Sandalstone 3.25% Notes

For the last few years Sandalstone Group, LLC has been offering a fully liquid Note which currently pays 3.25% annualized paid monthly.  It has been fully subscribed with opportunities to invest as participants move money in and out.  Here is Investor Feedback (the investor put in $100K in Feb 2013 and took it out on Jan 2014)
 
1). What was your motivation for depositing money?
  I had cash siting in Bank and was not sure what to do with it that time and paid more then bank. 
 
2). How did you find the system from a operational standpoint?
  Very easy and was great, money deposited automatically into my account every month.  
 
3). Would you recommend this to others? 
 Yes If they have money to park. 
 
A few notes on the program.  First it is Fully Liquid - which means note holders can get their money back at any time.  The minimum amount is $25,000.  Sandalstone Group, LLC can at its option increase the amount of interest paid - which it may do when interest rates rise.    
 
The Company has the following provisions to ensure that it can pay note holders:
 
1)  Open lines of credit equal to the amount outstanding under this program.  Thus if you ask for the money back you get it back no questions no delays.   There is a strict limit on notes issued as a result - the program pauses when the limit is reached.   
 
2)  More than sufficient cash flow to ensure interest payments are met.  Debt coverage ratio exceeds 8X at current rates.  
 
The Company's bank Lines of Credit cost it about 6%.  Instead of paying the bank 6% for money they are taking from you at 0% - the Company splits the difference and pays 3.25% directly to you - it's a Win-Win!.  The Company pays the Bank Origination Fees and Annual Fees so the Bank makes something as well (in case those of you working for a bank object to my disintermediation). The Bank has done its due diligence and vetted the Company for the entire amount of the Line and also its ability to pay at ~6%.  
 
The Company has been in Business for over 9 years and has a 100% payout record to all investors (debt and equity).  Contact Us if you want more information on this or on other investments that offer greater potential long term returns.
 
Frequently Asked Questions:
 
Q.  Is this the right investment for me?
We would be happy to talk to you about that in more detail with respect to your personal situation.  Generally speaking the Company has investors who keep excess cash in their money market accounts/checking accounts which earn them zero interest.  Excess cash is generally accepted by most financial planners as "emergency" cash needed to cover 6 to 9 months of expenses assuming no income.  What Sandalstone is finding is that in today's uncertain markets people have more excess cash than is generally recommended - this program serves as a way to have that protection while getting paid.  This is also a good investment for those of you who are holding a high amount of cash in anticipation of an event - down payment, wedding, etc. - who want the liquidity and who want to earn something meantime.  
 
Q.  How do I get paid the monthly interest?
A.  We can mail you a check or we can set up an EFT so that the money is automatically transferred into your back account every month.  Either way the process is automated using BillPay.  
 
Q.  How do I put in money/take out money?
A.  Large sums require either wire transfer or payment by check.  Wire transfer fees are generally about $15 to $30 for both the sender and recipient therefore we prefer to transact via check, esp. for US domestic transfers.
 
Q.  Can I take out less than $25,000?
A.  No.  It will be all or nothing to minimize transaction costs and hassle.  If you put in more that $25,000 then you can take out in increments of $10,000 or greater with $25,000 being a minimum balance required at all times.  
 
Q.  Will the terms change, if interest rates rise, will I get more?
A.  Perhaps, 3% is a floor, at Sandalstone's option it can raise the interest paid (this is solely a Sandalstone option and not tied to any other factor).  It can't lower it, however, it does have the right to Paydown the line at any time. 
 
Q.  Explain in more detail how the principal (my "deposit") is back stopped by Bank Lines of Credit?
A.  Sandalstone Group, LLC has real estate assets which do not have a mortgage attached to them.  The only debt is through credit lines.  The difference between a typical mortgage and a credit line is that when you pay down a mortgage you don't have access to that credit.  With a credit line when you pay down the line - you still have access to that credit.  Many of you have mortgages and home equity lines of credit.  As you know the principal balance on a mortgage can only go down (or stay the same for a short period), a HELOC can go up and/or down during the term it is open depending on how you pay off or advance from it.  
 
Sandalstone has credit line relationships with Wells Fargo and Bay Commercial Bank.  These lines provide Sandalstone with the ability to write a check for the amount of the outstanding credit available.  So the mechanics of the transaction are as follows:
1)  Investor gives Sandalstone $25,000.  Sandalstone gives investor a note for $25,000.
2)  Sandalstone deposits $25,000 into its Line of Credit.  It's Credit Available increases by $25,000.  Internally, Sandalstone freezes that portion of the Line of Credit.  
3)  Investor wants $25,000 back.  Sandalstone writes a check against Line of Credit and sends to Investor.  Investor deposits $25,000 and gets back principal.  Meanwhile Sandalstone's Credit Available decreases by $25,000.  
 
Q.  How does this compare to bonds?
A.  With bonds there is a stated holding period until redemption.  In the meantime the value of the bonds fluctuate due to a variety of factors including interest rates, risk, etc.  This compares to a money market/checking account in that you can ask for your money back at any time and you will get back the Principal amount.  There is no requirement to hold for any period as in a CD, etc. - you have total liquidity and the Principal is returned at face value.  While holding you get paid interest at the current rate monthly in the form of cash.  
 
Q.  Sounds great what are the risks?
A.  If this had an FDIC guarantee it would pay 0.25%.  The Company's lawyers prohibit it from using the word guarantee, however the greatest risk is that of returning the Principal - the $25,000 "deposit".  For Sandalstone to not be able to pay the credit lines would have to be revoked.  Sandalstone has had the Wells Fargo line of credit for the past 10 years and has had the Bay Commercial lines of credit for the last 6+ years. 
 
If in the case all Lines are revoked, ultimately then Sandalstone would have income producing real estate assets with no debt and it is confident in its ability to raise capital from other sources with this underlying asset in place.  In dire scenarios there is always the option to sell the asset for cash (the maximum amount of the line is at 50% of appraised value).  Of course if those assets along with Sandalstone and its managing member were to be wiped off the face of the earth - say a cataclysmic West Coast Earthquake then that would be a corner case for which there may not be a remedy... those of you who would be wiped out also wouldn't care in that unfortunate and unquantifiable event.