Frequently Asked Questions
What is Anderson Roberts Financial?
Anderson Roberts Financial (or “AR Financial”), is a private lender uniquely focused on loans for income producing commercial real estate properties. We conduct our business under our California Real Estate Brokers license. The company is 100% owned by Robert Schonefeld, the CEO and Founder.
What are the terms of your loans?
Generally, our loans range from 12 to 24 months. We also offer interest-only payments in most cases. This feature allows for more reasonable monthly payments during the loan term.
What are your rates?
Short term, bridge and structured loans typically command higher rates for a variety of reasons. Our rates on first mortgages start at 7.95%.
What is your underwriting and closing process?
As soon as we are in receipt of a signed term sheet after initial screening, our underwriting team works with the borrower to quickly assemble the required due diligence material. Our Underwriter reviews and verifies all information provided upfront and we structure the loan appropriately. We then work with legal counsel and escrow/title to arrange for loan documents and funding within the desired timeframe. Immediately following the closing, the borrower will be contacted by our professional loan servicing team who will coordinate monthly payment obligations.
Do you service all of your loans?
While we do outsource the collection and disbursement of payments (along with tax reporting), AR Financial is the Master Servicer and Agent on behalf of the lender group. As such, we closely monitor servicing activity to confirm payments are made in a timely manner. We augment the efforts of our servicer if a borrower is exhibiting late payments by interceding with direct communication with the borrower.
How do you know your process works?
Members of our team have had long and highly successful careers in commercial real estate lending and real estate capital markets. We have underwritten and funded over $5 billion in loans secured by commercial real estate and know the obstacles, both real and otherwise, faced by conventional lenders. In addition, we have been funding private loans for more than 25 years as our legacy company started in 1994. In the last few years, we have funded over $100 million in private loans. We are experienced and know how to conduct our business in a way that makes sense for us, our borrowers and our investors. Our numerous repeat borrowers are a testament to their satisfaction.
Questions for Borrowers
Which regions do you operate in?
We currently provide loans for qualified properties mainly throughout the Western US (California, Washington, Oregon, Nevada, and Arizona). However, depending on the transaction specifics, we may open our funding to additional regions and have done so in the past.
Which property types are suitable for your loan program?
We provide loans on an array of income producing commercial properties including industrial, office, retail, self-storage, multi-family, hotels and motels, manufactured housing/RV parks, and non-owner-occupied single-family homes. There are additional acceptable property types under the umbrella of income producing commercial properties and we look at those on a case-by-case basis.
How do you source your funds?
To date, we have funded nearly $100 million in loans with a consistent stable of private capital from high-net-worth individuals. Going forward, we may use several sources to fund our loan transactions. This may include a number of qualified private investors, a warehouse line from a banking institution, corporate resources, or a combination of those sources.
How fast can you fund?
Funding depends on the borrower’s timing requirements. We have funded in as fast as 5 business days but prefer at least 2 weeks from submission to the desired funding date. Since we avoid some of the time-consuming hurdles of conventional bank financing, we can be in a position to fund quickly. It is our goal to answer a borrower’s needs efficiently and cleanly.
How do I apply for a loan?
If you are interested in applying for a loan, please reach out to a member of our team and we will be happy to assess your needs and see if we can help.
I already work with a mortgage banker/broker, how does that fit into your process?
We welcome your professional representative to work with us on structuring a loan that works for you. We often work with borrower representatives and appreciate their involvement. We make sure to respect their relationship with you.
Do you require reserves of taxes, insurance or other items?
Generally, our loans do not require escrows for taxes, property insurance, replacement reserves, tenant improvements and lease commissions. We rely upon our borrower to keep those obligations current. On a case-by-case basis we may require cash reserves to cover certain near-term obligations.
Do you require title insurance or a recent appraisal?
Industry standard closing requirements are required for all loans. This includes title insurance, legal documentation, property insurance and other lender protections. Generally, we do NOT require new third-party reports (appraisal, environmental, engineering, etc.) for most transactions. As prudent lenders, we do have a member of our senior management team inspect every property prior to funding.
Do your loans have prepayment penalties?
Not in a traditional sense. Our loans require we earn a minimum interest while the loan is outstanding. This ranges from 6 to 12 months of interest and is dependent on the loan term a borrower requests.
Why do borrowers and mortgage brokers come to us?
There are many reasons. We all know how stringent, time-consuming and costly the process can be with conventional lenders. Getting to a “yes” or “no” can be tedious and borrowers often face last-minute demand from lenders that need to be fulfilled. At AR Financial, we are streamlined, efficient and clear in our approach. We can overcome obstacles, whether property or borrower, with creative structuring that banks and other conventional lenders simply can’t or won’t do. We focus on the sponsor and the property to clearly assess the merits of each transaction and aren’t saddled by lengthy credit approval processes or all-too-common bank regulations. We also know that not all properties are “ready for prime time” due to certain factors. For example, a property may be transitioning or going through lease-up and not be ready for conventional financing. An Anderson Roberts loan works well in those cases.
Questions for Investors
What is your typical loan size and how many investors are usually involved?
Our loan sizes range from $300,000 to $4,000,000 with our average loan being between $1 and $2 million. Depending on the loan size and level of investor interest, we have anywhere from five to over ten investors involved.
If I am an investor in a loan, when will my funds be required?
If you plan to invest in one of our loans, we will keep you up to date on the funding timeline throughout the underwriting process. Specific funding timelines vary loan to loan, however, we ask that our investors act quickly when funds are required from them as the funding timeline is a competitive advantage over larger lenders.
Once I have invested in your loan, how do I find my payment?
We retain an outside loan servicing company for the collection and disbursement of payments to our investors. When you become an investor with us, we will establish your account with that firm and payments will be ACH’d to your designated account about 10 days after receipt by our loan servicer.
What is a debt service reserve and why are they used?
A debt service reserve holds funds set aside at closing to pay a certain amount of interest. The reserve fund guarantees monthly payments to be made for the specified months and provides additional security for the loan which ultimately reduces the overall risk. We tend to put these in place when the loan is riskier than those of our typical loan profile or when a property is repositioning and the current cashflow is not sufficient to cover all obligations.
What happens when a borrower doesn’t make their monthly loan payment or refuses to pay?
We tend to work in a highly constructive manner with borrowers. This includes accommodating certain requests if, and only if, the borrower is performing in accordance with the loan documents. If a borrower is late on payments, we proceed with enforcement action at the earliest possible date and enforce late charges and default provisions. We are exceedingly proactive with our borrowers to ensure payments are made in a timely manner. However, as with any lender, we occasionally experience payment delays and defaults.
What happens if a loan matures and the borrower can’t or doesn’t want to refinance?
If a loan matures and the borrower is in good standing with us (i.e. they pay their monthly payments on time and there has been no diminishment of our collateral), we can provide the borrower with a loan extension. The extension time ranges depending on the specifics of the loan and there will be a fee associated with the extension.
How do you differ from a fund?
Funds active in the private lending market commingle the capital of investors into an investment vehicle and make loans according to pre-agreed parameters. Investors in funds have little or no say in specific loans their money is used to fund. Plus, smaller funds have administrative costs that at times can significantly reduce investor returns. Our program allows you to choose the specific loans in which you invest. With that, you can better define your “risk/return” profile for your particular investment portfolio. For example, certain investors prefer lower yielding first liens over higher yielding subordinate liens. Having your choice in loans, you have control in how you shape your investment portfolio over time.
In addition, we do not take control of your funds. Your investment amount is wired directly to an escrow company which disburses on behalf of the lender group. The agreement within the lender group is clearly spelled out in our proprietary ‘Co-Lender Agreement’ that is signed by all investors in a particular loan. You have direct access to any material related to a loan including our underwriting, loan documentation, credit decision, etc.
What is an A/B loan structure?
Occasionally, we provide A/B loan structures to our borrowers. This entails placing two liens (A and B) on the subject property at the same time. A-notes represent the senior lien and B-notes represent the junior lien. Investors in the A-note are in a safer position of the security and therefore receive a yield commensurate to that risk profile. Investors in the B-note are in a perceived riskier position and therefore are paid a higher yield commensurate with their risk level.
This approach provides two major benefits:
- It enables our financing to reach higher amounts to achieve a borrower’s goals while getting paid for the incremental risk. This structure is only used in unique situations and usually when we have prior experience with the borrower.
- Investors in either the A-note or the B-note (or a combination of both) can adjust their risk/return profile to their desired levels.