The Sponsors Role

Sponsors come from various industry segments, ranging from real estate investment trust subsidiaries to ongoing real estate investment companies to small entrepreneurs.  The sponsor of a securitized TIC holds an ongoing stake in the property along with the investors and so have a stake in how the investment performs.

Sponsors' duties include finding suitable property and successfully putting it under contract, performing their customary due diligence and acquiring assumable non-recourse financing.  After completing the TIC interest sales the sponsor will manage the property or arrange for property management services, send any disbursements to TIC owners, send annual summary statements to owners and oversee the property's sale and distribution of any proceeds.

Sponsors of securitized TIC transactions prepare and must use a private placement memorandum (PPM) to offer the property for sale.  The PPM is a document that discloses details of the property and any potential investment risks.  Included are such items as what the sponsor paid for the property, the sponsor's profit, the risks involved and a business plan.  The PPM will offer demographic, zoning and employment information whether positive or negative.  Any current plans for future construction that might impact the property are also presented including those planned by the sponsor, if any.  This allows the potential investor to see the good, the bad and the ugly in a balanced manner. 

The Broker/Dealer's Role

Broker/Dealers complete due diligence on many offerings to find the ones they believe meet their standards.  Some even take the due diligence a step further and enlist the services of companies that specialize in rendering written opinions on these types of investments.  The Broker/Dealer endeavors to make certain that each investment meets their standards and is of a caliber the Broker /Dealer would consider presenting to its client.  Each Broker/Dealer has their own levels and standards of conducting due diligence.  While due diligence is performed by sponsors and Broker/Dealers, each investor should conduct their own level of due diligence and make sure they are aware of the risks involved.

The Registered Representative's Role

The Registered Representative (RR) is charged with the responsibility of knowing the client from a financial standpoint.  Before any presentation of an individual property the Registered Representative would know if the client was accredited and his/her risk tolerance.  Securities laws are designed not only for disclosure, but also to emphasize suitability.  The Registered Representative is on the front line when it comes to deciding if a TIC type investment is suitable and appropriate for a particular client given their unique financial circumstance.  The actual property comparisons must wait until the registered representative has determined the accreditation status of the client, suitability and appropriateness of a TIC investment in general.

All of this makes finding information about specific TIC properties a little unusual.  You would think an industry that has grown 80% a year * in its first 6 years would be well advertised.  It would seem the different properties, their pricing, any cash flows and projected sales prices would be at your fingertips.  They are not; fully disclosed securitized TIC offerings are client centered.  Caveat Vendor

TIC interests are direct investments in real estate, and they are subject to all of the risks of owning, operating and disposing of real estate and are considered illiquid.  As always you should consult your tax professional for details regarding your specific situation. This material is for educational purposes, it does not constitute an offer for purchase or sale of securitized real estate.  Rick Willoughby is a Registered Principal offering securities and advisory services through Independent Financial Group, LLC, a registered broker-dealer and investment advisor. Member FINRA and SIPC. Independent Financial Group, LLC and Symphony Financial Services, LLC are not affiliated.
* www.ticassoc.org