Attached files
| file | filename |
|---|---|
| 8-K - Redwood Mortgage Investors IX | rmiix-20121127_8k.htm |
Exhibit 99.1
CONSOLIDATED BALANCE SHEET
JUNE 30, 2012
(Unaudited)
REDWOOD MORTGAGE CORP.
and Subsidiaries
900 Veterans Blvd, Suite 500
Redwood City, CA 94063
Phone 650-365-5341 Fax 650-364-3978
REDWOOD MORTGAGE CORP.
and Subsidiaries
CONSOLIDATED BALANCE SHEET
June 30, 2012
(unaudited)
CONTENTS
Page No.
Consolidated Balance Sheet (unaudited) 1
Notes to the Consolidated Balance Sheet (unaudited) 2 - 9
REDWOOD MORTGAGE CORP.
and Subsidiaries
CONSOLIDATED BALANCE SHEET
June 30, 2012
(unaudited)
ASSETS
|
Cash and cash equivalents
|
$
|
2,344,674
|
||
|
Receivables, due from affiliates/related parties
|
||||
|
Mortgage servicing fees
|
437,918
|
|||
|
Other
|
289,111
|
|||
|
Prepaid expenses
|
40,045
|
|||
|
Loans, net of discount of $10,451
|
300,511
|
|||
|
Real estate owned (REO) held as investment, net
|
3,115,523
|
|||
|
Advances, RMI IX, syndication costs
|
1,432,923
|
|||
|
Brokerage-related rights, loan originations, net
|
7,524,738
|
|||
|
Investments in affiliates
|
168,073
|
|||
|
Fixed assets, net
|
38,751
|
|||
|
Total assets
|
$
|
15,692,267
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
Liabilities
|
||||
|
Accounts payable
|
$
|
133,967
|
||
|
Accrued compensated absences
|
211,532
|
|||
|
Accrued liabilities, other
|
173,530
|
|||
|
Due to related parties
|
92,548
|
|||
|
Mortgage notes payable
|
1,628,194
|
|||
|
Loans (formation) from affiliates, net
|
7,159,697
|
|||
|
Deferred income taxes
|
2,214,000
|
|||
|
Total liabilities
|
11,613,468
|
|||
|
Stockholders’ equity
|
||||
|
Common stock: 100,000 shares authorized,
|
||||
|
1,000 shares issued and outstanding at stated value
|
4,000
|
|||
|
Additional paid-in capital
|
550,152
|
|||
|
Retained earnings
|
3,524,647
|
|||
|
Total stockholders’ equity`
|
4,078,799
|
|||
|
Total liabilities and stockholders’ equity
|
$
|
15,692,267
|
The accompanying notes are an integral part of the consolidated balance sheet
1
REDWOOD MORTGAGE CORP.
and Subsidiaries
NOTES TO THE CONSOLIDATED BALANCE SHEET
June 30, 2012 (unaudited)
NOTE 1 – GENERAL
In the opinion of management, the accompanying unaudited consolidated balance sheet contains all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the financial information herein. This consolidated balance sheet should be read in conjunction with the audited consolidated balance sheet for the fiscal year ended September 30, 2011, appearing in Redwood Mortgage Investors IX, LLC’s Post-Effective Amendment No. 6 to Form S-11. These notes include only those items for which updates are needed.
Throughout this document Redwood Mortgage Corp. will be referred to as RMC, Gymno LLC as Gymno, and Redwood Mortgage Investors (RMI) will refer to limited partnerships or LLCs sponsored by RMC.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See the notes accompanying the audited consolidated balance sheet of RMC as of September 30, 2011.
NOTE 3 – GENERAL PARTNER, MANAGING MEMBER AND RELATED PARTIES
Brokerage-related rights, loan originations, net/formation loans
Brokerage-related rights are summarized in the following table at June 30, 2012.
|
Brokerage-
|
||||||||||||||||
|
Related
|
Accumulated
|
Years
|
||||||||||||||
|
Partnership/LLC
|
Rights
|
Amortization
|
Net
|
Remaining
|
||||||||||||
|
RMI VII
|
914,413
|
(891,409
|
)
|
23,004
|
3
|
|||||||||||
|
RMI VIII
|
17,634,435
|
(10,829,164
|
)
|
6,805,271
|
22
|
|||||||||||
|
RMI IX
|
776,864
|
(80,401
|
)
|
696,463
|
25
|
|||||||||||
|
Total
|
$
|
19,325,712
|
$
|
(11,800,974
|
)
|
$
|
7,524,738
|
|||||||||
Additions to the brokerage-related rights (RMI IX only), net of discount, were $128,083 for the nine months ended June 30, 2012.
Estimated amortization expense for each of the next five years and thereafter is presented in the following table.
|
Year ending September 30,
|
||||
|
2012 (remaining three months)
|
$
|
238,234
|
||
|
2013
|
876,491
|
|||
|
2014
|
746,594
|
|||
|
2015
|
665,439
|
|||
|
2016
|
588,408
|
|||
|
Thereafter
|
4,409,572
|
|||
|
$
|
7,524,738
|
RMC has determined no allowance for impairment was required against its brokerage-related rights.
2
REDWOOD MORTGAGE CORP.
and Subsidiaries
NOTES TO THE CONSOLIDATED BALANCE SHEET
June 30, 2012 (unaudited)
NOTE 3 – GENERAL PARTNER, MANAGING MEMBER AND RELATED PARTIES (continued)
Brokerage-related rights, loan originations, net/formation loans (continued)
The formation loans are non-interest bearing and are being repaid equally over an approximate ten-year period commencing the year after the close of a partnership/LLC offering. Interest has been imputed at the market rate of interest in effect during the offering. The effective interest rates range between 3.25% and 7.752%.
|
|
The formation loans are due as summarized in the following table, as of June 30, 2012.
|
|
Year ending September 30,
|
RMI VIII (1)
|
RMI IX (1)
|
Total
|
|||||||||
|
2012
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
|
2013
|
1,898,136
|
74,121
|
1,972,257
|
|||||||||
|
2014
|
1,674,153
|
74,121
|
1,748,274
|
|||||||||
|
2015
|
1,322,500
|
74,121
|
1,396,621
|
|||||||||
|
2016
|
1,162,799
|
74,121
|
1,236,920
|
|||||||||
|
2017
|
756,400
|
74,121
|
830,521
|
|||||||||
|
Thereafter
|
813,025
|
477,426
|
1,290,451
|
|||||||||
|
Total borrowings
|
7,627,013
|
848,031
|
8,475,044
|
|||||||||
|
Less discount on imputed interest
|
(1,196,692
|
)
|
(118,655
|
)
|
(1,315,347
|
)
|
||||||
|
Total loans (formation), net of discount
|
$
|
6,430,321
|
$
|
729,376
|
$
|
7,159,697
|
||||||
If the general partners/managing members are removed and RMC is no longer receiving payments for services rendered, the debt on the related formation loan is forgiven, and would be an offset to any impairment resulting to the asset recognized for brokerage-related rights.
(1) The annual amounts due are based upon the loan balance at December 31, 2011 and June 30, 2012.
Advances to RMI IX, syndication costs
RMC advances certain organizational and offering expenses on behalf of RMI IX. RMI IX is obligated to reimburse RMC for these costs up to an amount equal to 4.5% of gross offering proceeds until RMC has been fully reimbursed.
Syndication cost transactions for the nine months ended June 30, 2012 are summarized in the following table.
|
Balance, October 1, 2011
|
$
|
1,098,517
|
||
|
Advances made by RMC
|
446,721
|
|||
|
Repayments received from RMI IX
|
(112,315
|
)
|
||
|
Balance, June 30, 3012
|
$
|
1,432,923
|
3
REDWOOD MORTGAGE CORP.
and Subsidiaries
NOTES TO THE CONSOLIDATED BALANCE SHEET
June 30, 2012 (unaudited)
NOTE 3 – GENERAL PARTNER, MANAGING MEMBER AND RELATED PARTIES (continued)
Investments in affiliates
Gymno’s investment in affiliates is presented in the following table as of June 30, 2012.
|
Gymno
|
||||||||||||
|
Investment
|
||||||||||||
|
Gymno
|
Percent of
|
|||||||||||
|
Net Assets
|
Investment
|
Net Assets
|
||||||||||
|
RMI IV
|
$ | 3,416,763 | $ | 3,515 | 0.10 | % | ||||||
|
RMI V
|
1,551,595 | 4,491 | 0.29 | % | ||||||||
|
RMI VI
|
4,813,635 | 11,394 | 0.24 | % | ||||||||
|
RMI VII
|
6,297,774 | 5,723 | 0.09 | % | ||||||||
|
RMI VIII
|
200,741,320 | 95,423 | 0.05 | % | ||||||||
|
RMI IX, LLC
|
11,484,938 | 12,521 | 0.11 | % | ||||||||
|
Total investments in affiliates
|
$ | 228,306,025 | $ | 133,067 | ||||||||
RMC acquired an investment from a limited partner in RMI VIII. This investment is accounted for under the equity method. At June 30, 2012 the recorded value of the investment was $32,868.
RMC, as a manager of RMI IX, has an investment in RMI IX of $2,654 at June 30, 2012.
Gymno LLC
Gymno’s balance sheet is presented in the following table as of June 30, 2012.
|
Assets
|
||||
|
Cash and cash equivalents
|
$
|
557,198
|
||
|
Investments in affiliates
|
133,067
|
|||
|
Total assets
|
$
|
690,265
|
||
|
Liabilities and Stockholders’ Equity
|
||||
|
Accrued liabilities
|
$
|
3,980
|
||
|
Common stock, no par, authorized 1,000,000 shares; 500
|
||||
|
shares issued and outstanding
|
12,500
|
|||
|
Retained earnings
|
673,785
|
|||
|
Total liabilities and stockholders’ equity
|
$
|
690,265
|
4
REDWOOD MORTGAGE CORP.
and Subsidiaries
NOTES TO THE CONSOLIDATED BALANCE SHEET
June 30, 2012 (unaudited)
NOTE 4 – LOANS
Loans unpaid principal balance (principal)
Loan transactions are summarized in the following table for the nine months ended June 30, 2012.
|
Secured
|
Unsecured
|
|||||||
|
Principal, October 1, 2011
|
$
|
—
|
$
|
313,547
|
||||
|
Originated for affiliates
|
2,399,771
|
—
|
||||||
|
Assigned to RMI IX
|
(2,399,771
|
)
|
—
|
|||||
|
Borrower repayments
|
—
|
(2,585
|
)
|
|||||
|
Principal, June 30, 2012
|
$
|
—
|
$
|
310,962
|
||||
At June 30, 2012, RMC had two unsecured loans. One loan is a demand note with a principal balance of $300,000 and an interest rate of 7.5%. The borrower is making monthly payments of interest only. The second loan is co-owned with four affiliated partnerships. RMC’s portion of the loan, net of a discount of $10,451, is $511. The borrower is making monthly payments to 2015.
Scheduled principal payments
Scheduled principal payment dates of the performing unsecured loans are summarized in the following table as of June 30, 2012.
|
Year ending September 30,
|
||||
|
2012 (remaining three months)
|
$
|
862
|
||
|
2013
|
3,446
|
|||
|
2014
|
3,446
|
|||
|
2015
|
3,208
|
|||
|
2016
|
—
|
|||
|
Thereafter
|
—
|
|||
|
Total
|
10,962
|
|||
|
Less discount
|
(10,451
|
)
|
||
|
Demand note
|
300,000
|
|||
|
Total loans, net of discount
|
$
|
300,511
|
Loans bear interest at rates ranging from zero to 10%. Interest is imputed on loans with no stated interest rate.
5
REDWOOD MORTGAGE CORP.
and Subsidiaries
NOTES TO THE CONSOLIDATED BALANCE SHEET
June 30, 2012 (unaudited)
NOTE 4 – LOANS (continued)
Matured loans
There were no loans past maturity as of June 30, 2012.
Delinquency
There were no delinquent loans as of June 30, 2012. The Company reports delinquency based upon the most recent contractual agreement with the borrower.
Loans designated impaired/in non-accrual status
There were no loans designated impaired or classified in non-accrual status as of June 30, 2012.
Allowance for loan losses
There is no allowance for loan losses as of June 30, 2012.
NOTE 5 – REAL ESTATE OWNED (REO) HELD AS INVESTMENT, NET
REO held as investment, net, had the activity and changes in the impairment reserves summarized in the following table for the nine months ended June 30, 2012.
|
REO Held
|
||||||||||||
|
REO Held
|
Accumulated
|
As Investment,
|
||||||||||
|
As Investment
|
Depreciation
|
Net
|
||||||||||
|
Balance, October 1, 2011
|
$
|
3,278,607
|
$
|
(146,360
|
)
|
$
|
3,132,247
|
|||||
|
Acquisitions
|
—
|
—
|
—
|
|||||||||
|
Improvements
|
1,400
|
—
|
1,400
|
|||||||||
|
Depreciation
|
—
|
(18,124
|
)
|
(18,124
|
)
|
|||||||
|
Balance, June 30, 2012
|
$
|
3,280,007
|
$
|
(164,484
|
)
|
$
|
3,115,523
|
|||||
|
Number of properties
|
3
|
2
|
3
|
|||||||||
RMC owns three California properties. Two of the properties (owned by RMC) are single-family residences and are rented. One single-family residence is located in San Mateo County and the other is located in Riverside County. The recorded investment in these assets at acquisition was $1,778,607. The third property is undeveloped land in San Mateo County (owned by Weeks, LLC), with a recorded investment at acquisition of $1,600,000.
6
REDWOOD MORTGAGE CORP.
and Subsidiaries
NOTES TO THE CONSOLIDATED BALANCE SHEET
June 30, 2012 (unaudited)
NOTE 6 – FIXED ASSETS
Fixed assets are summarized in the following table at June 30, 2012.
|
Office equipment
|
$
|
258,256
|
||
|
Computer equipment
|
80,498
|
|||
|
Software
|
33,817
|
|||
|
Auto
|
71,297
|
|||
|
Leasehold improvements
|
22,684
|
|||
|
Total fixed assets
|
466,552
|
|||
|
Accumulated depreciation and amortization
|
(427,801
|
)
|
||
|
Fixed assets, net
|
$
|
38,751
|
NOTE 7 – MORTGAGE NOTES PAYABLE
Mortgage notes payable activity is summarized in the following table for the nine months ended June 30, 2012.
|
Balance, October 1, 2011
|
$
|
1,655,462
|
||
|
Payments
|
(27,268
|
)
|
||
|
Balance, June 30, 2012
|
$
|
1,628,194
|
As of June 30, 2012, RMC has mortgage notes payable on two of the REO held as investment. One note (by RMC) is owed to an individual with an unpaid principal balance of $461,634 with an interest rate which increases annually from 4.0% to 5.0%, is interest only, and matures February 2013. The other note (by Weeks, LLC) is owed to three affiliated limited partnerships with an unpaid principal balance of $1,166,560, an interest rate of 7.0%, amortized for 20 years, and matures January 2016.
Future minimum principal payments are summarized in the following table at June 30, 2012.
|
Year ending September 30,
|
||||
|
2012 (remaining three months)
|
$
|
9,410
|
||
|
2013
|
500,966
|
|||
|
2014
|
42,175
|
|||
|
2015
|
45,224
|
|||
|
2016
|
1,030,419
|
|||
|
Thereafter
|
—
|
|||
|
Total mortgage notes payable
|
$
|
1,628,194
|
7
REDWOOD MORTGAGE CORP.
and Subsidiaries
NOTES TO THE CONSOLIDATED BALANCE SHEET
June 30, 2012 (unaudited)
NOTE 8 – PROFIT-SHARING PLAN
RMC has a defined contribution profit-sharing plan which provides for RMC contributions of 5% of eligible wages, plus any discretionary additional RMC contributions.
NOTE 9 – INCOME TAXES
The Company’s estimated net operating loss (“NOL”) carry forwards available are approximately $2,880,000 for federal taxes and $2,094,000 for California taxes at September 30, 2011. The NOLs can be carried forward twenty years for federal taxes and twenty years for California taxes and expire at various times through the year 2031.
NOTE 10 – COMMITMENTS AND GUARANTEES
RMC has contracted with an independent service bureau for computer processing services for the partnership and RMI IX accounting functions at approximately $8,750 per month. The contract was subject to renewal at the end of its term which is May 31, 2012, and is currently being negotiated. RMC receives reimbursement of a major portion of its computer processing expenses from the five affiliated limited partnerships and RMI IX.
At June 30, 2012, the principal balance of the bank loan to Redwood Mortgage Investors VIII, guaranteed by RMC and Gymno LLC was $4,750,000. In September 2012, all amounts due on the bank loan were remitted.
RMC guaranteed two loans issued by four affiliated limited partnerships with balances totaling approximately $246,000 at June 30, 2012. RMC has guaranteed to cover losses, if any, incurred by the partnerships related to these loans to the extent such losses exceed the then existing reserves, as defined in the agreement, and related collateral value. The two loans are substantially reserved for in the partnership loan loss reserves. RMC owns directly $511, net, of one of the loans.
RMC rents its office space under a noncancelable operating lease agreement. In 2008, the lease was amended to provide additional space of approximately 2,300 square feet and the lease was extended until December 31, 2013. The amended lease requires monthly payments of $25,644 with stated annual increases. RMC has two, five year options to renew this lease.
Noncancelable future minimum lease payments under this lease are as follows as of June 30, 2012.
|
2012 (remaining three months)
|
$
|
84,221
|
||
|
2013
|
396,542
|
|||
|
2014
|
100,148
|
|||
|
Thereafter
|
—
|
|||
|
Total
|
$
|
580,911
|
8
REDWOOD MORTGAGE CORP.
and Subsidiaries
NOTES TO THE CONSOLIDATED BALANCE SHEET
June 30, 2012 (unaudited)
NOTE 11 – SUBSEQUENT EVENTS
RMC has evaluated events through November 27, 2012, the date the balance sheet was available for issuance.
RMC acts as the broker in originating mortgage loans for RMI VIII and RMI IX, as well as for the other affiliated partnerships (RMI IV – VII). The corresponding brokerage commissions paid by borrowers from mortgage loans made by these funds are the primary source of cash used to repay the formation loans. RMI VIII was prohibited by its lending banks from originating new loans under the terms of an Amended and Restated Loan Agreement dated October 2010, and a preceding forbearance agreement that was in effect in the fourth quarter of 2009, until the bank loan was repaid in full, September 2012. The amended loan and forbearance agreements were the result of a technical (i.e. non-payment) covenant default under the original loan. As a result, RMC was deprived of the opportunity to receive brokerage commissions on loans by RMI VIII for the period from the fourth quarter of 2009 continuing through September 30, 2012, a period of almost three years. During that period, despite receiving no loan brokerage commissions, RMC continued to make the annual formation loan payments of approximately $1.8 million per year (or $5.4 million for the three years) from its own cash reserves that existed as of the date of the forbearance agreement. RMC believes it would have had a reasonable argument that the annual formation loan payments should be suspended until such time as lending by RMI VIII was permitted to resume and brokerage commissions could be earned, but RMC elected not to make such a proposal and, instead, continued to make annual formation loan payments due to concerns that the lending banks would view nonpayment of the formation loan as another technical loan default that might have led to a “distressed sale” liquidation of RMI VIII’s assets, resulting in substantial loss of limited partners’ capital.
As the bank loan was fully repaid as of September 2012, RMC will be proposing, in December 2012, a temporary suspension of annual formation loan payments, beginning with the payment due December 31, 2012, for the three-year period then beginning, which is a period commensurate with the period during which lending by RMI VIII was prohibited and RMC was deprived of loan brokerage commissions.
RMC will continue to make payments due on its RMI IX formation loan as no disruption of lending has occurred in this fund.
9