,873 | 2,131 |
Jul - Sep 11 | 117,179 | 151,211 | 162,965 | -2,131 |
Oct - Dec 11 | 153,654 | 153,681 | 176,990 | 0 |
TOTAL | 603,570 | 697,691 | 818,679 | 1,797 |
During 2011 and 2010 the company’s distributed annualized yield was 6.50%. The company’s cash distributions to members (excluding redemptions) during 2011 and 2010 were $600,790 and $203,975, respectively.
Net income recorded during 2011 and 2010 for members was $512,772 and $164,028, respectively. The difference between net income and cash distributions was due to the managers anticipating investing excess cash in additional quality loans throughout the year, which due to the financial markets and the general economic conditions did not present themselves. The managers believe in 2012 the difference will be recouped and therefore are not anticipating a permanent capital reduction.
3. Supplemental Information Tabular Information Concerning Our Prior Performance
A new section entitled “TABULAR INFORMATION CONCERNING OUR PRIOR PERFORMANCE” is hereby inserted immediately after the section entitled “TABULAR INFORMATION CONCERNING OUR PRIOR PROGRAMS” on page 110 of the prospectus. Such new section shall read in its entirety as follows:
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TABULAR INFORMATION CONCERNING OUR PRIOR PERFORMANCE
Appendix II contains prior performance and investment information for our company’s initial public offering. Tables I through III of Appendix I contain unaudited information relating to our initial public offering, and our managers’ experience in raising and investing funds, compensation of our managers and their affiliates and operating results of our initial public offering as of December 31, 2011. Table IV of Appendix II is omitted since the company has not completed operations. Table V of Appendix II contains unaudited information relating to the payment of the company’s mortgage loans.
Purchasers of the units offered by this prospectus should not assume that the results set forth in Appendix II will be indicative of our future results. Moreover, the operating results for the prior programs identified in Appendix I of the prospectus, which have not completed their operations, should not be considered indicative of future results of such prior programs or whether such prior programs will achieve their investment objectives which will in large part depend on facts that cannot now be determined.
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APPENDIX II – PRIOR PERFORMANCE TABLES
The information contained in the following prior performance tables consists solely of information related to the company’s initial public offering. The purpose of the tables is to provide information on the performance of the company’s managers in its initial public offering to assist prospective investors in evaluating the experience of the managers as sponsors of this type of program. The inclusion of these tables, which are not typically required and which may not necessarily be provided in the future, does not imply that the investors in this offering will experience results comparable to those experienced by investors to date in the initial public offering.
The tables consist of:
TABLE I - EXPERIENCE IN RAISING AND INVESTING FUNDS
Table I summarizes, as a percentage basis, all funds received through December 31, 2011, for the initial public offering of the company.
TABLE II - COMPENSATION TO MANAGERS AND AFFILIATES
Table II summarizes the compensation paid to the managers and affiliates in connection with the initial public offering of the company.
TABLE III - OPERATING RESULTS OF THE COMPANY
Table III summarizes the annual operating results from inception in 2009, through December 31, 2011, for the company.
TABLE IV- RESULTS OF COMPLETED PROGRAMS
Table IV is omitted since the company has not concluded operations.
TABLE V - PAYMENT OF MORTGAGE LOANS
Table V presents information on the payment of the company’s mortgages within the three (3) years ended December 31, 2011.
The inclusion of the following tables in the prospectus does not imply that the company will continue to make investments comparable to those reflected in the tables with respect to cash flow, income tax consequences available to investors, or other factors, nor does it imply that the company will continue to experience returns, if any, comparable to those experienced to date by the company in its initial public offering.
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TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
REDWOOD MORTGAGE INVESTORS IX, LLC
(AS OF DECEMBER 31, 2011)
(NOT COVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)
Table I presents in tabular form on a percentage basis, all proceeds received by Redwood Mortgage Investors IX, LLC in its initial public offering through December 31, 2011. Table I also sets forth on a percentage basis, how the proceeds were utilized by the company. In addition, Table I sets forth information with respect to the date the initial public offering commenced and the length of the offering. Please be advised that there can be no assurance that the results below will be indicative of the company’s future results.
1st Offering | ||||
Dollar Amount Offered | $ | 187,500,000 | ||
Dollar Amount Raised (100%) | $ | 11,568,188 | ||
Less Offering Expenses: | ||||
Organization Expense | 4.50 | % | ||
Selling Commissions Paid to Non Affiliates (1) | 0 | |||
Selling Commissions Paid to Affiliates | 0 | |||
Percentage Available for Investment | ||||
Net of Offering Expenses | 95.50 | % | ||
Loans Funded from Offering Proceeds Secured | ||||
by Deeds of Trust (2) | 86.50 | % | ||
Formation Loan | 7.00 | % | ||
Loan Commitments | 0 | |||
Loan Application or Mortgage | ||||
Processing Fees | 0 | |||
Funds Available for Future Commitments (2) | 0 | |||
Reserve | 2.00 | % | ||
Total | 95.50 | % | ||
Date Offering Commenced | 06/08/09 | |||
Length of Offering (ongoing) | 31 months | |||
Months to Commit 90% of Amount Available for | ||||
Investment (Measured from Beginning of Offering) | N/A | |||
Percent of Leverage Used (3) | 0.00 | % |
(1) | Selling commissions are paid by Redwood Mortgage Corp. to broker-dealers from the proceeds of a formation loan borrowed from RMI IX. The formation loan is unsecured, non-interest bearing and is not guaranteed. The formation loan will be repaid over a period of 10 years following the completion of the offering and will be reduced partially by a portion of applicable early redemption penalties paid to RMI IX. Participating broker-dealers receive selling commissions of 7% of gross offering proceeds. |
(2) | Loans repaid by borrowers are available for investment in new loans. |
(3) | RMI IX has no borrowings as of December 31, 2011. |
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TABLE II
COMPENSATION TO MANAGERS AND AFFILIATES
(AS OF DECEMBER 31, 2011)
(NOT COVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)
Table II sets forth in tabular form, the compensation received by the managers and affiliates in connection with the current initial public offering of units in the company as of December 31, 2011.
RMI IX | ||||
Date Offering Commenced (1) | 06/08/09 | |||
Dollar Amount Raised (2) | $ | 11,568,188 | ||
Amount Paid to Managers and | ||||
Affiliates from: | ||||
Offering Proceeds | 0 | |||
Selling Commissions | 0 | |||
Loan Application or Loan Processing Fees | 0 | |||
Reimbursement of Expenses, at Cost | 503,698 | |||
Acquisition Fees | 0 | |||
Advisory Fees | 0 | |||
Other | 0 | |||
Loan Points, Processing and Other Fees Paid | ||||
by the Borrowers to Affiliates: | ||||
Points (3) | $ | 207,613 | ||
Processing Fees (3) | 16,804 | |||
Reconveyance Fees (3) | 540 | |||
Dollar Amount of Cash Generated from | ||||
Operations Before Deducting | ||||
Payments to Managers and Affiliates | 767,264 | |||
Amount Paid to Managers and Affiliates | ||||
from Operations: | ||||
LLC Management Fees | 1,289 | |||
Mortgage Servicing Fee | 21,764 | |||
Reimbursement of Expenses, at Cost | 45,212 | |||
Early Withdrawal | 2,229 | |||
Administrative Fees | 93,200 | |||
Managers’ 1% Interest in Profits (Loss) | 6,977 |
(1) Indicates the date of the initial public offering of the company commenced.
(2) | Indicates the aggregate dollar amount raised in the initial public offering of the company as of December 31, 2011. |
(3) These sums were paid by borrowers of company funds, and were not expenses of the company.
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TABLE III
OPERATING RESULTS OF REDWOOD MORTGAGE INVESTORS IX, LLC
RMI IX – AGGREGATED (AS OF DECEMBER 31, 2011)
(NOT COVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)
Table III presents the annual operating results of the company since inception.
2009 | 2010 | 2011 | ||||||||||
Gross Revenues | $ | 17,649 | $ | 190,461 | $ | 593,612 | ||||||
Profit on sale of properties | — | — | — | |||||||||
Less: Operating expenses | 3,594 | 22,215 | 67,627 | |||||||||
Interest expense | - | 2,562 | 8,033 | |||||||||
Depreciation | — | — | — | |||||||||
Net Income – GAAP Basis | 14,055 | 165,684 | 517,952 | |||||||||
Taxable Income | ||||||||||||
– from operations | 14,055 | 165,684 | 517,952 | |||||||||
– from gain on sale | — | — | — | |||||||||
Cash generated from operations | (68,128 | ) | 211,103 | 460,595 | ||||||||
Cash generated from sales | — | — | — | |||||||||
Cash generated from refinancing | — | — | — | |||||||||
Cash generated from operations, sales | ||||||||||||
and refinancing | (68,128 | ) | 211,103 | 460,595 | ||||||||
Less: Cash distributions to investors | ||||||||||||
– from operating cash flow | — | 203,975 | 460,595 | |||||||||
– from sales and refinancing | — | — | — | |||||||||
– from other | 13,914 | — | 140,195 | |||||||||
Cash generated (deficiency) after cash distributions | (82,042 | ) | 7,128 | (140,195 | ) | |||||||
Less: Special items (not including sales and | ||||||||||||
refinancing) (identify and quantify) | — | — | — | |||||||||
Cash generated (deficiency) after cash | ||||||||||||
distributions and special items | $ | (82,042 | ) | $ | 7,128 | $ | (140,195 | ) |
Table III continued on following page
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TABLE III (continued)
OPERATING RESULTS OF REDWOOD MORTGAGE INVESTORS IX, LLC
RMI IX – AGGREGATED (AS OF DECEMBER 31, 2011)
(NOT COVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)
2009 | 2010 | 2011 | ||||||||||
Tax and Distribution Data Per $1,000 Invested | ||||||||||||
Federal Income Tax Results: | ||||||||||||
Ordinary income (loss) | ||||||||||||
– from operations | $ | 16 | $ | 52 | $ | 56 | ||||||
– from recapture | ||||||||||||
Capital gain (loss) | ||||||||||||
Cash Distributions to Investors by Source | ||||||||||||
(on GAAP basis) | ||||||||||||
– Investment income | 16 | 52 | 56 | |||||||||
– Return of capital | 0 | 13 | 9 | |||||||||
Source (on cash basis) (1) | ||||||||||||
– Sales | ||||||||||||
– Refinancing | ||||||||||||
– Operations | 0 | 65 | 50 | |||||||||
– Other | 16 | 0 | 15 | |||||||||
Amount (in percentage terms) remaining invested | ||||||||||||
in program properties at the end of the last year | ||||||||||||
reported in the Table (original total acquisition | ||||||||||||
cost of properties retained divided by original total | ||||||||||||
acquisition cost of all properties in program)(2) | N/A | N/A | N/A |
NOTES: | (1) | The company, in accordance with its operating agreement, allocates profits and losses and distributes cash monthly to members who have not elected to participate in our distribution reinvestment plan. The amount distributed is based on an annual forecast of profits which is adjusted for any surplus or shortfall from the prior year resulting from a forecast-to-actual difference. The requirement to maintain a cash reserve in the company is considered in determining whether the amount that would otherwise be distributed requires adjustment. |
We commenced active operations in October 2009. In 2009 and 2011, we did not generate enough cash flow from operating activities to fully fund distributions. Therefore, some of our distributions in those years were paid from sources other than cash flow from operating activities. Distributions in excess of our cash flow from operating activities have been funded from cash on hand, which may include proceeds from offerings and loan repayments from borrowers. |
(2) | Funds from loan repayments from borrowers are available for investment in new loans. |
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TABLE IV
RESULTS OF COMPLETED PROGRAMS
(NOT COVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)
Table IV is omitted since the company has not concluded operations.
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TABLE V
PAYMENT OF LOANS
REDWOOD MORTGAGE INVESTORS IX, LLC
FOR THE THREE YEARS ENDED
DECEMBER 31, 2011
(NOT COVERED BY REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM)
SINGLE FAMILY (county)
CLOSED | LOAN | INTEREST/ | PROCEEDS | ||
PROPERTY | FUNDED | ON | AMOUNT | LATE/MISC | TO DATE |
Riverside | 11/19/09 | 03/24/10 | 104,000.00 | 3,498.48 | 107,498.48 |
Los Angeles | 10/23/08 | 12/07/10 | 248,240.00 | 50,192.08 | 298,432.08 |
Los Angeles | 07/15/09 | 12/30/10 | 269,745.37 | 31,503.91 | 301,249.28 |
San Mateo | 03/08/11 | 04/29/11 | 1,000,000.00 | 10,676.63 | 1,010,676.63 |
Santa Clara | 12/06/10 | 05/03/11 | 877,500.00 | 30,499.15 | 907,999.15 |
San Francisco | 01/27/11 | 08/10/11 | 100,000.00 | 5,536.08 | 105,536.08 |
Riverside | 06/18/09 | 10/03/11 | 111,800.00 | 24,930.13 | 136,730.13 |
San Francisco | 07/14/11 | 09/26/11 | 275,000.00 | 5,960.71 | 280,960.71 |
MULTIPLE UNITS (county)
CLOSED | LOAN | INTEREST/ | PROCEEDS | ||
PROPERTY | FUNDED | ON | AMOUNT | LATE/MISC | TO DATE |
Los Angeles | 05/21/10 | 08/16/10 | 178,000.00 | 3,818.10 | 181,818.10 |
Alameda | 02/14/11 | 12/05/11 | 750,000.00 | 56,552.02 | 806,552.02 |
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