Saturday, October 11, 2008

TICA Update - DBSI and Thompson National Properties
I was at TICA's annual conference for one day last week. I found out news about two prominent TIC sponsors. DBSI is in trouble and Argus threw in the towel. DBSI, the Idaho-based sponsor, was a no-show at TICA. I saw one of its principals, John Mayeron(?), talking with people, but its booth was empty and it canceled its presentations. DBSI fired all its sales force late in September. It is reviewing all its programs - TICs, Notes and funds - and may reduce distributions. DBSI had opaque financial statements and its TIC deals were master leased, with DBSI responsible for payments if the underlying properties were unable to support the distributions. This implosion will get blamed on the Credit Crisis, but it has been in the works for several years. DBSI's master lease structure, which was supposed to protect investors by having DBSI ensure lease payments (distributions to investors), is going to prove worthless, as DBSI will break its lease obligation. This is not surprising, and unfortunately, DBSI will not be the first.

I also heard, and this was later confirmed, that Thompson National Properties, is entering into a joint venture with Argus Realty Investors. I am not sure why it's being called a joint venture. (Maybe because Argus, as a TIC sponsor who gets all its payments up front, is worthless and therefore could not be an acquisition because there was nothing of value to acquire.) Thompson is taking over management of all Argus properties and the two principals of Argus, Dick Gee and Tim Snodgrass, are joining Thompson. Call it what you will, but there is nothing joint about this takeover. The betting now starts on how long Snodgrass and Gee stay with Thompson.

No comments: