Redwood Mortgage Investors Viii 10-Q 2019 Q1 Quarterly report

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 March 31, 2019

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.)

177 Bovet Road, Suite 520, San Mateo, CA	94402
(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 every Interactive Data File required to be submitted 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 such files).☒  YES    ☐  NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  YES    ☒  NO

Securities registered pursuant to Section 12(b) of the Act: None

Part I –FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Consolidated Balance Sheets

March 31, 2019 (unaudited) and December 31, 2018 (audited)

($ in thousands)

	March 31,			December 31,
	2019			2018
ASSETS
Cash, in banks	$	5,771		$	13,607
Loans
Secured by deeds of trust
Principal		99,305			97,375
Advances	52			52
Accrued interest		834			764
Prepaid interest		(228	)		(341	)
Loan balance, secured		99,963			97,850
Allowance for loan losses		—			—
Loans, net		99,963			97,850
Real estate owned (REO)		4,153			4,153
Other assets, net		60			113
Total assets	$	109,947		$	115,723

LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and other accrued  liabilities	$	455		$	388
Total liabilities		455			388
Commitments and Contingencies (Note 7)
Partners’ capital
Limited partners’ capital, subject to liquidation, net		115,047			121,012
General partners’ deficit		(723	)		(734	)
Total partners’ capital, net		114,324			120,278
Receivable from manager (formation loan)		(4,832	)		(4,943	)
Partners’ capital subject to liquidation, net of formation loan		109,492			115,335
Total liabilities and partners’ capital	$	109,947		$	115,723

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 Months ended March 31, 2019 and 2018 ($ in thousands) (unaudited)

	2019			2018
Revenues
Interest income	$	2,206		$	2,407
Late fees		10			8
Revenue, loans		2,216			2,415
Recovery of loan losses		—			(6	)
Operations expense
Mortgage servicing fees		392			473
Asset management fees		113			138
Costs from Redwood Mortgage Corp.		321			475
Professional services		218			232
REO, net (Note 5)		27			(28	)
Other		(1	)		(64	)
Total operations expense		1,070			1,226
Net income	$	1,146		$	1,195
Net income
Limited partners (99%)		1,135			1,183
General partners (1%)		11			12
	$	1,146		$	1,195

The accompanying notes are an integral part of these consolidated financial statements.

3

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Statements of Changes in Partners’ Capital

For the Three Months Ended March 31, 2019

($ in thousands) (unaudited)

	Limited
	Partners’
	Capital			General			Total
	Subject to			Partners’			Partners’
	Liquidation,net			Capital(Deficit)			Capital
Balance, December 31, 2018	$	121,012		$	(734	)	$	120,278
Net income		1,135			11			1,146
Distributions		(592	)		—			(592	)
Liquidations		(6,508	)		—			(6,508	)
Balance, March 31, 2019	$	115,047		$	(723	)	$	114,324

For the Three Months Ended March 31, 2018

($ in thousands) (unaudited)

	Limited
	Partners’
	Capital			General			Total
	Subject to			Partners’			Partners’
	Liquidation,net			Capital(Deficit)			Capital
Balance, December 31, 2017	$	146,791		$	(785	)	$	146,006
Net income		1,183			12			1,195
Distributions		(682	)		—			(682	)
Liquidations		(7,125	)		—			(7,125	)
Balance, March 31, 2018	$	140,167		$	(773	)	$	139,394

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 Months Ended March 31, 2019 and 2018

($ in thousands) (unaudited)

	2019			2018
Cash from Operations
Interest received	$	2,023		$	2,466
Other loan income		10			8
Operations expense		(923	)		(1,121	)
Rental operations, net		—			21
Holding costs		(27	)		(65	)
Total cash provided by operations		1,083			1,309
Cash from Investing Activities
Loans
Principal collected on loans - secured		15,245			9,912
Loans transferred to affiliates		—			5,890
Unsecured loan payments received		—			6
Loans originated		(17,175	)		(600	)
Advances received on loans		—			384
Total - Loans		(1,930	)		15,592
REO
Sales		—			1,632
Total - REO		—			1,632
Total cash (used in) provided by investing activities		(1,930	)		17,224
Cash from Financing Activities
Distributions to partners
Cash – partner liquidations		(6,508	)		(7,125	)
Formation loan payment, net of early withdrawal fees		111			183
Cash – partner distributions		(592	)		(682	)
Cash Distributions to partners, net		(6,989	)		(7,624	)
Total cash used in financing activities		(6,989	)		(7,624	)
Net (decrease) increase in cash		(7,836	)		10,909
Cash, beginning of period		13,607			1,723
Cash, end of period	$	5,771		$	12,632

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 Months Ended March 31, 2019 and 2018

($ in thousands) (unaudited)

Reconciliation of net income to net cash provided by operations:

	2019			2018
Cash flows from operations
Net income	$	1,146		$	1,195
Adjustments to reconcile net income to net cash provided by operating activities
REO – gain on disposal		—			(93	)
Change in operation assets and liabilities
Prepaid interest		(113	)		—
Accrued interest		(70	)		58
Other assets		53			23
Accounts payable and other liabilities		67			130
Payable to affiliate		—			(4	)
Net cash provided by operations	$	1,083		$	1,309

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

March 31, 2019 (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, 2018 filed with the U.S. Securities and Exchange Commission (SEC). The results of operations for the three month period ended March 31, 2019 are not necessarily indicative of the operations results to be expected for the full year.

Redwood Mortgage Investors VIII, a California Limited Partnership (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 by first and second deeds of trust.

The rights, duties, and powers of the limited partners and general partners of the partnership are governed by the Limited Partnership Agreement (Partnership Agreement).

The following is a summary of certain provisions of the Partnership Agreement and is qualified in its entirety by the terms of the agreement itself. Limited partners should refer to the Partnership Agreement for complete disclosure of its provisions.

The ongoing sources of funds for loans are the proceeds from:

• loan payoffs;

• borrowers’ monthly principal and interest payments;

• earnings retained (i.e. not distributed) in partners’ capital accounts;

• REO sales;

• loan sales;

• payments from RMC on the outstanding balance of the formation loan; and,

• a line of credit, if obtained.

The partnership is externally managed by Redwood Mortgage Corp., a general partner (RMC or the manager). The general partners are Redwood Mortgage Corp. and Michael R. Burwell (Burwell), an individual. The manager is solely responsible for managing the business and affairs of the partnership, subject to the voting rights of the partners on specified matters. The manager acting alone has the power and authority to act for and bind the partnership. RMC provides the personnel and services necessary to conduct our business as we have no employees of our own. The general partner is required to contribute to capital one tenth of one percent (0.1%) of the aggregate capital accounts of the members.

The mortgage loans the partnership funds and/or invests in are arranged and generally are serviced by RMC.

Limited partners representing a majority of the outstanding units may, without the consent of the general partners, vote to:

• dissolve the partnership;

• amend the partnership agreement subject to certain limitations;

• approve or disapprove the sale of all or substantially all of the assets of the partnership; and

• remove or replace one or all of the general partners.

A majority in interest of partnership units is required to elect a new general partner to continue the partnership business after a general partner ceases to be a general partner due to its withdrawal.

7

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

Income or loss are allocated among the limited partners according to their respective capital accounts after one percent (1%) of income or loss are allocated to the general partners. The income allocation to the general partners amounted to approximately $11,000 and $12,000 for the three months ended March 31, 2019 and 2018, respectively. Beginning in 2010, and continuing until January 1, 2020, RMC assigned its right to two-thirds of one percent (0.66%) of income or losses to Burwell in exchange for Burwell assuming one hundred percent (100%) of the general partners’ equity deficit. The monthly results are subject to subsequent adjustment as a result of quarterly and year-end accounting and reporting. Investors should not expect the partnership to provide tax benefits of the type commonly associated with limited partnership tax shelter investments. Federal and state income taxes are the obligation of the partners, other than the annual California franchise tax and the California LLC cash receipts taxes paid by the partnership’s subsidiaries.

Distribution 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 income 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 income 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. Income allocable to limited partners who elect to compound income 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 60% at March 31, 2019 and 2018.

Liquidity, capital withdrawals and early withdrawals

There are substantial restrictions on transferability of units, and there is no established public trading and/or secondary market for the units. To provide liquidity to limited partners, the partnership agreement provides that limited partners, after the minimum five-year period, may withdraw all or a portion of their capital accounts in 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 a part of the limited partner’s capital account in four quarterly installments beginning on the last day of the calendar quarter following the quarter in which the notice of withdrawal is given, subject to a 10% early withdrawal penalty applicable to any sums withdrawn prior to the time when such sums could have been withdrawn without penalty. There is a limited right of accelerated liquidation for an investor’s heirs upon an investor’s death.

The partnership has not established a cash reserve from which to fund redemptions and, accordingly, the partnership’s capacity to return a limited partner’s capital is subject to the availability of partnership cash. The General Partner is under no obligation to sell loans from the portfolio in order to honor redemption requests, and the program can be restricted or suspended at any time. Cash flow is considered to be available only after all current partnership expenses have been paid (including compensation to the general partners and affiliates) and adequate provision has been made for the payment of all periodic cash distributions on a pro rata basis which must be paid to limited partners who elected to receive such distributions upon subscription for units. Per the Limited Partnership Agreement, no more than 20% of the total limited partners’ capital account balances at the beginning of any year may be liquidated during any calendar year. Notwithstanding this 20%, the general partners shall have the discretion to further limit the percentage of total limited partners’ capital accounts that may be withdrawn in order to comply with the safe harbor provisions of the regulations under Section 7704 of the Internal Revenue Code of 1986, as amended, to avoid the partnership being taxed as a corporation. If notices of withdrawal in excess of these limitations are received by the general partners, the priority of distributions among limited partners shall be determined as follows: first to those limited partners withdrawing capital accounts according to the 20 quarter or longer installment liquidation period, then to Benefit Plan Investors withdrawing capital accounts after five years over four quarterly installments, then to executors, heirs, and other administrators withdrawing capital accounts upon the death of a limited partner and finally to all other limited partners withdrawing capital accounts. Except as provided above, withdrawal requests will be considered by the general partners in the order received.

Investment objectives and lending guidelines

The partnership’s primary investment objectives are to:

• yield a high rate of return from mortgage lending, after the payment of certain fees and expenses to the general partners and their affiliates; and,

• preserve and protect the partnership’s capital.

8

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

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.

The partnership’s loans generally have shorter maturities than typical mortgages. In the event that a loan is performing, and collection is deemed probable at maturity, the partnership may elect to extend the loans maturity. In the event a borrower is unable to repay in full the principal owing on the loan maturity, the partnership may elect to modify the loan payment terms and place the designated loan as impaired, or may foreclose and take back the property for sale.

Generally, interest rates on the partnership’s mortgage loans have not been affected by market movements in interest rates. If, as expected, the partnership continues to make and invest in fixed rate loans primarily, and interest rates were to rise, a possible result would be lower prepayments of the partnership’s loans. This increase in the duration of the time loans are on the books may reduce overall liquidity, which itself may reduce the partnership’s investment into new loans at higher interest rates. Conversely, if interest rates were to decline, the partnership could see a significant increase in borrower prepayments. If the partnership then invests in new loans at lower rates of interest, a lower yield to partners may possibly result.

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 loan combined with the outstanding debt and claims secured by a senior deed of trust on the real property generally will not exceed a specified percentage of the appraised value of the property (the loan-to-value ratio, or LTV) as determined by an independent written appraisal at the time the loan is made. The LTV generally will not exceed 80% for residential properties (including multi-family), 75% for commercial properties, and 50% for land. The excess of the value of the collateral securing the loan over the partnership’s debt and any senior debt owing on the property is the “protective equity.”

The partnership believes its LTV policy provides more potential protective equity than competing lenders who fund loans with a higher LTV. However, the partnership may be viewed as an “asset” lender based on its emphasis on LTV in its underwriting process. Being an “asset” lender may increase the likelihood of payment defaults by borrowers. Accordingly, the partnership may have a higher level of payment delinquency and loans designated as impaired for financial reporting purposes than that of lenders, such as banks and other financial institutions subject to federal and state banking regulations, which are typically viewed as “credit” lenders.

Term of the partnership

The partnership will continue until 2032, unless sooner terminated as provided in the partnership agreement.

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 owning a single real property asset). 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.

9

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

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:

• independent;

• knowledgeable;

• able to transact; and,

• 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.

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:  

• market comparables or sales approach;

• cost to replace; and,

• 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/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 and cash equivalents

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 March 31, 2019, substantially all of the partnership’s cash balances in banks exceed the federal depository insurance limit of $250,000.The bank or banks in which funds are deposited are reviewed periodically for their general credit worthiness/investment grade credit rating.

10

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

Loans and interest income

Performing loans are carried at amortized costs which is generally equal to 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 unpaid principal balance and accrue interest until repaid by the borrower.

For performing loans, interest is accrued daily on the principal plus advances, if any. Impaired loans less than 180 days delinquent continue to recognize interest income as long as the loan is in the process of collection and is considered to be well-secured. Impaired loans are placed on non-accrual status if 180 days delinquent or 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. Late fees are recognized in the period received.

The partnership may fund a specific loan origination net of an interest reserve (one to two years) to insure timely interest payments at the inception of the loan. In the event of an early loan payoff, any unapplied interest reserves would be first applied to any accrued but unpaid interest and then as a reduction of principal.

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 had 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. If the loan modification results in a significant delay or reduction in the cash flow compared to the original note, the modification is deemed a troubled debt restructuring and a loss is recognized.

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 matured loan was previously designated as impaired.

Allowance for loan losses

Loans and the related accrued interest and advances (i.e. the loan balance) are analyzed on a periodic basis for ultimate recoverability. Collateral fair values are reviewed quarterly and the protective equity for each loan is computed. As used herein, “protective equity” is the dollar amount by which the fair value of the collateral, net of any senior liens, exceeds 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.

For loans designated impaired, a provision is made for loan losses to adjust the allowance for loan losses to an amount such that the net carrying amount (unpaid principal less the specific allowance) is reduced to the lower of the loan balance or 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.

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 (i.e., the dollar amount of the deficiency of the fair value of the underlying collateral to the loan balance) is computed.

The partnership charges off uncollectible loans and related receivables directly to the allowance account once it is determined the full amount is not collectible.

At foreclosure, any excess of the recorded investment in the loan (accounting basis) over the net realizable value is charged against the allowance for loan losses.

11

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

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 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- Accounting and Financial Reporting for Expected Credit Losses

The Financial Account Standards Board (FASB) issued an Accounting Standards Update (ASU) that significantly changes how entities will account for credit losses for most financial assets that are not measured at fair value through net income. The new standard will supersede currently in effect guidance and applies to all entities. Entities will be required to use a current expected credit loss (CECL) model to estimate credit impairment. This estimate will be forward-looking, meaning management will be required to use forecasts about future economic conditions to determine the expected credit loss over the remaining life of an instrument. This will be a significant change from the current incurred credit loss model and generally may result in allowances being recognized in earlier periods than under the current credit loss model. The manager expects to adopt the ASU for interim and annual reporting in 2020.

RMI VIII invests in real estate secured loans made with the expectation that the possibility of credit losses is remote as a result of substantial protective equity provided by the underlying collateral.  The real estate secured programs and low loan-to-value ratios have caused RMC to conclude that the adoption of the CECL model from the incurred loss models presently in use as to credit loss recognition will likely not materially impact the reported results of operations or financial position.

NOTE 3 – GENERAL PARTNERS AND OTHER RELATED PARTIES

The general partners, RMC and Burwell, are entitled to 1% of the profits and losses of the partnership. See Note 1 (Organization and General).

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 $392,000 and $473,000 for the three months ended March 31, 2019 and 2018, respectively. No mortgage servicing fees were waived in any period reported.

Assetmanagementfees

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).

12

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

Asset management fees paid to the general partners were approximately $113,000 and $138,000 for the three months ended March 31, 2019 and 2018, respectively. No asset management fees were waived in any period presented.

Costs from Redwood Mortgage Corp.

RMC is reimbursed by the partnership for operating expenses incurred on behalf of the partnership, including without limitation, accounting and audit fees, legal fees and expenses, postage and preparation of reports to limited partners, and out-of-pocket general and administration expenses. Other costs are allocated pro-rata based on the percentage of total capital of all mortgage funds managed by RMC. Payroll and consulting fees are broken out first based on activity, and then allocated to the company on a pro-rata basis based on percentage of capital to the total capital of all mortgage funds. The decision to request reimbursement of any qualifying charges is made by RMC at its sole discretion.

Operating expenses totaling approximately $321,000 and $475,000 for the three months ended March 31, 2019 and 2018, respectively, were reimbursed to RMC.

Commissions and fees are paid by the borrowers to RMC

Brokerage commissions, loan originations

For fees in connection with the review, selection, evaluation, negotiation and extension of loans, the general partners may collect loan brokerage commissions (points) limited to an amount not to exceed 4% of the total partnership assets per year. The loan brokerage commissions are paid by the borrowers and thus, are not an expense of the partnership.  

Other fees

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

In the ordinary course of business, performing loans may be transferred by executed assignment, in-part or in-full, between the affiliated mortgage funds at par. During the three months ended March 31, 2018, the partnership transferred two performing loans in-full to Redwood Mortgage Investors IX, LLC, an affiliated mortgage fund, at par value, which approximates fair value, of approximately $5,890,000. The partnership received cash for the transfer and has no continuing obligation or involvement on the assigned loans. No loans were transferred during the three months ended March 31, 2019.

Formation loan/Commissions paid to broker-dealers

Commissions for sales of limited partnership units paid to broker-dealers (B/D sales commissions) were paid by RMC and were not paid directly by the partnership out of offering proceeds.  Instead, the partnership advanced to RMC amounts sufficient to pay the B/D sales commissions and premiums paid to partners in connection with unsolicited orders up to 7% of offering proceeds.  The receivable arising from the advances is unsecured, and non-interest bearing and is referred to as the “formation loan.”

The primary source of the repayments made by RMC on the formation loan is expected to be loan brokerage commissions. As of March 31, 2019, the partnership had made such advances of approximately $22,567,000, of which approximately $4,832,000 remain outstanding on 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 activity is summarized in the following table for the three months ended March 31, 2019 ($ in thousands).

	2019
Balance, January 1	$	4,943
Early withdrawal penalties		(111	)
Repayments		—
Balance, March 31	$	4,832

13

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

The future minimum payments on the formation loan, net of early withdrawal penalties, as of March 31, 2019 are presented in the following table ($ in thousands).

2019	$	539
2020		650
2021		650
2022		650
2023		650
Thereafter		1,693
Total	$	4,832

RMC is required to make annual payments on the formation loan, net of early withdrawal penalties.

The table below sets forth withdrawals of limited partner capital for the three months ended March 31, 2019 and 2018 ($ in thousands).

	2019		2018
Capital liquidations-without penalty	$	5,390	$	4,902
Capital liquidations-subject to penalty		1,118		2,223
Total	$	6,508	$	7,125
Scheduled liquidations, at March 31	$	45,108	$	51,707

NOTE 4 – LOANS

Loans generally are funded at a fixed interest rate with a loan term of up to five years.

As of March 31, 2019, 47 (84%) of the partnership’s 56 loans (representing 97% 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 March 31, 2019, 24 (43%) of the loans outstanding (representing 66% 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.

Loans unpaid principal balance (principal)

Secured loan transactions are summarized in the following table for the three months ended March 31, 2019 ($ in thousands).

	2019
Principal, beginning of period	$	97,375
Loans originated		17,175
Principal payments received		(15,245	)
Principal, March 31, 2019	$	99,305

Two loans with an aggregate principal balance of approximately $508,000 were renewed during the three months ended March 31, 2019. See Note 3 (General Partners and Other Related Parties) for a description of loan transfers by executed assignments to affiliates. The partnership originates loans with the intent to hold the loans until maturity. From time to time the partnership may sell certain loans.  Loans are classified as held for sale once a decision has been made to sell loans and loans held for sale have been identified.

14

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

Loan characteristics

Secured loans had the characteristics presented in the following table as ($ in thousands).

	March 31,			December 31,
	2019			2018
Number of secured loans		56			56
Secured loans – principal	$	99,305		$	97,375
Secured loans – lowest interest rate (fixed)		5.0	%		5.0	%
Secured loans – highest interest rate (fixed)		10.5	%		10.5	%
Average secured loan – principal	$	1,773		$	1,739
Average principal as percent of total principal		1.8	%		1.8	%
Average principal as percent of partners’ capital, net of formation loan		1.6	%		1.5	%
Average principal as percent of total assets		1.6	%		1.5	%
Largest secured loan – principal	$	9,100		$	10,900
Largest principal as percent of total principal		9.2	%		11.2	%
Largest principal as percent of partners’ capital, net of formation loan		8.3	%		9.5	%
Largest principal as percent of total assets		8.3	%		9.4	%
Smallest secured loan – principal	$	38		$	39
Smallest principal as percent of total principal		0.1	%		0.1	%
Smallest principal as percent of partners’ capital, net of formation loan		0.1	%		0.1	%
Smallest principal as percent of total assets		0.1	%		0.1	%
Number of California counties where security is located	18				18
Largest percentage of principal in one California county		22.7	%		26.7	%
Number of secured loans with a filed notice of default		—			—
Secured loans in foreclosure – principal	$	—		$	—
Number of secured loans with prepaid interest		1			1
Prepaid interest	$	228		$	341

As of March 31, 2019, the partnership’s largest loan, with an unpaid principal balance of approximately $9,100,000 (representing 9.2% of outstanding secured loans and 8.3% of partnership total assets), had an interest rate of 9.00%, was secured by a commercial building in Santa Clara County, and has a maturity of February 1, 2020. As of March 31, 2019, the partnership had no outstanding construction or rehabilitation loans and no commitments to fund construction, rehabilitation or other loans.

Borrower payments are deposited into a bank trust account maintained by RMC, and subsequently are disbursed to the partnership after an appropriate holding period to ensure the funds are collected. At March 31, 2019, the trust account held $361,192  in borrower payments, which was disbursed to the partnership on or before April 15, 2019.

15

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

Lien position

At funding, secured loans had the following lien positions and are presented in the following table as of March 31, 2019 and December 31, 2018 ($ in thousands).

	March 31, 2019								December 31, 2018
	Loans		Principal			Percent			Loans		Principal			Percent
First trust deeds		34	$	82,789			83	%		34	$	80,285			82	%
Second trust deeds		22		16,516			17			22		17,090			18
Total principal, secured loans		56	$	99,305			100	%		56	$	97,375			100	%
Liens due other lenders at loan closing				34,378								37,632
Total debt			$	133,683							$	135,007
Appraised property value at loan closing			$	254,419							$	258,134
Percent of total debt to appraised values (LTV) at loan closing(1)				54.6	%							54.9	%

(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 March 31, 2019 and December 31, 2018 ($ in thousands).

	March 31, 2019						December 31, 2018
	Loans	Principal		Percent			Loans	Principal		Percent
Single family(2)	34	$	35,237		35	%	32	$	35,893		36	%
Multi-family	3		7,713	8			3		1,713	2
Commercial	18		55,905	56			20		59,319	61
Land	1		450	1			1		450	1
Total principal, secured loans	56	$	99,305		100	%	56	$	97,375		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 March 31, 2019 consists of 17 loans with principal of approximately $11,917,000 that are owner occupied and 17 loans with principal of approximately $23,320,000 that are non-owner occupied. Single family property type at December 31, 2018 consisted of 16 loans with principal of approximately $12,839,000 that are owner occupied and 16 loans with principal of approximately $23,054,000 that are non-owner occupied.

16

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (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 March 31, 2019 and December 31, 2018 ($ in thousands).

	March 31, 2019					December 31, 2018
	Principal		Percent			Principal		Percent
San Francisco Bay Area(3)
San Mateo	$	22,536		22.7	%	$	23,122		23.7	%
San Francisco		21,388		21.5			26,026		26.7
Santa Clara		11,582		11.7			3,789		3.9
Alameda		4,151		4.2			4,166		4.2
Solano		3,560		3.6			3,560		3.7
Marin		1,184		1.2			849		0.9
Napa		556		0.6			559		0.6
Contra Costa		312		0.3			314		0.2
		65,269		65.8			62,385		63.9
Other Northern California
Santa Cruz		2,098		2.0			2,121		2.1
Sacramento		1,700		1.7			3,300		3.4
Amador		733		0.7			737		0.8
Monterey		487		0.5			489		0.5
Mariposa		38		0.1			39		0.1
		5,056		5.0			6,686		6.9
Total Northern California		70,325		70.8			69,071		70.8
Los Angeles & Coastal
Los Angeles		18,916		19.1			18,236		18.7
Santa Barbara		2,096		2.1			2,099		2.2
Orange		653		0.7			654		0.7
		21,665		21.9			20,989		21.6
Other Southern California
San Bernardino		5,900		5.9			5,900		6.1
Riverside		1,415		1.4			1,415		1.5
		7,315		7.3			7,315		7.6
Total Southern California		28,980		29.2			28,304		29.2
Total principal, secured loans	$	99,305		100.0	%	$	97,375		100.0	%

(3) Includes the Silicon Valley

17

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

Scheduled maturities

Secured loans are scheduled to mature as presented in the following table as of March 31, 2019 ($ in thousands).

Scheduled maturities, as of March 31, 2019	Loans		Principal		Percent
2019(4)		23	$	52,950		53	%
2020		18		33,146		33
2021		11		9,635		10
2022		1		370		—
2023		1		2,096		2
Thereafter		1		658		1
Total future maturities		55		98,855		99
Matured as of March 31, 2019		1		450		1
Total principal, secured loans		56	$	99,305		100	%

(4) Loans scheduled to mature in 2019 from April 1 to December 31.

One loan, with a principal balance of approximately $450,000, which was 120 days delinquent, was past maturity at March 31, 2019.

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.

Delinquency

Secured loans summarized by payment delinquency are presented in the following table ($ in thousands).

	March 31, 2019				December 31, 2018
	Loans		Principal		Loans		Principal
Past Due
30-89 days		1	$	395		1	$	450
90-179 days		2		3,743		1		3,300
180 or more days		—		—		—		—
Total past due		3	$	4,138		2		3,750
Current		53		95,167		54		93,625
Total principal, secured loans		56	$	99,305		56	$	97,375

Interest income of approximately $127,000 and $88,000 was accrued on loans contractually past due 90 days or more as to principal and/or interest payments as of March 31, 2019 and December 31, 2018, respectively.  

Loans in non-accrual status

No loans were in non-accrual status at March 31, 2019 or December 31, 2018.  At March 31, 2019, two loans with an aggregate principal balance of approximately $3,743,000 were contractually 90 or more days past due as to principal or interest and not in non-accrual status. At December 31, 2018, one loan with a principal balance of approximately $3,300,000 was contractually 90 or more days past due as to principal or interest and not in non-accrual status.

18

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

Loans designated impaired

Impaired loans had the balances shown and the associated allowance for loan losses presented in the following table as of March 31, 2019 and December 31, 2018 ($ in thousands).

	March 31,		December 31,
	2019		2018
Principal	$	3,743	$	3,300
Recorded investment(4)		3,870		3,388
Impaired loans without allowance		3,870		3,388
Impaired loans with allowance		—		—
Allowance for loan losses, impaired loans		—		—
Number of Loans		2		1

(5) Recorded investment is the sum of principal, advances, and interest accrued for financial reporting purposes.

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 three months ended March 31, 2019 and the year ended December 31, 2018 ($ in thousands).

	March 31,		December 31,
	2019		2018
Average recorded investment	$	3,629	$	5,987
Interest income recognized		—		257
Interest income received in cash		—		210

Allowance for loan losses

At March 31, 2019, and December 31, 2018, the partnership had no allowance for loan losses as all loans had protective equity such that at March 31, 2019, and December 31, 2018, collection was deemed probable for amounts owing.

Modifications, workout agreements and troubled debt restructurings

At March 31, 2019 and December 31, 2018, the partnership had no modifications, workout agreements, or troubled debt restructurings in effect.

NOTE 5 – REAL ESTATE OWNED (REO)

There were no REO transactions during the three months ended March 31, 2019.

During the three months ended March 31, 2018, the partnership sold 5 units in a condominium complex in Los Angeles County with a gain of approximately $93,000, which decreased REO by approximately $1,538,000.

The partnership held the following four properties, with a carrying value of approximately $4,153,000 which approximated the net realizable value, at March 31, 2019:

• In San Francisco County, 3 residential units in a condominium complex

• In Fresno County, a partially completed home subdivision

• In Marin County, approximately 13 acres zoned for residential development

• In Stanislaus County, approximately 14 acres zoned commercial

19

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

REO, net is comprised of the following components for the three months ended March 31, 2019 and 2018.

	2019			2018
Holding costs, net of other income	$	(27	)	$	(65	)
Gains/(losses) on sales		—			93
Valuation adjustment		—			—
REO, net	$	(27	)	$	28

NOTE 6 – FAIR VALUE

Loans

The partnership does not record its performing loans at fair value on a recurring basis as it is the intention of the partnership to hold loans until maturity. As in 2018, when certain performing loans were sold, at an immaterial gain (net of expenses), the sale occurred in the same reporting period as when they would have been classified as held-for-sale. Therefore the recorded amount of the preforming loan (i.e. the loan balance) is deemed to approximate 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 collection of the amount owed is assured, including foregone interest, if any).

Loans designated impaired (i.e. that are collateral dependent) are measured at fair value on a non-recurring basis when the net realizable value of the real property collateral is determined to be less than the loan balance. No impaired loans were measured at fair value on a non-recurring basis at and for the periods ended March 31, 2019 or December 31, 2018.

REO

The partnership does not record REO at fair value on a recurring basis. The following assets and liabilities would be measured at fair value on a non-recurring basis.

• REO acquired through foreclosure during the year.

• REO for which a valuation reserve or valuation reserve adjustment has been recorded.

The following methods and assumptions are used when estimating fair value.

Secured loans, performing (i.e. not designated as impaired) (Level 2) - Each loan is reviewed quarterly for its delinquency, LTV adjusted for the most recent valuation of the underlying collateral, remaining term to maturity, borrower’s payment history and other factors.  The fair value of loan balances secured by deeds of trust is deemed to approximate the recorded amount (per the financial statements) as our loans:

• are of shorter terms at origination than commercial real estate loans by institutional lenders;

• are written without a prepayment penalty causing uncertainty/a lack of predictability as to the expected duration of the loan; and

• have limited marketability and are not yet sellable into an established secondary market.

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 and assumptions are used to determine the fair value of the collateral securing a loan.

Single family – Management’s preferred method for determining the fair market value of its single-family residential assets is the sale comparison method. Management primarily obtains sale comps via 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.

20

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

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 – Management’s preferred method for determining the aggregate retail value of its multifamily units is the sale comparison method. Sale comps are reviewed for similarity to the subject property, examining features such as proximity to subject, rental income, number of units, composition of units by the number of bedrooms and bathrooms, square footage, condition, amenities and year built.

Management’s secondary method for valuing its multifamily assets as income-producing rental operations is the direct capitalization method. In order to determine market cap rates for properties of the same class and location as the subject, management refers to published data from reliable third-party sources such as the CBRE Cap Rate Survey. Management 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 project. When adequate sale comps are not available or 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 and/or management will seek additional information in the form of brokers’ opinion of value or appraisals.

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 market 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 adequate sale comps are not available or 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 and/or management will seek additional information in the form of brokers’ opinion of value or appraisals.

Management supplements the direct capitalization method with 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 sale comps are available), brokers’ opinion of value, or appraisal.

NOTE 7 – COMMITMENTS AND CONTINGENCIES, OTHER THAN LOAN AND REO COMMITMENTS

Commitments

The partnership’s only commitment is for scheduled limited partners’ capital withdrawal requests at March 31, 2019 as presented in the following table ($ in thousands).

2019	$	16,361
2020		12,410
2021		8,385
2022		5,312
2023		2,381
Thereafter		259
Total	$	45,108

21

REDWOOD MORTGAGE INVESTORS VIII,

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2019 (unaudited)

Future recovery under an agreement with a borrower

Pursuant to the terms of an October 21, 2011 workout agreement dated October 21, 2011, between RMI VIII and a borrower in default on certain loans secured by various California properties, RMI VIII obtained by assignment from the developer of those properties a non-voting economic interest in the developer’s LLC membership interest in a joint venture, in an amount equal to 25% of all distributions of profit and return of invested capital attributable to that LLC membership interest, but excluding management and development fees, payable to the developer from certain other subsequent joint ventures from which the developer receives a share of the proceeds upon sale of the to be developed properties.  In August of 2018, control and ownership of a property in a joint venture subject to the agreement transferred to the majority member in the joint venture at a profit. The amount of the profit is being determined by the members and is not distributable until the remaining property/asset is liquidated by the venture. However, as of the date of the financial statements, the determination of the amount of the profit, and the amount to be distributed to the developer, to which RMI VIII would have a claim of 25%, has not been completed and/or agreed upon by the members of the joint venture.  The members have the option to retain the amounts – and to not distribute – if they elect to proceed with the development of the remaining property held by the joint venture. In 2016, RMI VIII received approximately $3.5 million from completed projects subject to the workout agreement and assignment of economic interest. It is expected that the proceeds from the current joint venture, if distributed and not held pending development of the remaining project, would be substantially less than the 2016 amount.  Due to the uncertainty as to the amount and timing of the distribution, if any, no recognition was recorded in the financial statements as of March 31, 2019 and December 31, 2018 for the future recovery of amounts.

Legal proceedings

In the normal course of its business, the partnership may become involved in legal proceedings (such as assignment of rents, bankruptcy proceedings, appointment of receivers, unlawful detainers, judicial foreclosure, etc.) to collect the debt owed under the promissory notes, to enforce the provisions of the deeds of trust, to protect its interest in the real property subject to the deeds of trust and to resolve disputes with borrowers, lenders, lien holders and mechanics. None of these actions, in and of themselves, typically would be of any material financial impact to the net income or balance sheet of the partnership. As of the date hereof, the partnership is not involved in any legal proceedings other than those that would be considered part of the normal course of business.

NOTE 8 – SUBSEQUENT EVENTS

None.

22

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, 2018, filed with the U.S. Securities and Exchange Commission. The results of operations for the three month period ended March 31, 2019 are not necessarily indicative of the 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, 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 withdrawals 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, interest rates, and/or changes in California real estate markets;

• the impact of competition and competitive pricing for mortgage loans;

• our ability to grow our mortgage lending business;

• the general partners’ ability to make and arrange for loans that fit our investment criteria;

• the volume and timing of loan sales to third parties or if we are able to sell loans at all;

• 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 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 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.

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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.

Results of Operations

General economic conditions- California

Our mortgage loans are secured by California real estate, primarily through first and second deeds of trust.  Our loan investment activity and the value of the real estate securing our loans is impacted significantly by economic activity and employment conditions in California.  Wells Fargo’s Economics Group periodically provides timely, relevant information and analysis in its commentary and reports.  Highlights from a recently issued report from Wells Fargo Securities Economic Group is presented below.

In the publication “California Sees Solid Job Growth in March” dated April 19, 2019:

“California’s latest employment data show considerable improvement. Employers added 24,500 new jobs in March, following an increase of 20,900 jobs the prior month. February’s gain was revised up from an initially reported gain of just 14,600 jobs. With the latest gain, payrolls have risen by an average of 17,100 jobs per month through the first three months of the year, or a 1.1% annual rate, which is well behind the 23,200 jobs per month or 1.6% pace in 2018. California’s unemployment rate has also risen to 4.3%, after hitting a low of 4.1% in July and remaining there for six months.”

“The moderation in nonfarm payroll growth has mostly been confined to a handful of industries. Construction employment has declined slightly during the first three months of this year, although employment bounced back solidly in March. The wildfires that hit late last year may have led to a pause in building in parts of the state, and unusually wet weather earlier this year may have also restrained building activity. Wholesale trade and the trucking and warehousing industries are another weak spot. By contrast, employment remains strong in the tech sector, where hiring has actually gained momentum since the start of this year.

“The split between the performance of California’s tech sector and the trade sector is playing out in the geography of job gains. Areas most closely tied to the tech sector are accounting for a growing proportion of California’s job gains, while those more closely tied to trade are languishing. The San Francisco Bay Area has accounted for 60.6% of the state’s jobs so far this year, up from 26.9% in 2018. Hiring has also held up well in San Diego and Western Los Angeles, which are home to bustling tech sectors focusing on communications and digital entertainment.”

“The L.A. metro division lost 1,300 jobs in March, marking the second decline in the past three months. Anaheim added just 800 jobs in March following a loss of 400 jobs the prior month, which was the fourth drop in the past seven months. The Inland Empire added 2,200 jobs in March, ending a string of four consecutive drops that had wiped out 5,900 jobs. Employment in the Ventura County and Thousand Oaks area rose by just 200 jobs in March, following like-sized drops in both January and February. In all, greater Los Angeles added just 1,900 jobs in March and 2,000 jobs so far this year. By contrast, Southern California added 99,000 jobs in 2018, or 8,250 a month. As we noted last month, the soft patch in job growth in Southern California coincides with the slowdown in international trade. Container volume through the Port of Los Angeles and Port of Long Beach has slowed over the past year, particularly in the last few months. The culprit is likely the continued uncertainty surround trade negotiations with China and the tariffs on imported goods and retaliatory tariffs on U.S. exports. Foreign direct investment has also slowed somewhat, which has weighed on housing. Southern California’s technology and entertainment sectors are still going strong, however, which is bolstering activity in downtown and western LA.”

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Key performance indicators

Key performance indicators are presented in the following table for the three months ended March 31, 2019 and 2018 ($ in thousands).

	2019			2018
Secured loans – average daily balance	$	103,407		$	124,926
Secured loans – end-of-period	$	99,305		$	114,753
Interest on loans	$	2,206		$	2,407
Portfolio interest rate(1)		8.5	%		8.1	%
Effective yield rate(2)		8.5	%		7.7	%
Provision for (recovery of) loan losses	$	—		$	(6	)
Percent(2)		0.0	%		0.0	%
Operations expense	$	1,070		$	1,254
Net Income	$	1,146		$	1,195
Percent(3)(4)		3.8	%		3.3	%
Limited Partners’ capital – average balance	$	118,025		$	143,479
Limited Partners’ capital – end-of-period(5)	$	115,038		$	140,167

(1) Stated note interest rate, weighted daily average (annualized)

(2) Percent of secured loans – average daily balance (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) Scheduled liquidations as of March 31, 2019 were approximately $45,108,000. Scheduled liquidations as of March 31, 2018 were approximately $51,707,000. Additional detail regarding limited partner capital withdrawals is available under the caption “Cash flows and Liquidity” in this Management Discussion and Analysis.

Secured loans

The March 31, 2019 end-of-period secured loan balance was approximately $99.3 million, down  13.5% ($15.5 million) compared to the March 31, 2018 end-of-period secured loan balance of approximately $114.8 million. The overall reduction in the balance of the secured loan portfolio is due to the reduction in overall capital under management.

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 our overall conservative weighted-average loan-to-value ratio (LTV) which at March 31, 2019 was 54.6%. Thus, per the appraisal-based valuations at the time of loan inception, borrowers have, in the aggregate, equity of 45.4% in the property, and we as lenders have loaned in the aggregate 54.6% (including other senior liens on the property) against the properties we hold as collateral for the repayment of our loans.

At March 31, 2019 and 2018 the partnership held no loans classified as held-for-sale.

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.

Performance overview

For the three months ended March 31, 2019, net income available to limited partners as a percent of Limited Partners’ capital – average daily balance was 3.8%.

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For the three months ended March 31, 2019, the decrease in interest income on loans ($2.2 million in 2019, $2.4 million in 2018) is reflective of the decrease in the secured loan – average daily balance, due primarily to the overall reduction in total capital under management. Net income for the three months ended March 31, 2019 was approximately $1,146,000, a decrease of approximately $49,000 (4.1%) compared to the same period in 2018 due primarily to a decrease in the secured loan – average daily balance, and the  overall reduction in capital under management. Total limited partners’ capital was approximately $115.0 million and $140.2 million at March 31, 2019 and 2018, respectively. Total operations expense as a percent of interest income on loans was 48.5% and 50.9% for the three months ended March 31, 2019 and 2018, respectively.

Analysis and discussion of income from operations 2019 v. 2018 (three months ended)

Significant changes to revenue and expense for the three month period ended March 31, 2019 compared to the same period in 2018 are summarized in the following table ($ in thousands).

				Provision for
	Interest			(Recovery of)			Operations			Net
	on Loans			LoanLosses			Expense			Income
For the three months ended
March 31, 2019	$	2,206		$	—		$	1,070		$	1,146
March 31, 2018		2,407			(6	)		1,226			1,195
Change	$	(201	)	$	6		$	(156	)	$	(49	)
Explanation
Loan balance increase (decrease)		(529	)		—			(81	)		(448	)
Effective yield rate		328			—			—			328
REO sales		—			—			30			(30	)
Manager expense allocations		—			—			(91	)		91
Capital balance decrease		—			—			(77	)		77
Other		—			6			63			(67	)
Change	$	(201	)	$	6		$	(156	)	$	(49	)

The table above displays only significant changes to net income for the period and is not intended to cross foot.

Interest on loans

Interest income decreased due to the decrease of the secured loan portfolio and approximately $10,000 in default interest collected on a previously impaired loan during the three months ended March 31, 2018, which was partially offset by an increase in the average portfolio interest rate (8.5% in 2019 and 8.1% in 2018). The secured loans- average daily balance decreased approximately $21.5 million, or approximately 17.2%.

Provision for (recovery of) loan losses/allowance for loan losses

At March 31, 2019, the partnership had no allowance for loan losses as all loans had protective equity such that at March 31, 2019, collection was deemed probable for amounts owing.

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Operations expense 2019 v. 2018

Significant changes to operations expense for the three month period ended March 31, 2019 compared to the same period in 2018 are summarized in the following table ($ in thousands).

	Mortgage			Asset			Costs
	Servicing			Management			From			Professional
	Fees			Fees			RMC			Services			REO, net			Other			Total
For the three months ended
March 31, 2019	$	392		$	113		$	321		$	218		$	27		$	(1	)	$	1,070
March 31, 2018		473			138			475			232		$	(28	)		(64	)		1,226
Change	$	(81	)	$	(25	)	$	(154	)	$	(14	)	$	55		$	63		$	(156	)
Explanation
Loan balance increase (decrease)		(81	)		—			—			—			—			—			(81	)
REO sales		—			—			(11	)		(14	)		55			—			30
Capital balance decrease		—			(25	)		(52	)		—			—			—			(77	)
Manager expense allocations		—			—			(91	)		—			—			—			(91	)
Other		—			—			—			—			—			63			63
Change	$	(81	)	$	(25	)	$	(154	)	$	(14	)	$	55		$	63		$	(156	)

•Mortgage servicing fees

The decrease in mortgage servicing fees was due to the decrease in the average secured loan balance. Fees are charged at the annual rate of 1.5%.

•Asset management fees

The decrease in asset management fees was due to the reduction in the total capital under management. Total limited partners’ capital at March 31, 2019 and 2018, was approximately $115.0 million and $140.2 million, respectively. Asset management fees are charged up to 1/32 of 1% of the “net asset value” (3/8 of 1% annually).

•Costs from RMC

The decrease in costs from RMC was due to the reduction in total capital under management, a decrease in the cost of REO management, and a decrease in allocable payroll and consulting expenses incurred by RMC. RMC is reimbursed by the partnership for operating expenses incurred on behalf of the partnership, including without limitation, accounting and audit fees, legal fees and expenses, postage and preparation of reports to limited partners, and out-of-pocket general and administration expenses. Other costs are allocated pro-rata based on the percentage of total capital of all mortgage funds managed by RMC. Payroll and consulting fees are broken out first based on activity, and then allocated to the company on a pro-rata basis based on percentage of capital to the total capital of all mortgage funds. The decision to request reimbursement of any qualifying charges is made by RMC at its sole discretion.

•Professional services

Professional services consist primarily of legal, audit and tax compliance expenses. The decrease in professional services was due primarily to a decrease in audit and legal fees relating to real estate transactions, and related financial reporting.

REO, net

The March 31, 2019, REO balance, end of period, was approximately $4.2 million, down 24.2% ($1.3 million) compared to the March 31, 2018 balance of approximately $5.5 million.

Rental operations were substantially wound down, and all residential rental units had been made vacant for sale at December 31, 2017. As such, there were no rental operations in 2019 or 2018. Any month to month rents received in periods after December 31, 2017 are included in REO, net.

See Note 5 (Real Estate Owned (REO)) to the financial statements included in Part I, Item 1 of this report for detailed presentations of REO sales transactions, and additional information regarding REO activity during the period, which presentation is incorporated by reference into this Item 2.

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Cash flows and liquidity

Cash flows by business activity are presented in the following table for the three months ended March 31, 2019 and 2018 ($ in thousands).

	2019			2018
Partners' capital
Distributions	$	(592	)	$	(682	)
Formation loan, net of early withdrawal fees		111			183
Liquidations		(6,508	)		(7,125	)
Cash used in partners' capital		(6,989	)		(7,624	)
Loan earnings and payments
Interest		2,023			2,466
Other loan income		10			8
Operations expense		(923	)		(1,121	)
Principal payments and recoveries		15,245			9,918
Loans transferred to affiliates		—			5,890
Total cash from loan earnings		16,355			17,161
Loans originated, net		(17,175	)		(600	)
Advances received on loans		—			384
Total cash from loan production		(17,175	)		(216	)
Cash from loan earnings and production		(820	)		16,945
REO operations, sales and development
Rental operations, net		—			21
Holding costs		(27	)		(65	)
Proceeds from real estate sales		—			1,632
Cash from REO operations, sales and development		(27	)		1,588
Net cash increase/(decrease) before distributions to limited partners		(847	)		18,533
Net increase/(decrease) in cash	$	(7,836	)	$	10,909
Cash, end of period	$	5,771		$	12,632

Withdrawals of limited partner capital

The table below sets forth withdrawals of limited partner capital ($ in thousands).

	2019		2018
Capital liquidations-without penalty	$	5,390	$	4,902
Capital liquidations-subject to penalty		1,118		2,223
Total	$	6,508	$	7,125
Scheduled liquidations, at March 31	$	45,108	$	51,707

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Scheduled limited partner capital withdrawals at March 31, 2019 are presented in the following table ($ in thousands).

2019	$	16,361
2020		12,410
2021		8,385
2022		5,312
2023		2,381
Thereafter		259
Total	$	45,108

The ongoing sources of funds for loans are the proceeds (net of withdrawals from partner capital accounts, subject to limitations) from:

• loan payoffs;

• borrowers’ monthly principal and interest payments;

• earnings retained (i.e. not distributed) in partners’ capital accounts;

• REO sales;

• loan sales;

• payments from RMC on the outstanding balance of the formation loan; and,

• a line of credit, if obtained.

The partnership’s loans generally have shorter maturity terms than typical mortgages. As a result, constraints on the ability of our borrowers to refinance their loans at maturity possibly would have a negative impact on their ability to repay their loans. In the event a borrower is unable to repay at maturity, the partnership may consider extending the term through a loan modification or foreclosing on the property. A reduction in loan repayments would reduce the partnership’s cash flows and restrict the partnership’s ability to invest in new loans and/or, if ongoing for an extended period, provide earnings distributions and withdrawals of partners’ capital.

Generally, within a broad range, the partnership’s rates on mortgage loans is not affected by market movements in interest rates. If, as expected, we continue to make and invest in fixed rate loans primarily, and interest rates were to rise, a possible result would be lower prepayments of the partnership’s loans. This increase in the duration of time loans are on the books may reduce overall liquidity, which itself may reduce the partnership’s investment into new loans at higher interest rates. Conversely, if interest rates were to decline, we could see a significant increase in borrower prepayments. If we then invest in new loans at lower interest rates, a lower yield to limited partners may possibly result.

Contractual Obligations

The partnership’s only contractual obligation is to fund capital account withdrawal requests, subject to cash available per the terms of the partnership agreement. See Note 3 (General Partners and Other Related Parties) and Note 7 (Commitments and Contingencies, Other Than Loan and REO Commitments) to the financial statements included in Part I, Item 1 of this report for detailed presentations on commitments and contingencies, which presentation is incorporated by this reference into this Item 2.

At March 31, 2019, the partnership had no construction or rehabilitation loans outstanding.

The partnership had no off-balance sheet arrangements as such arrangements are not permitted by the partnership agreement.

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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 60% at March 31, 2019 and 2018, respectively.

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 is externally managed by RMC. The manager is solely responsible for managing the business and affairs of the partnership, subject to the voting rights of the members on specified matters. The manager acting alone has the power and authority to act for and bind the partnership. RMC provides the personnel and services necessary for us to conduct our business, as we have no employees of our own.

California limited partnerships generally do not have a board of directors, nor, therefore, do we have an audit committee of the board of directors. Thus, there is not conventional independent oversight of the partnership’s financial reporting process. The manager, however, provides the equivalent functions of a board of directors and of an audit committee for, among other things, the following purposes:

• appointment, compensation, review and oversight of the work of the independent public accountants; and

• establishing and maintaining internal controls over financial reporting.

RMC, as the manager, carried out an evaluation, with the participation of RMCs President (acting as principal executive officer/principal financial officer) of the effectiveness of the design and operation of the manager's controls and procedures over financial reporting and disclosure (as defined in Rule 13a-15 of the Exchange Act) for and as of the end of the period covered by this report. Based upon that evaluation, RMC's principal executive officer/principal financial officer concluded that the manager'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.

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PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

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 March 31, 2019, the partnership was not involved in any legal proceedings other than those that would be considered part of the normal course of business.

ITEM 1A. Risk Factors

Not included as the partnership is a smaller reporting company.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

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 March 31, 2019 were approximately $6,508,000. 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.

ITEM 3. Defaults Upon Senior Securities

Not Applicable.

ITEM 4. Mine Safety Disclosures

Not Applicable.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

Exhibit No.	Description of Exhibits
31.1	Certification of General Partner pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

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.

	REDWOOD MORTGAGE INVESTORS VIII, a California Limited Partnership
	(Registrant)
Date:  May 10, 2019	By:	Redwood Mortgage Corp., General Partner
		By:	/s/ Michael R. Burwell
		Name:	Michael R. Burwell
		Title:	President, Secretary and Treasurer
			(On behalf of the registrant, and in the capacity of principal financial officer), Director
Date:  May 10, 2019	By:	Michael R. Burwell, General Partner
		By:	/s/ Michael R. Burwell
		Name:	Michael R. Burwell
		Title:	General Partner

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