A new company, Ascent Realty Advisors, has been formed to help tenant in common investors and sponsors. Here is an article from GlobeSt.com discussing the new venture. The principals behind the new entity are from TIC Properties, a sponsor of tenant in common programs, and CapHarbor. Ascent has formed a limited partnership, Ascent Commercial Property Limited Partnership, which will allow tenant in common investors (and presumably Delaware Statutory Trust (DST) investors as well) to exchange their interests for limited partnership units. The exchange is called a 721 exchange and would allow TIC or DST investors to maintain their tax deferral while becoming part of a diversified portfolio. The partnership will focus on office and industrial TIC and DST properties. Ascent will likely form a public non-traded that will be affiliated with the partnership.
Here is a quote from the GlobeSt article:
Ascent intends to allow for the roll-up of properties on a tax-deferred basis through section 721 of the IRS code. The company is also considering the formation of a publicly registered, non-traded REIT. The Ascent Fund, which will focus on office and industrial properties, will be managed by Ascent Commercial Property Management LLC, led by president Barry Gruebbel.It is this blog's opinion that modifying the TIC or DST structure is going to be the only way many TIC or DST deals are going to be able to modify debt, short of selling the properites, and to get access to capital. The above deal is the third that I have seen or heard about so far this year. There are going to be more programs like this over the coming months.
3 comments:
Agreed that it is likely that most TIC deals will have to be restructured in order to resolve the financial issues so many find themselves with. It seems to me, though, that the same stumbling block will rear its ugly head, the unanimous consent requirement. Certainly an investor can transfer his interest to the partnership. Will all of the investors be willing to do the same? Or is Ascent going to cram them down through governance provisions regarding the debt service provided on behalf of defaulting tenants? And this does not even begin to address the maturing debt problems that you have documented so well. Interesting strategy, bordering on vulture investing. However, it could be lucrative if Ascent can add value by rationalizing the ownership structures.
You hit on the key point of these consolidations. There is not a way where a TIC investor has to convert, so the Operating Partnership could be stuck with dealing with a handful of co-owners. There is no assurance that even with an operating partnership owning a majority of a property that lenders will view this favorably.
Are you familiar with any bankruptcy case in which a 721 roll up was used as part of a chapter 11 restructuring?
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