FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Period Ended March 31, 2001
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Commission file number 33-30427
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REDWOOD MORTGAGE INVESTORS VII
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(exact name of registrant as specified in its charter)
California 94-3094928
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(State or other jurisdiction of I.R.S. Employer
incorporation of organization) Identification No.
650 El Camino Real, Suite G, Redwood City, CA 94063
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(address of principal executive office)
(650) 365-5341
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
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 reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES XX NO
----------- ----------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES NO NOT APPLICABLE X
---------- ----------- ----------
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest date.
NOT APPLICABLE
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
BALANCE SHEETS
MARCH 31, 2001 (unaudited) AND DECEMBER 31, 2000 (audited)
ASSETS
2001 2000
-------------- ---------------
Cash $354,014 $269,000
-------------- ---------------
Accounts receivable:
Loans, secured by deeds of trust 10,794,375 12,794,297
Accrued Interest on loans 452,473 363,321
Advances on loans 29,880 29,825
Accounts receivables, unsecured 184,724 188,421
-------------- ---------------
11,461,452 13,375,864
Less allowance for doubtful accounts 850,548 850,548
-------------- ---------------
10,610,904 12,525,316
-------------- ---------------
Real estate owned, acquired through
foreclosure, held for sale 855,995 816,094
-------------- ---------------
$11,820,913 $13,610,410
============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Notes payable - bank line of credit $1,900,000 $3,500,000
Accounts payable and accrued expenses 11,449 4,102
-------------- ---------------
1,911,449 3,504,102
-------------- ---------------
Partners' capital
Limited partners' capital, subject to
redemption Net of formation loan
receivable of $53,640 and $75,612 for
2001 and 2000, respectively 9,897,486 10,094,330
General partners' capital 11,978 11,978
-------------- ---------------
Total partners' capital 9,909,464 10,106,308
-------------- ---------------
Total liabilities and
partners' capital $11,820,913 $13,610,410
============== ===============
The accompanying notes are an integral part of the financial statements.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND MARCH 31, 2000 (unaudited)
THREE MONTHS
ENDED MARCH 31
------------------------------------------
2001 2000
------------------ -------------------
Revenues:
Interest on loans $346,349 $305,263
Interest on bank deposits 37 697
Late charges 674 318
Other 2,001 1,553
------------------ -------------------
349,061 307,831
------------------ ------------------
Expenses:
Loan servicing fees 21,071 20,221
Interest on note payable - bank 72,771 27,123
Clerical costs through Redwood
Mortgage Corp. 10,501 7,146
Asset management fee 9,587 8,198
Provision for doubtful accounts
and losses on real estate acquired
through foreclosure 0 0
Professional services 20,848 8,452
Printing, supplies and postage 1,310 1,262
Other 1,488 1,863
------------------ ------------------
137,576 74,265
------------------ ------------------
Net Income $211,485 $233,566
================== ==================
Net income: To General Partners (1%) $2,115 $2,336
To Limited Partners (99%) 209,370 231,230
------------------ ------------------
$211,485 $233,566
================== ==================
Net income per $1,000 invested by
Limited Partners for entire period:
- where income is reinvested
and compounded $20.61 $20.74
================== ==================
- where partner receives income
in monthly distributions $20.47 $20.60
================== ==================
The accompanying notes are an integral part of the financial statements.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 2000 (audited) AND
THE THREE MONTHS ENDED MARCH 31, 2001 (unaudited)
PARTNERS' CAPITAL
-----------------------------------------------------
LIMITED PARTNERS' CAPITAL
-----------------------------------------------------
Capital
Account Formation
Limited Loan
Partners Receivable Total
------------- --------------- --------------
Balances at January 1, 1998 $13,208,844 $(341,275) $12,867,569
Formation Loan collections 0 66,908 66,908
Net Income 838,105 0 838,105
Early withdrawal penalties (30,529) 20,980 (9,549)
Partners' withdrawals (1,826,304) 0 (1,826,304)
------------- --------------- --------------
Balances at December 31, 1998 $12,190,116 $(253,387) $11,936,729
Formation Loan collections 0 75,138 75,138
Net Income 900,485 0 900,485
Early withdrawal penalties (18,553) 12,750 (5,803)
Partners' withdrawals (1,909,231) 0 (1,909,231)
------------- --------------- --------------
Balances at December 31, 1999 $11,162,817 $(165,499) $10,997,318
Formation Loan collections 0 79,505 79,505
Net Income 891,145 0 891,145
Early withdrawal penalties (15,107) 10,382 (4,725)
Partners' withdrawals (1,868,913) 0 (1,868,913)
------------- --------------- --------------
Balances at December 31, 2000 $10,169,942 $(75,612) $10,094,330
Formation Loan collections 0 19,498 19,498
Net Income 209,370 0 209,370
Early withdrawal penalties (3,600) 2,474 (1,126)
Partners' withdrawals (424,586) 0 (424,586)
-------------- --------------- --------------
Balances at March 31, 2001 $9,951,126 $(53,640) $9,897,486
============== =============== ==============
The accompanying notes are an integral part of the financial statements.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 2000 (audited) AND
THE THREE MONTHS ENDED MARCH 31, 2001 (unaudited)
PARTNERS' CAPITAL
-----------------------------------------
Capital Account
General Total Partners'
Partners Capital
------------------ -------------------
Balances at January 1, 1998 $11,978 $12,879,547
Formation Loan collections 0 66,908
Net income 8,466 846,571
Early withdrawal penalties 0 (9,549)
Partners' withdrawals (8,466) (1,834,770)
------------------ -------------------
Balances at December 31, 1998 $11,978 $11,948,707
Formation Loan collections 0 75,138
Net income 9,096 909,581
Early withdrawal penalties 0 (5,803)
Partners' withdrawals (9,096) (1,918,327)
------------------ -------------------
Balances at December 31, 1999 $11,978 $11,009,296
Formation Loan collections 0 79,505
Net income 9,001 900,146
Early withdrawal penalties 0 (4,725)
Partners' withdrawals (9,001) (1,877,914)
------------------ -------------------
Balances at December 31, 2000 $11,978 $10,106,308
Formation Loan collections 0 19,498
Net income 2,115 211,485
Early withdrawal penalties 0 (1,126)
Partners' withdrawals (2,115) (426,701)
------------------ -------------------
Balances at March 31, 2001 $11,978 $9,909,464
================== ===================
The accompanying notes are an integral part of the financial statements.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (unaudited)
THREE MONTHS ENDED
MARCH 31,
2001 2000
-------------- ---------------
Cash flows from operating activities:
Net income $211,485 $233,566
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for doubtful accounts 0 0
Provision for losses on real
estate held for sale 0 0
Early withdrawal penalty
credited to income (1,126) (1,202)
(Increase) decrease in accrued
interest and advances (89,207) (91,658)
Increase (decrease) in accounts
payable and accrued expenses 7,347 0
Increase (decrease) in deferred
interest on loans 0 0
Increase (decrease) in prepaid expenses 0 (2,816)
-------------- ---------------
Net cash provided by operating activities 128,499 137,890
------------- ---------------
Cash flows from investing activities:
Principal collected on loans 3,336,295 130,227
Loans made (1,336,373) (1,400,420)
Additions to Real Estate held for sale (71,590) (8,347)
Dispositions of Real Estate held for sale 31,689 0
Accounts Receivable Unsecured (disbursement) 0 0
Proceeds from unsecured Accounts Receivable 3,697 0
------------- ---------------
Net cash provided by (used in)
investing activities 1,963,718 (1,278,540)
-------------- ---------------
Cash flows from financing activities:
Net increase (decrease) in note payable-bank (1,600,000) 1,400,000
Formation loan collections 19,498 21,972
Partners withdrawals (426,701) (465,595)
-------------- ---------------
Net cash provided by (used in)
financing activities (2,007,203) 956,377
-------------- ---------------
Net increase (decrease) in cash 85,014 (184,273)
Cash - beginning of period 269,000 388,770
-------------- ---------------
Cash - end of period $354,014 $204,497
============== ===============
Interest paid $72,771 $27,123
The accompanying notes are an integral part of the financial statements.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
NOTE 1 - ORGANIZATION AND GENERAL
Redwood Mortgage Investors VII, (the "Partnership") is a California Limited
Partnership, of which the General Partners are D. Russell Burwell, Michael R.
Burwell and Gymno Corporation, a California corporation owned and operated by
the individual General Partners. The Partnership was organized to engage in
business as a mortgage lender for the primary purpose of making loans secured by
Deeds of Trust on California real estate. Loans are being arranged and serviced
by Redwood Mortgage Corp., an affiliate of the General Partners. At September
30, 1992, the offering had been closed with contributed capital totaling
$11,998,359 for limited partners.
A minimum of 2,500 units ($250,000) and a maximum of 120,000 units
($12,000,000) were offered through qualified broker-dealers. As loans were
identified, partners were transferred from applicant status to admitted partners
participating in loan operations. Each month's income is allocated to partners
based upon their proportionate share of partner's capital. Some partners have
elected to withdraw income on a monthly, quarterly or annual basis.
A. Sales Commissions - Formation Loan
Sales commissions ranging from 0% (Units sold by General Partners) to 10%
of the gross proceeds were paid by Redwood Mortgage Corp., an affiliate of the
General Partners that arranges and services the loans. To finance the sales
commissions, the Partnership was authorized to loan to Redwood Mortgage Corp. an
amount not to exceed 8.3% of the gross proceeds invested in the Partnership,
provided that the formation loan for the minimum offering period could be 10% of
the gross proceeds for the minimum offering period. The formation loan is
unsecured and is being repaid, without interest, in ten installments of
principal, over a ten-year period commencing January 1, 1992. At December 31,
1992, Redwood Mortgage Corp. had borrowed $914,369 from the Partnership to cover
sales commissions relating to $11,998,359 limited partner contributions (7.62%).
Through March 31, 2001, $860,729 including $149,728 in early withdrawal
penalties had been repaid leaving a balance of $53,640. The Formation Loan,
which is due from an affiliate of the General Partners', has been deducted from
Limited Partners' capital in the balance sheet. As amounts are collected from
Redwood Mortgage Corp., the deduction from capital will be reduced.
B. Other Organizational and Offering Expenses
Organizational and offering expenses, other than sales commissions,
(including printing costs, attorney and accountant fees, and other costs), were
paid by the Partnership. Such costs were limited to 10% of the gross proceeds of
the offering or $500,000 whichever was less. The General Partners were to pay
any amount of such expenses in excess of 10% of the gross proceeds or $500,000.
Organization costs of $10,102 and syndication costs of $415,692 were
incurred by the Partnership. The sum of organization and syndication costs,
$425,794, approximated 3.55% of the gross proceeds contributed by the Partners.
Both the Organization and Syndication Costs have been fully amortized and
allocated to the Partners.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Accrual Basis
Revenues and expenses are accounted for on the accrual basis of accounting
wherein income is recognized as earned and expenses are recognized as incurred.
Once a loan is categorized as impaired, interest is no longer accrued thereon.
B. Management Estimates
In preparing the financial statements, management is required to make
estimates based on the information available that affect the reported amounts of
assets and liabilities as of the balance sheet date and revenues and expenses
for the related periods. Such estimates relate principally to the determination
of the allowance for doubtful accounts, including the valuation of impaired
loans, and the valuation of real estate acquired through foreclosure. Actual
results could differ significantly from these estimates.
C. Loans, Secured by Deeds of Trust
The Partnership has both the intent and ability to hold the loans to
maturity, i.e., held for long-term investment. They are therefore valued at cost
for financial statement purposes with interest thereon being accrued by the
effective interest method.
Financial Accounting Standards Board Statements (SFAS) 114 and 118 provide
that if the probable ultimate recovery of the carrying amount of a loan, with
due consideration for the fair value of collateral, is less than the recorded
investment, and related amount due and the impairment is considered to be other
than temporary, the carrying amount of the investment (cost) shall be reduced to
the present value of future cash flows.
At March 31, 2001, and years ended December 31, 2000 and 1999, reductions
in the cost of loans categorized as impaired by the Partnership totaled
$137,175, $137,175 and $152,231, respectively. The reduction in stated value was
accomplished by increasing the allowance for doubtful accounts.
As presented in Note 9 to the financial statements as of March 31, 2001,
the average loan to appraised value of security at the time the loans were
consummated was 61.84%. When a loan is valued for impairment purposes, an
updating is made in the valuation of collateral security. However, such a low
loan to value ratio tends to minimize reductions for impairment.
D. Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents
include interest bearing and non-interest bearing bank deposits.
E. Real Estate Owned, Held for Sale
Real estate owned, held for sale, includes real estate acquired through
foreclosure, and is stated at the lower of the recorded investment in the
property, net of any senior indebtedness, or at the property's estimated fair
value, less estimated costs to sell.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
The following schedule reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, less estimated
costs to sell as of March 31, 2001 and December 31, 2000:
March 31, December 31,
2001 2000
--------------- ----------------
Costs of properties $1,298,840 $1,258,966
Reduction in value (442,845) (442,872)
--------------- ----------------
Fair value reflected in
financial statements $855,995 $816,094
=============== ================
F. Income Taxes
No provision for Federal and State income taxes is made in the financial
statements since income taxes are the obligation of the partners if and when
income taxes apply.
G. Organization and Syndication Costs
The Partnership bears its own organization and syndication costs (other
than certain sales commissions and fees described above) including legal and
accounting expenses, printing costs, selling expenses, a 1% wholesale brokerage
fee and filing fees. Organizational costs of $10,102 were capitalized and were
amortized over a five-year period. Syndication costs of $415,692 were charged
against partners' capital and were allocated to individual partners consistent
with the Partnership Agreement.
H. Allowance for Doubtful Accounts
Loans and the related accrued interest, fees and advances are analyzed on a
continuous basis for recoverability. Delinquencies are identified and followed
as part of the loan system. A provision is made for bad debt to an amount
considered by management to be adequate, with due consideration to collateral
value, to provide for unrecoverable accounts receivable, including impaired
loans, other loans, accrued interest and advances on loans, and other accounts
receivable (unsecured). The composition of the allowance for doubtful accounts
as of March 31, 2001 and December 31, 2000 was as follows: March 31, December
31, 2001 2000 --------------- ---------------- --------------- ----------------
Impaired loans $137,175 $137,175
Unspecified loans 569,612 569,612
Accounts receivable, unsecured 143,761 143,761
------------ ----------------
$850,548 $850,548
============ ================
I. Net Income Per $1,000 Invested
Amounts reflected in the statements of income as net income per $1,000
invested by Limited Partners for the entire period are actual amounts allocated
to Limited Partners who had their investment throughout the period and have
elected to either leave their earnings to compound or have elected to receive
monthly distributions of their net income. Individual income is allocated each
month based on the Limited partners' pro rata share of Partners' Capital.
Because the net income percentage varies from month to month, amounts per $1,000
will vary for those individuals who made or withdrew investments during the
period, or select other options.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES
The following are commissions and/or fees which will be paid to the General
Partners and/or related parties.
A. Mortgage Brokerage Commissions
Redwood Mortgage Corp. receives mortgage brokerage commissions for services
in connection with the review, selection, evaluation, negotiation and extension
of loans in an amount up to 12% of the principal amount of the loans through the
period ending 6 months after the termination date of the offering. Thereafter,
commissions are limited to an amount not to exceed 4% of the total Partnership
assets per year. Such commissions are paid by the borrowers, and are not an
expense to the Partnership. Loan brokerage fees for three months through March
31, 2001, and years ended December 31, 2000, 1999, and 1998, totaled $45,906,
$130,487, $207,739 and $166,752, respectively.
B. Loan Servicing Fees
Redwood Mortgage Corp. also receives monthly loan servicing fees of up to
1/8 of 1% (1.5% annual) of the unpaid principal, or such lesser amount as is
reasonable and customary in the geographic area where the property securing the
loan is located. Loan servicing fees of $21,071, $110,713, $127,440 and $128,493
were incurred for the three months ended March 31, 2001 and years ended December
31, 2000, 1999 and 1998, respectively.
C. Asset Management Fee
The General Partners receive a monthly fee 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% annual). Asset management fees were $9,587, $38,400, $44,524 and $16,141
during the three months ended March 31, 2001, and the years ended December 31,
2000, 1999 and 1998, respectively.
D. Other Fees
The Partnership Agreement provides for other fees such as reconveyance,
Mortgage assumption and Mortgage extension fees. Such fees are incurred by the
borrowers and are paid to parties related to the General Partners.
E. Income and Losses
All income and losses are credited or charged to partners in relation to
their respective Partnership interests. The Partnership interest of the General
Partners (combined) is a total of 1%.
F. Operating Expenses
The General Partners or their affiliate (Redwood Mortgage Corp.) are
reimbursed by the Partnership for all operating expenses actually incurred by
them on behalf of the Partnership, including without limitation, out-of-pocket
general and administration expenses of the Partnership, accounting and audit
fees, legal fees and expenses, postage and preparation of reports to Limited
Partners. Such reimbursements are reflected as expenses in the Statements of
Income.
G. General Partners Contributions
The General Partners collectively or severally were to contribute 1/10 of
1% in cash contributions as proceeds from the offering were admitted to limited
Partner capital. As of December 31, 1992 a General Partner, GYMNO Corporation,
had contributed $11,998, 1/10 of 1% of limited partner contributions in
accordance with Section 4.02(a) of the Partnership Agreement.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
NOTE 4 - OTHER PARTNERSHIP PROVISIONS
A. Applicant Status
Subscription funds received from purchasers of units were not admitted to
the Partnership until appropriate lending opportunities were available. During
the period prior to the time of admission, which ranged between 1-120 days,
purchasers' subscriptions remained irrevocable and earned interest at money
market rates, which were lower than the return on the Partnership's loan
portfolio.
Interest earned prior to admission was credited to partners in applicant
status. As loans were made, applicant subscriptions were transferred to Limited
Partner status to begin sharing in income from loans secured by deeds of trust.
The interest earned prior to admission was either paid to the investors or
transferred to Partners' Capital along with the original investment.
B. Term of the Partnership
The term of the Partnership is approximately 40 years, unless sooner
terminated as provided. The provisions provide for no capital withdrawal for the
first five years, subject to the penalty provision set forth in (E) below.
Thereafter, investors have the right to withdraw over a five-year period, or
longer.
C. Election to Receive Monthly, Quarterly or Annual Distributions
Upon subscriptions, investors elected either to receive monthly, quarterly
or annual distributions of earnings allocations, or to allow earnings to
compound.
D. Profits and Losses
Profits and losses are allocated among the Limited Partners according to
their respective capital accounts after 1% is allocated to the General Partners.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
E. Liquidity, Capital Withdrawals and Early Withdrawals
There are substantial restrictions on transferability of Units and
accordingly an investment in the Partnership is not liquid. Limited Partners had
no right to withdraw from the Partnership or to obtain the return of their
capital account for at least one year from the date of purchase of Units, which
in all instances had occurred as of March 31, 2001. In order to provide a
certain degree of liquidity to the Limited Partners after the one-year period,
Limited Partners may withdraw all or part of their Capital Accounts from the
Partnership 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. The 10% penalty is applicable
to the amount withdrawn early and will be deducted from the Capital Account.
Withdrawal after the one-year holding period and before the five-year holding
period was permitted only upon the terms set forth above.
After five years from the date of purchase of the Units, Limited Partners
have the right to withdraw from the Partnership, on an installment basis,
generally this is done over a five-year period in twenty (20) quarterly
installments. Once a Limited Partner has been in the Partnership for the minimum
five-year period, no penalty will be imposed if withdrawal is made in twenty
(20) quarterly installments or longer. Notwithstanding the five-year (or longer)
withdrawal period, the General Partners may liquidate all or part of a 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. This withdrawal is 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.
The Partnership will not establish a reserve from which to fund withdrawals
and, accordingly, the Partnership's capacity to return a Limited Partner's
capital account is restricted to the availability of Partnership cash flow.
Furthermore, no more than 20% of the total Limited Partners' capital accounts
outstanding at the beginning of any year, shall be liquidated during any
calendar year.
F. Guaranteed Interest Rate For Offering Period
During the period commencing with the day a Limited Partner was admitted to
the Partnership and ending 3 months after the offering termination date, the
General partners guaranteed an interest rate equal to the greater of actual
earnings from mortgage operations or 2% above The Weighted Average cost of Funds
Index for the Eleventh District Savings Institutions (Savings & Loan & Thrift
Institutions) as computed by the Federal Home Loan Bank of San Francisco
monthly, up to a maximum interest rate of 12%. The guarantee amounted to $12,855
and $5,195 in 1990 and 1991, respectively. In 1992 and 1993, actual realization
exceeded the guaranteed amount each month. Beginning with fiscal years after
1993, the guarantee no longer applies.
NOTE 5 - LEGAL PROCEEDINGS
Legal actions against borrowers and other involved parties have been
initiated by the Partnership to help assure payments against unsecured accounts
receivable totaling $184,724 at March 31, 2001. The Partnership is a defendant,
along with numerous other defendants including a developer, contractor and other
lenders, in a lawsuit involving a homeowner's association's attempt to recover
"damages" for faulty construction.
Management anticipates that the ultimate results of these cases will not
have a material adverse effect on the net assets of the Partnership, with due
consideration having been given in arriving at the allowance for doubtful
accounts.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
NOTE 6 - NOTE PAYABLE BANK - LINE OF CREDIT
The Partnership has a bank line of credit secured by its loan portfolio of
up to $3,500,000 at .25% over prime. The balances outstanding as of March 31,
2001 and December 31, 2000 were $1,900,000 and $3,500,000 respectively, and the
interest rate was 8.75% (8.50% prime + .25%) at March 31, 2001. This line of
credit expires May 1, 2003.
NOTE 7 - INCOME TAXES
The following reflects a reconciliation from net assets (Partners' Capital)
reflected in the financial statements to the tax basis of those net assets:
March 31, December 31,
2001 2000
--------------- ----------------
Net assets - Partners' Capital
per financial statements $9,909,464 $10,106,308
Formation loan receivable 53,640 75,612
Allowance for doubtful accounts 850,548 850,548
--------------- ----------------
Net assets tax basis $10,813,652 $11,032,468
=============== ================
In 2000 and 1999, approximately 70% and 69%, respectively, of taxable
income was allocated to tax exempt organizations i.e., retirement plans. Such
plans do not have to file income tax returns unless their "unrelated business
income" exceeds $1,000. Applicable amounts become taxable when distribution is
made to participants.
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of financial instruments:
(a) Cash and Cash Equivalents - The carrying amount equals fair value. All
amounts, including interest bearing, are subject to immediate withdrawal.
(b) Loans (see note 2 (c) had a carrying value of $10,794,375 at March 31,
2001. The fair value of these loans of $10,783,947 was estimated based upon
projected cash flows discounted at the estimated current interest rates at which
similar loans would be made. The applicable amount of the allowance for doubtful
accounts along with accrued interest and advances related thereto should also be
considered in evaluating the fair value versus the carrying value.
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS
The loans are secured by recorded deeds of trust. At March 31, 2001, there
were 38 loans outstanding with the following characteristics:
Number of loans outstanding 38
Total loans outstanding $10,794,375
Average loan outstanding $284,063
Average loan as percent of total 2.63%
Largest loan outstanding $1,743,724
Largest loan as percent of total 16.15%
Number of counties where security is located (all California) 11
Largest percentage of loans in one county 33.34%
Average loan to appraised value of security
at time loan was consummated 61.84%
Number of loans in foreclosure 1
The following categories of loans are pertinent at March 31, 2001, and 2000:
March 31, December 31,
2001 2000
---------------- ----------------
First Trust Deeds $7,275,193 $8,720,986
Second Trust Deeds 3,329,460 4,000,140
Third Trust Deeds 189,722 73,171
---------------- ----------------
Total loans 10,794,375 12,794,297
Prior liens due other lenders 8,870,562 8,761,363
---------------- ----------------
Total debt $19,664,937 $21,555,660
================ ================
Appraised property value at
time of loan $31,800,194 $35,518,467
================ ================
Total investments as a percent
of appraisals 61.84% 60.69%
================ ================
Investments by Type of Property:
Owner occupied homes $248,594 $218,942
Non-Owner occupied homes 1,685,179 1,644,636
Apartments 2,352,449 2,590,022
Commercial 6,508,153 8,340,697
---------------- ----------------
$10,794,375 $12,794,297
================ ================
REDWOOD MORTGAGE INVESTORS VII
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
Scheduled maturity dates of loans as March 31, 2001 are as follows:
Year Ending
December 31, Amount
-------------------- -------------------
2001 $7,991,610
2002 1,396,795
2003 557,241
2004 129,417
2005 514,605
Thereafter 204,707
-------------------
Total $10,794,375
===================
The scheduled maturities for 2001 above include approximately $2,464,007 in
eight loans, which are past maturity at March 31, 2001. Although interest
payments on most of these loans are current, $2,294,007 of these loans was
categorized as delinquent over 90 days.
The cash balance at March 31, 2001 of $354,014 was in two banks with
interest bearing balances totaling $318,572. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $151,472. The Partnership's main
bank is the same financial institution that has provided the Partnership with
the $3,500,000 limit line of credit. At March 31, 2001, draw down against this
facility was $1,900,000. As and when deposits in the Partnership's bank accounts
increase significantly beyond the insured limit, the funds are either placed in
new loans or used to pay-down on the line of credit balance.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
On September 30, 1992, the Partnership had sold 119,983.59 units and its
contributed capital totaled $11,998,359 of the approved $12,000,000 issue, in
units of $100 each. As of that date, the offering was formally closed. At March
31, 2001, Partners' Capital totaled $9,909,464.
At March 31, 2001, the Partnership loans outstanding totaled $10,794,375.
This represents a decline of $1,999,922 from the December 31, 2000 loans
balance. This reduction in loans outstanding as of March 31, 2001 was chiefly
due to loan repayments and loan pay-offs being used to fund withdrawals to the
Limited Partners of $424,586 during three months through March 31, 2001 and
partial reduction in line of credit balance by $1,600,000. Loans decreased from
$13,449,741 from 1997 to $12,794,297 in 2000, a decrease of $655,444 chiefly due
to the ability of the General Partners to reduce amounts of real estate owned by
$289,743, reinvestment of earnings of $390,213, offset by payments to
withdrawing Limited Partners $1,856,833, a reduction of outstanding Note Payable
- - Bank of $1,112,663 and investment of cash. The Partnership began funding loans
on December 27, 1989, and as of March 31, 2001, had credited the Partners'
accounts with income at an average annualized (compounded) yield of 7.85%.
Since the fall of 1999, mortgage interest rates have been rising due
primarily to economic forces and by the Federal Reserve raising its core
interest rates. However, since January 2001, the Federal Reserve has been
dramatically cutting its core interest rates with four successive 1/2% cuts. The
latest cut being April 18, 2001, which reduced the Federal Funds Rate to 4.50%.
The effect of the cuts has greatly reduced short-term interest rates and to a
lesser extent reduced long-term interest rates. This will have the effect of
lowering interest rates in the marketplace. New loans will be originated at then
existing interest rates. In the future, interest rates likely will change from
their current levels. The General Partners cannot at this time predict at what
levels interest rates will be in the future. Although the rates charged by the
Partnership are influenced by the level of interest rates in the market, the
General Partners do not anticipate that rates charged by the Partnership to its
borrowers will change significantly from the beginning of 2001 over the next 12
months. As of March 31, 2001, the Partnership Real Estate Owned account and the
investment in Partnership account had a combined balance of $855,995. These
accounts had combined balances of $307,931 and $816,094 for the years ended
December 31, 1999 and 2000, respectively. The increase in the Partnership Real
Estate Owned account is the result of the acquisition of one property through
foreclosure. The General Partners anticipate that the annualized yield for the
new year, 2001, will be between 8% and 9%.
The Partnership has a line of credit with a commercial bank secured by its
loans to a limit of $3,500,000, at a variable interest rate set at one-quarter
percent above the prime rate. As of March 31, 2001, the prime rate was 8.50% and
the line of credit rate was 8.75%. As of March 31, 2001, December 31, 2000, and
December 31, 1999, the balances were $1,900,000, $3,500,000 and $800,000,
respectively. This line of credit expires on May 01, 2003. This added source of
funds helped in maximizing the Partnership yield by allowing the Partnership to
minimize the amount of funds in lower yield investment accounts when appropriate
loans are not currently available. Since most of the loans made by the
Partnership bear interest at a rate in excess of the rate payable to the bank
which extended the line of credit, once the required principal and interest
payments on the line of credit are paid to the bank, the loans funded using the
line of credit generate revenue for the Partnership. As of March 31, 2001, the
Partnership is current with its interest payments on the line of credit. For the
years ended December 31, 1998, 1999, 2000 and three months through March 31,
2001, interest paid was $170,867, $182,350, $257,390 and $72,771, respectively.
The Partnership's income and expenses, accruals and delinquencies are
within the normal range of the General Partners' expectations, based upon their
experience in managing similar Partnerships over the last twenty-four years.
Loan Servicing Fees in 1998 were $128,493, in 1999 were $127,440, in 2000 were
$110,713, and three months through March 31, 2001 were $21,071. These Loan
Servicing Fees were declining as the outstanding mortgage loan portfolio
balances declined. Asset Management Fees increased to $16,141 in 1998, and to
$44,524 in 1999. For the year 2000, Management Fees paid were $38,400, and for
three months through March 31, 2001, management fee paid was $9,587. In 1997,
the General Partners waived or partially waived this fee to the Partnership and
increased the Asset Management Fee to its allowed amount of 3/8 of 1% in 1999,
2000, and 2001. All other expenses fluctuated in a very close range except for
Interest on Note Payable - bank and Provision for Doubtful Accounts and losses
on Real Estate Acquired Through Foreclosure each discussed elsewhere in this
Management Discussion and Analysis of Financial Condition and Results of
Operations. Borrower foreclosures, as set forth under Results of Operations, are
a normal aspect of Partnership operations and the General Partners anticipate
that they will not have a material effect on liquidity. As of March 31, 2001,
there was one property in foreclosure. Cash is constantly being generated from
interest earnings, late charges, pre-payment penalties, amortization of loans
and pay-off on notes. Currently, cash flow exceeds Partnership expenses,
earnings and capital payout requirements. Excess cash flow will be invested in
new loan opportunities when available, used to reduce the Partnership credit
line or other Partnership business.
The General Partners regularly review the loan portfolio, examining the
status of delinquencies, the underlying collateral securing these properties,
the REO expenses and sales activities, borrowers payment records, etc. Data on
the local real estate market and on the national and local economy are studied.
Based upon this information and other data, loss reserves are increased or
decreased. Because of the number of variables involved, the magnitude of the
possible swings and the General Partners inability to control many of these
factors, actual results may and do sometimes differ significantly from estimates
made by the General Partners. Management provided $423,054, $329,057, $65,664,
and $0. As provision for doubtful accounts for the years ended December 31,
1998, 1999, 2000, and three months through March 31, 2001, respectively. The
provision for doubtful accounts was decreased $11,441 to $423,054 in 1998, by
$93,997 to $329,057 in 1999, by $263,393 to $65,664 in 2000, and by $65,664 to
$0 in 2001. These decreases reflect reduced expected REO anticipated losses and
improved collections of secured and unsecured receivables.
The Partnership makes loans primarily in Northern California. As of March
31, 2001, approximately 60%, ($6,452,734) of the loans held by the Partnership
were in the five San Francisco Bay Area Counties. The remainder of the loans
held were secured primarily by Northern California real estate outside the San
Francisco Bay Area. Since January 2001, the Federal Reserve has reduced the
Federal Funds Rate to 4.5%. The effect of the cuts has greatly reduced
short-term interest rates and to a lesser extent reduced long-term interest
rates. The lowering of interest rates has encouraged those borrowers that hold
higher interest rate loans than those currently available to seek refinancing of
their existing obligations to advantage themselves of these lower rates. The
Partnership may face prepayments in the existing portfolio from existing
borrowers advantaging themselves of these lower rates. However, demand for loans
from qualified borrowers continues to be strong and as prepayments occur, we
expect to replace these loans with loans at similar interest rates. Therefore,
at this time we do not believe that the average loan portfolio interest rate
will decline substantially in the coming months.
The reduction in the Federal Funds rates by the Federal Reserve has been
primarily prompted by concerns of the United States economy slowing down and
perhaps slipping into recession. Additionally, both the New York and tech-heavy
NASDAQ stock markets have suffered significant set backs over the last 10
months. The technology stocks have been particularly hard hit. Many of these
technology stocks have their headquarters in the Silicon Valley, one of the
primary lending areas of the Partnership. While there certainly has been a
decline in economic activity, there has not manifested a clear trend in housing
prices, the security behind many of our loans. The housing market has been
incredibly strong throughout the San Francisco Bay Area with multiple offers
above the asking price a common if not expected occurrence in the sale of
residential properties for more than a year. A return to a more normal
residential real estate market seems to be developing in the low to high average
priced homes with little, if any, value reductions. High end priced homes in the
more than one million dollar category may sustain greater value depreciation.
The commercial leasing market is experiencing an increase in available
vacancies and considerable available sublease space availability. According to
CB Richard Ellis commercial office vacancies have increased in San Francisco
from 3.4% in the fourth quarter of 2000 to 6.9% in the first quarter of 2001.
Lease rates are falling as landlords compete for tenants. This will have the
effect of lowering rents for buildings, which lose tenants through turnover or
financial difficulties. There may be some declines in values as commercial
property values are primarily reflective of the net income the property can
generate. The decline in rents may be offset by reductions in investor
capitalization rates as investors lower return expectations as long-term
interest rates decline.
The Partnership had an average loan to value ratio computed as of the date
the loan was made of 61.84%, as of March 31, 2001. This did not account for any
increases in property values for loans, which were acquired by the Partnership
during 1997, 1998, 1999, and 2000 when Northern California Real Estate
substantially increased in value. This low loan to value will assist the
Partnership in weathering downturns in real estate values if they materialize in
the coming months.
On April 6th 2001, Pacific Gas and Electric (PG&E) California's biggest
public utility company filed for Chapter 11 bankruptcy. The full effect of
PG&E's bankruptcy is yet to be played out. Stockholders, other utility companies
and banks that have loaned PG&E millions of dollars were particularly hit hard.
When a company like PG&E goes bankrupt, it has a ripple effect. This has not
only affected the hi-tech and manufacturing industries, professional and
commercial businesses, transportation and utilities sectors, but every household
and individual as a whole. The crisis, which means higher costs to consumers,
could adversely affect the economy, employment and the Partnership's lending in
its commercial sector. The state government, PG&E and others are working
diligently to solve the power crisis in California. The likely result is that
electric and natural gas will cost consumers more than ever before. This may
have some effect upon real estate values as demand for real estate could be
reduced as companies make long term plans to locate in areas without power
delivery problems and lower cost power availability.
The Partnership's interest in land located in East Palo Alto, CA, was
acquired through foreclosure. The investment was previously classified as
Investment in Partnership in the Financial Statements and has been reclassified
into Real Estate Owned. The Partnership's basis of $43,815, $38,238, $9,039, and
$ 0, for the three months ended March 31, 2001, and for the years ended December
31, 2000, December 31, 1999, and 1998, respectively, has been invested with that
of two other Partnerships. The Partnership is continuing to explore remediation
options available to mitigate the pesticide contamination, which affects the
property. This pesticide contamination appears to be the result of agricultural
operations by prior owners, and is unrelated to the Arsenic Contamination for
which a major chemical company remains responsible. The General Partners do not
believe at this time that remediation of the pesticide contaminants will have a
material adverse effect on the financial condition of the Partnership. The
General Partners are attempting to subdivide this land into two parcels and
exploring the ability to obtain new zoning for this property. It appears that
the efforts of the General Partners to subdivide the land will meet with
success. This will allow the arsenic contamination portion of the property to be
delivered to the party responsible for the arsenic contamination. The remaining
land will be made available for development or sale by the Partnership.
At the time of subscription to the Partnership, Limited Partners made an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound earnings in their capital account. For the years
ended December 31, 1998, 1999, 2000, and three months through March 31, 2001,
the Partnership made distributions of earnings to Limited Partners after
allocation of syndication costs of $456,358, $490,841, $454,386, and $99,944,
respectively. Distribution of Earnings to Limited Partners after allocation of
syndication costs for the years ended December 31, 1998, 1999, 2000 and three
months through March 31, 2001 to Limited Partners' capital accounts and not
withdrawn was $381,747, $409,644, $436,759, and $109,426, respectively. As of
December 31 1998, December 31, 1999, and March 31, 2001, Limited Partners
electing to withdraw earnings represented 53%, 54% and 49% of the Limited
Partners capital.
The Partnership also allows the Limited Partners to withdraw their capital
account subject to certain limitations (see liquidation provisions of
Partnership Agreement). For the years ended December 31, 1998, 1999, 2000, and
three months through March 31, 2001, $381,458, $231,025, $179,343, and $44,996
were liquidated subject to the 10% penalty for early withdrawal. These
withdrawals are within the normally anticipated range that the General Partners
would expect in their experience in this and other Partnerships. The General
Partners expect that a small percentage of Limited Partners will elect to
liquidate their capital accounts over one year with a 10% early withdrawal
penalty. In originally conceiving the Partnership, the General Partners wanted
to provide Limited Partners needing their capital returned a degree of
liquidity. Generally, Limited Partners electing to withdraw over one year need
to liquidate their investment to raise cash. The trend the Partnership is
experiencing in withdrawals by Limited Partners electing a one year liquidation
program represents a small percentage of Limited Partner capital as of December
31, 1998, 1999, 2000, and three months through March 31, 2001, respectively and
is expected by the General Partners to commonly occur at these levels.
Additionally, for the years ended December 31, 1998, 1999, 2000, and three
months through March 31, 2001, $1,019,017, $1,205,917, $1,250,291, and $283,246,
respectively, were liquidated by Limited Partners who have elected a liquidation
program over a period of five years or longer. This ability to withdraw after
five years by Limited Partners has the effect of providing Limited Partner
liquidity, which the General Partners then expect, a portion of the Limited
Partners to avail themselves of. This has the anticipated effect of the
Partnership growing, primarily through reinvestment of earnings in years one
through five. The General Partners expect to see increasing numbers of Limited
Partner withdrawals in years five through eleven, at which time the bulk of
those Limited Partners who have sought withdrawal have been liquidated. After
year eleven, liquidation generally subsides and the Partnership capital again
tends to increase.
Actual liquidation of both capital and earnings from year five (1994)
through year eleven (2000) and three months through March 31, 2001 is shown
hereunder; which confirms the General Partners theory on the liquidation habits
of the Limited Partners:
Years ended December 31,
Earnings Capital
Liquidation Liquidation Total
--------------- -------------- ---------------
1994 $263,206 *$340,011 $603,217
1995 $270,760 *$184,157 $454,917
1996 $336,341 *$722,536 $1,058,877
1997 $399,379 *$1,212,916 $1,612,295
1998 $456,358 *$1,400,475 $1,856,833
1999 $490,841 *$1,436,942 $1,927,783
2000 $454,386 *$1,429,634 $1,884,020
Three months through
March 31, 2001 $99,944 *$328,242 $428,186
* These amounts represent gross of early withdrawal penalties.
After 25 years of active participation in the mortgage business, D. Russell
Burwell, our founder and a General Partner of the Partnership has decided to
retire effective September 30, 2001. "Russ" has enjoyed a long and successful
career. His original business model, upon which our Partnership has its roots,
has withstood the test of time through varying economic cycles. Collectively,
the various Redwood Mortgage Investors Partnerships (I-VIII) have grown from an
idea to over $110,000,000 in assets and produced excellent results for the
Limited Partners under Russ's stewardship in Redwood Mortgage Investor's VII.
This Partnership originally raised $11,998,359 in Limited Partner Capital
contributions and at March 31, 2001 had $9,897,486 in remaining Limited Partner
Capital.
Over the last few years, Russ has been passing along his duties and
responsibilities to the remaining General Partners. The remaining General
Partners are Mr. Michael Burwell and Gymno Corporation, a California
Corporation. Mr. Michael Burwell has been a General Partner of Redwood Mortgage
Investors VII since its inception and has been employed by Redwood Mortgage
Corp, an affiliate of the Partnership, since 1979. The Partnership through the
remaining General Partners and the employees of its affiliate Redwood Mortgage
Corp. is well prepared for Russ's departure and looks forward to emulating the
steady consistent returns that the Limited Partners have enjoyed during Russ'
tenure.
Mr. D. Russell Burwell is providing this notification pursuant to Article 8
Section 8.02 of the Limited Partnership Agreement. The remaining General
Partners have elected to continue the business of the Partnership as described
in Article 9 Section 9.01(d) of the Limited Partnership Agreement.
The General Partners have determined that for purposes of establishing a
value for reporting purposes, including brokerage and trustee account
statements, the estimated value of the Limited Partnership interests on a per
unit basis is equal to the capital account balance of each investor in the
Partnership. Each investor's capital account balance is set forth periodically
on the Partnership account statement provided to investors. The amount of
Partnership earnings each investor is entitled to receive is determined by the
ratio that each investor's capital account bears to the total amount of all
investor capital accounts then outstanding. The capital account balance of each
investor should be included on any NASD member client account statement in
providing a per unit estimated value of the client's investment in the
Partnership in accordance with NASD Rule 2340.
While the General Partners have set an estimated value for the Partnership
units, such determination may not be representative of the ultimate price
realized by an Investor for such units upon sale. No public trading market
exists for the Partnership's units and none is likely to develop. Thus, the
ability of an investor to liquidate his or her investment is limited subject to
certain liquidation rights provided by the Partnership, which may include early
withdrawal penalties (See the section of the Prospectus entitled "Risk Factors -
Purchase of Units is a long term investment").
Bruce and/or John Cropper (the Croppers) have been performing audit and
accounting services to the General Partners of the Partnership and their
affiliates for over 16 years through the following CPA firms: 1993-1998 - Parodi
& Cropper, CPA's; 1999 - Caporicci, Cropper & Larson, LLP and 2000 - Armanino
McKenna LLP.
Bruce and John Cropper were shareholders in Cropper Accountancy Corp.
through December 31, 2000.
Cropper Accountancy was a partner in the firm of Parodi & Cropper from 1993
until April of 1998. In May of 1998, Cropper Accountancy Corp., formed a
partnership with Caporicci & Larson creating a new firm, Caporicci, Cropper &
Larson, LLP with offices in Irvine and Walnut Creek, California. The Parodi &
Cropper firm was dissolved.
Effective January 1, 2001, Cropper Accountancy Corp., withdrew from
Caporicci, Cropper & Larson, LLP partnership. John Cropper joined the larger
regional firm of Armanino McKenna LLP as a partner and Bruce Cropper continues
to provide services through Cropper Accountancy. The Croppers continue to
perform audit and accounting services to the General Partners of the partnership
and their affiliates.
As a result, the Partnership has retained the firm of Armanino McKenna LLP,
to provide its audit and financial services. Thus, although there has been a
change in accounting firms, there has not been a change in accountants and there
have not been any disagreements on any matter of accounting principles,
practices or financial status disclosures.
COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP
As indicated above in Item 10, the Partnership has no officers or
directors. The Partnership is managed by the General Partners. There are certain
fees and other items paid to management and related parties.
A more complete description of management compensation is found in the
Prospectus, pages 12-13, under the section "Compensation of the General Partners
and the Affiliates", which are incorporated by reference. Such compensation is
summarized below.
The following compensation has been paid to the General Partners and
Affiliates for services rendered during the three months ended March 31, 2001.
All such compensation is in compliance with the guidelines and limitations set
forth in the Prospectus.
Entity Receiving Description of Compensation
Compensation and Services Rendered Amount
- --------------------------------------------------------------------------------
I. Redwood Mortgage Corp. Loan Servicing Fee
for servicing loan ..........................$21,071
General Partners Asset Management Fee
&/or Affiliates for managing assets.......................... $9,587
General Partners 1% interest in profits....................... $2,115
General Partners &/or Portion of early withdrawal
Affiliates penalties applied to reduce
Formation Loan............................... $2,474
II. FEES PAID BY BORROWERS ON LOANS PLACED BY COMPANIES RELATED TO THE
GENERAL PARTNERS WITH THE PARTNERSHIP(EXPENSES OF BORROWERS NOT OF THE
PARTNERSHIP)
Redwood Mortgage Corp. Mortgage Brokerage Commissions for
services in connection with the
review, selection, evaluation,
negotiation, and extension of the
loan paid by the borrowers and not
by the Partnership...........................$45,906
Redwood Mortgage Corp. Processing and Escrow Fees for
services in connection with
notary, document preparation,
credit investigation, and escrow
fees payable by the borrowers and
not by the Partnership....................... $1,655
Gymno Corporation Inc. Reconveyance Fee................................ $41
III. IN ADDITION, THE GENERAL PARTNERS AND/OR RELATED COMPANIES
PAY CERTAIN EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT
IS REIMBURSED AS NOTED IN THE STATEMENT OF INCOME..................$10,501
LOAN PORTFOLIO SUMMARY AS OF MARCH 31, 2001
Partnership Highlights
Loan to Value Ratios
First Trust Deeds $7,275,192.56
Appraised Value of Properties * 12,943,595.00
Total Investment as a % of Appraised Value 56.21%
First Trust Deed Loans $7,275,192.56
Second Trust Deed Loans 3,329,460.53
Third Trust Deed Loans 189,722.40
------------------
$10,794,375.49
First Trust Deeds due other Lenders 7,392,466.00
Second Trust Deeds due other Lenders 1,478,096.00
------------------
Total Debt $19,664,937.49
==================
Appraised Property Value * $31,800,194.00
==============
Total Investment as a % of Appraised Value 61.84%
Number of Loans Outstanding 38
Average Investment 284,062.51
Average Investment as a % of total loans 2.63%
Largest Investment Outstanding 1,743,724.13
Largest Investment as a % of total loans 16.15%
Loans as a Percentage of Total Loans
First Trust Deed Loans 67.40%
Second Trust Deed Loans 30.84%
Third Trust Deed Loans 1.76%
-----------------
Total 100.00%
Loans by Type of Property Amount Percent
Owner Occupied Homes $248,593.76 2.30%
Non Owner Occupied Homes 1,685,179.03 15.61%
Apartments 2,352,449.28 21.80%
Commercial 6,508,153.42 60.29%
-----------------
-----------------
Total $10,794,375.49 100.00%
Statement of Conditions of Loans
Number of Loans in Foreclosure 1
*Values used are the appraisal values utilized at the time the loan was
consummated.
Diversification by County
County Total Loans Percent
San Francisco $3,598,584.69 33.34%
Stanislaus 2,789,397.08 25.84%
Alameda 1,026,387.10 9.51%
Contra Costa 967,396.96 8.96%
Placer 878,793.59 8.14%
Santa Clara 678,388.30 6.28%
Santa Cruz 474,480.05 4.40%
San Mateo 181,977.29 1.69%
Sacramento 96,716.11 .90%
Shasta 79,162.59 .73%
Sonoma 23,091.73 .21%
------------------- -----------
Total $10,794,375.49 100.00%
=================== ===========
PART 2
OTHER INFORMATION
Item 1. Legal Proceedings
None, where the Partnership is a defendant.
Please refer to Note 6 of Notes to Financial
Statements.
Item 2. Changes in the Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Not Applicable
(b) Form 8-K
Form 8-K was filed on February 7, 2000,
relating to a change in accounting firms.
Another Form 8-K was filed on February 13,
2001, relating to the subsequent change in
accounting firms. On April 11, 2001, the
Partnership filed yet another form 8-K
regarding D. Russell Burwell's retirement as
more fully discussed earlier under
"Management Discussion" area.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934 the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereto duly authorized on the 7th day of May 2001.
REDWOOD MORTGAGE INVESTORS VII
By: /S/ D. Russell Burwell
---------------------------------------------
D. Russell Burwell, General Partner
By: /S/ Michael R. Burwell
---------------------------------------------
Michael R. Burwell, General Partner
By: Gymno Corporation, General Partner
By: /S/ D. Russell Burwell
---------------------------------------------
D. Russell Burwell, President
By: /S/ Michael R. Burwell
---------------------------------------------
Michael R. Burwell, Secretary/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity indicated on the 7th day of May 2001.
Signature Title Date
/S/ D. Russell Burwell
- -----------------------------------
D. Russell Burwell General Partner May 7, 2001
/S/ Michael R. Burwell
- -----------------------------------
Michael R. Burwell General Partner May 7, 2001
/S/ D. Russell Burwell
- -----------------------------------
D. Russell Burwell President of Gymno May 7, 2001
Corporation,
(Principal Executive Officer);
Director of Gymno Corporation
/S/ Michael R. Burwell
- -----------------------------------
Michael R. Burwell Secretary/Treasurer May 7, 2001
of Gymno Corporation
(Principal Financial and
Accounting Officer);
Director of Gymno Corporation