The TIC Workout

Article by Stephen I. Burr and Elizabeth L. Corey

Since the promulgation of Revenue Procedure 2002-22 the tenant-in-common (TIC) offering industry has grown to approximately $5 billion in annual equity raised. Although accurate statistics are hard to come by, perhaps as much as $10 billion in equity has been raised since 2002, spread across more than 1,000 offerings.

Given the volume of TIC transactions, the number of materially underperforming TIC transactions (i.e., transactions where the return to the investors is materially below what was projected) appears remarkably low. Some of this is no doubt attributable to the generally favorable market conditions for commercial real estate over the past five years. It has only been five years, with most of the transactions done in the past three years, so many of the TIC investments are still in early stages. As well, most TIC transactions are based upon stabilized, income-producing property, utilizing a fairly low level of debt (in