Another One...
I just saw another TIC offering with negative leverage. Like the post mentioned below, this deal has a mortgage rate that is expected to be 5.6%, and the cap rate (return) is 4.9%, inclusive of all the fees and reserves of the offering. This apparent economic disadvantage is easily solved. The sponsor has reserved cash to supplement the distribution for the first three years and the mortgage is interest-only for the first three years. Oh, and the growth rate on the Net Operating Income is projected at more than 4% annually. OK. Looks good on paper, but watch that distribution in the fourth year.