Experts: TICs Are Down, Not Dead

NEW YORK CITY-With the economy and real estate markets scraping bottom, and with the ongoing legal saga of DBSI Inc. reminding everyone what could happen with a TIC structure gone wrong, questions have arisen as to whether the tenant-in-common structure for investment is going by the wayside. Experts gathered at Incisive Media’s RealShare TIC 2009 recently to discuss that very question.

The speakers participating in the virtual conference agreed that the period between 2005 and 2007 were rife with equity raises and TIC sponsorships, all geared toward real estate investments. Money was easily had and investors learned that by pooling resources, they could earn even more.

Then two events happened in 2007 according to James Shaw, president and co-founder, OMNI Real Estate Services. The first, he noted, was the swan song of the REITs. “Some of the traded REITs were sold, then repackaged, and resold again,” he remarked . And second, while the economy was nosing into a downturn, “overall real estate activity was having its last gasp,” Shaw added.

Still, and somewhat surprisingly, TIC activity has shown to be ahead of overall real estate activity, especially in recent months. “From last October to March, people were in the fetal position, keeping money under their mattresses,” Shaw commented. “From March to May, we saw people coming back, wanting a vanilla product.” The past two months, he added, investors still want the vanilla; but they also want a little spice with their investments.

Still, both Shaw and OMNI Brokerage Inc. CEO Greg Paul agreed that the trend has been a reduction in TIC sponsors, a lower minimum investment, and properties staying on the market longer. But pulling out their crystal balls, the speakers are seeing more turmoil to come. Between 2010 and 2013, Paul pointed out that many loans are going to mature. If the sponsors of those loans can’t get refinancing, trouble could happen. “Depending on what’s going on with the market,” he said, “That’s when things could get interesting.”

Click here to tune in to the full Incisive Media RealShare TIC 2009 webinar conference.