Commercial Loans Blog

Commercial Loans and TIC Roll-Ups

Posted by George Blackburne on Thu, Feb 22, 2018

Tick.jpgWhat on earth is a TIC roll-up?  Do they bite when you try to roll them up?

In order to understand a TIC roll-up, you first have to understand a TIC.  A tenancy-in-common investment ("TIC" or "TIC Investment") is an investment by a taxpayer in real estate which is co-owned with other investors.

Since the taxpayer holds title to the real estate as a tenant-in-common, TIC investments qualify under the like-kind rules of §1031.  In other words, if the 67-year-old owner of a big apartment building, in which he has lots of equity, gets tired of the hassles of management, he can do a delayed exchange into a TIC.

 

Apply For Preferred Equity or  a Commercial Scond Mortgage

 

destroyed_by_drugs.jpg

 

TIC investments are typically made in projects such as apartment houses, shopping centers, office buildings, etc.  Management responsibilities are provided by management professionals.  Cash returns on these types of investments are typically in the 6% to 7% range.  Syndicators of TICs are called "sponsors."

TIC investments are commonly structured in one of the following ways -

  • A single-tenant property with an established credit rating; or

  • Multiple tenants subject to a single master lease with the TIC sponsor who subleases to the tenants; or

  • Multiple tenants each with separate leases managed by professional management.

 

Submit Your Loan to 750 Commercial   Lenders Using C-Loans.com.  It's Free!

 

Cheating.jpg

 

TIC's do have a few drawbacks.  These investments have extended terms, so the investor is pretty much stuck in the deal for a long period.  To make matters worse, there is no liquidity.  A TIC investor can't easily sell his tenancy-in-common interest.

Okay, now that we know what a TIC is, we are once again ready to ask, "What on earth is a TIC roll-up?"

 

Free List of 3,159 Commercial Lenders  Sort By Your Own Criteria

 

Buddy System.jpg

 

That's the question I asked my buddy, Yoni Miller, of QuickLiquidity.com.  Yoni had just sent out another tombstone announcing the closing of a $6.8 million subordinated loan secured by a portfolio of industrial buildings along the Eastern seaboard.  The senior debt was a CMBS loan.  The proceeds of Yoni's loan were used to effect this strange transaction known as TIC roll-up.  

 

Earn Up to 12% Interest

 

Awake.jpg

 

In response to my question, Yoni wrote:  

"Well, a TIC roll-up is when all of those TIC owners are rolled up into one single new entity, often an LLC with a managing member.  For example, imagine a property that has 20 different TIC owners.  Usually they need a majority or complete consent to sell or refinance, which means most lenders won't lend to TICs because there is no sole decision maker."
 
"Therefore the 20 TIC owners “roll up” into one new LLC, where they all own the same ownership percentage, but one person is the manager, instead of everyone needing to consent to a refi/sale.  Lenders will then normally lend against the property."
 
 
Nine-Hour Video Training Course  How to Broker Commercial Loans
 
 
Become a Hard Money Lender  Sub-Contract Out Your Servicing  Earn $1,700 Per Month On a Single Loan
 
 
Bad Day.jpg
 
 
Get Both Video Training   Programs For Just $849.
 
Free $549 Training Course

 

Topics: TIC